Shoen v. Shoen
| Decision Date | 18 September 1990 |
| Docket Number | No. 1,I-,I-X,D,CA-CV,1 |
| Citation | 804 P.2d 787,167 Ariz. 58 |
| Parties | , Fed. Sec. L. Rep. P 95,683 Samuel W. SHOEN, M.D.; Mary Anna Shoen-Eaton; Cecilia M. Shoen Hanlon; Katrina M. Shoen; Theresa M. Shoen; Leonard S. Shoen; and the following Arizona corporations: Samwill, Inc.; Cemar, Inc.; Kattydid, Inc.; Thermar, Inc.; and L.S.S., Inc., Plaintiffs-Appellants, v. Edward J. SHOEN; Paul F. Shoen; James P. Shoen; Aubrey K. Johnson; William E. Carty; John M. Dodds; Gary B. Horton; Henry E. Martin; Harry B. DeShong, Jr.; Gary V. Klinefelter; Amerco, a Nevada corporation; Jim White; John Does; XYZ Corporations; and ABC Partnerships, Defendants-Appellees. 89-140. |
| Court | Arizona Court of Appeals |
This case arises out of a struggle for control of Amerco Corporation. It is an appeal from the trial court's denial of a preliminary injunction sought by a group of Amerco shareholders to cancel the issuance of certain voting stock, to cancel acts based on the issuance of such stock, and to preclude further voting of the stock in question. We affirm the order of the trial court denying the injunction.
Amerco, a Nevada corporation, owns U-Haul Corporation, which is in the business of renting moving trucks and moving equipment. The business was founded some forty-five years ago by Leonard S. Shoen, who, over a period of time, gave his children most of his Amerco stock.
We will refer to the plaintiffs as the "dissident stockholders' group" and to the defendants as the "directors' group." The dissident stockholders' group is comprised of Leonard S. Shoen; six of his children, including Dr. Samuel W. Shoen; and seven Arizona corporations controlled by these family members. The directors' group includes three of Leonard S. Shoen's sons, including Edward J. Shoen; five stockholder-officers of Amerco; three directors of Amerco, one of whom is also a stockholder-officer; and Amerco itself. Michael Shoen is a member of the dissident stockholders' group although he is not a party to this action. Leonard Shoen's minor son, Scott Shoen, owns a beneficial interest in 1,835.94 shares of Amerco stock which is held in trust by the United States National Bank of Oregon. Scott Shoen's shares are now aligned with the dissident stockholders' group, but neither Scott nor the bank is a party to this action. Likewise, Mark Shoen and Sophia Shoen are members of the directors' group but are not parties to this action.
For reasons that will emerge, the date July 24, 1988, is significant in this case. As of that day, the dissident stockholders' group, exclusive of the 1,835.94 shares held in trust for Scott Shoen, owned a total of 45,636.48 shares of the company's stock which represented 49.66 percent of the total outstanding shares. The directors' group, again exclusive of the shares held in trust for Scott Shoen, owned a total of 42,086.73 shares representing 45.80 percent of the total outstanding shares. Stockholders outside the family owned 2,341.85 shares which was 2.54 percent of those outstanding. Scott Shoen's interest represented 2.00 percent of the outstanding shares. In addition to the 91,901 outstanding shares, the corporation retained 8,099 treasury shares, making a total of 100,000 authorized shares.
Leadership of Amerco has shifted over the past few years, with each group representing different management styles and corporate goals. Family members have vacillated in their alliances. At the time of the events of interest here, however, the groups were aligned as set forth above. The dissident stockholders' group insists that as of July 24, 1988, the trustee for Scott Shoen was affiliated with their coalition, but this is disputed by the directors' group. We will discuss this secondary dispute in more detail below.
The events at the heart of this dispute occurred over the course of a few weeks in July 1988. On July 17, 1988, all the members of the dissident stockholders' group, except the trustee for Scott Shoen, met and signed an informal, handwritten agreement to join together to "maximize the value and liquidity of their interests in Amerco, and, if feasible at an acceptable value, to investigate a sale of Amerco at the earliest possible opportunity."
In the days following July 17, 1988, Edward J. Shoen, President of Amerco and Chairman of the Board of Directors, became increasingly concerned that the dissident stockholders' group might be planning a hostile takeover or some other action involving Amerco. His suspicion was based on bits and pieces of information about members of the dissident stockholders' group meeting with investment bankers, lawyers, and consultants known for their expertise in the areas of corporate takeover and restructuring. Several Shoen family members reported that the purpose of these meetings was to pursue a sale or Acting on his suspicions, Edward J. Shoen organized several meetings over the weekend of July 23 and 24 with Amerco board members, in-house counsel, and outside attorneys. The meetings were held to devise a strategy to retain control of the corporation. The directors' group took several measures to ensure their control and to preserve the status quo.
[167 Ariz. 61] breakup of Amerco. Edward J. Shoen had been told that the dissident stockholders' group had contacted an attorney who specialized in representations involving the breakup of companies. Efforts to obtain additional explicit information from members of the dissident stockholders' group were rebuffed.
First, on July 24, and prior to any formal board action, the five Shoen siblings in the directors' group entered into a written voting trust agreement which provided that for a period of thirty months, the trust members would: (1) vote their stock as a block as directed by a majority of the five members; (2) vote against any corporate sale or merger not unanimously approved; and (3) give James P. Shoen their proxies which allowed him to vote the shares of others in the group if either the number of shareholders attending a meeting was insufficient to produce a majority vote or the shareholders failed to instruct James P. Shoen how they wished the shares voted. The proxies were to be voted against any action which would result in the merger or dissolution of the company, absent unanimous consent otherwise.
The second action by the directors' group was to convene a board of directors meeting on the evening of Sunday, July 24, 1988. The voting trust agreement adopted earlier that day was neither discussed at the meeting nor disclosed to the board. At the meeting, based on outside counsel's recommendation, the board adopted a Key Employee Stock Purchase Plan applicable to five senior Amerco employees. The board valued the 8,099 treasury shares held by the corporation at $2,715 per share. These shares were then committed to the plan and were sold to the five key employees. The price was based on an appraisal by American Appraisal Associates. Each key employee was required to make a down payment in the amount of the par value of the stock of $100 per share, which amounted to $162,000 each for four of the key employees and $161,900 for the fifth. Edward J. Shoen financed the entire $809,900 down payment for these shares by writing a check from his children's conservatorship funds to each key employee. The balance of the amounts due from the key employees was evidenced by five-year non-recourse promissory notes secured by a pledge of the newly issued stock. As part of the Key Employee Stock Purchase Plan, each key employee was required to grant the board a five-year irrevocable proxy to vote the shares purchased. The board, in turn, gave Edward J. Shoen exclusive authority to vote the proxies. By mutual agreement, these proxies were, however, subsequently revoked on August 3, 1988.
The board also approved outside counsel's suggestions to issue 100,000 shares of preferred stock and to require a two-thirds "supermajority" vote to effect any significant change in the company, such as a merger or sale of substantially all assets. Additional suggestions by outside counsel were considered and rejected. These included the adoption of a "fair price" provision in the corporate charter to prevent a majority from obtaining a control premium without sharing it with the minority. If adopted, such a provision would require that if a large portion of the company were sold, the price paid for all shares must be the same. The board also rejected the suggestions that directors' terms be staggered, and that all or part of the company be sold to a "white knight," i.e., the transfer of a block of stock to a friendly company to deprive the dissident stockholders' group of the ability to take over Amerco. The board also declined to issue an additional one hundred shares of common stock for possible use in a merger or for defensive activity. The meeting then ended.
As a consequence of the activities of July 24, Edward J. Shoen was authorized to vote those shares held by the employees under the Key Employee Stock Purchase Plan and ...
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