Loading...
HomeMy WebLinkAbout12-6711IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA CIVIL DIVISION FREDDIE BLISH, . Plaintiff, . v. . MICHAEL EGGIMAN and MICHAEL HOWARD, Defendants. 'III ~iV(I No.. ~~ NOTICE YOU HAVE BEEN SUED IN COURT. If you wish to defend against the claims set forth in the foregoing pages, you must take action within twenty (20) days after this Complaint and Notice are served, by entering a written appearance personally or by attorney to the claims set forth against you. You are warned that if you fail to do so the case may proceed without you and judgment may be entered against you by the Court without further notice for any money claimed in the Complaint or for any other claim or relief requested by the Plaintiff. You. may lose money or property or other rights important to you. YOU SHOULD TAKE THIS PAPER TO YOUR LAWYER AT ONCE. IF YOU DO NOT HAVE A LAWYER OR CANNOT AFFORD ONE, GO TO OR TEI EPHONE THE OFFICE SET FORTH BELOW TO :FIND OUT WHERE YOU CAN GET LEGAL HELP. THIS OFFICE CAN PROVIDE YOU WITH INFORMATION ABOUT HIRING A LAWYER. [F YOU CANNOT AFFORD TO HIRE A LAWYER, THIS OFFICE MAY BE ABLE TO PROVIDE YOU WITH INFORMATION ABOUT AGENCIES THAT MAY OFFER LEGAL SERVICES TO ELIGIBLE PERSONS AT A REDUCED FEE OR NO FEE. Cumberland County Bar Association 32 South Bedford Street Carlisle, PA 17013 Tel. No. 717-249-3166 X103 ~~ ~~ ~59~ ~~ IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA CIVIL DIVISION FREDDIE BLISH, . Plaintiff, No.: v,. MICHAEL EGGIMAN and . MICHAEL HOWARD, . Defendants. . COMPLAINT 1. Plaintiff Freddie Blish is a competent adult residing at 103 'Timberwolf Trail, Liberty Hill, Texas. 2. Defendant Michael Eggiman is a competent adult residing at 18797 NW Dairy Creek Road, North Plains Oregon. 3. Defendant Michael Howard is a competent adult residing at 11812 NW Rockton Drive, kIllsboro, Oregon. 4. The events alleged in this Complaint took place in Mechanicsburg, Cumberland County, Pennsylvania. 5. On or about April 11, 201.1 at: 1:10 pm Plaintiff initiated a telephone call from his mobile phone while inside his vehicle located in Mechanicsburg, Pennsylvania to the home of Defendant Eggiman. 6. Plaintiff engaged in a telephone conversation with both Defendants at this time. 7. 1laintiff did not consent to the recording of this conversation prior to the conversation. 8. Plaintiff later learned that this conversation had been recorded by Defendants without his permission. 9. Plaintiff has obtained a transcript of the telephone conversation, which is attached hereto, incorporated herein by reference, and marked Exhibit "A." 10. The contents of the conversation between Plaintiff and Defendants relate to negotiations regarding a business partnership dispute. COUNT I -Wiretapping and Electronic Surveillance Control Act 11. All paragraphs of this Complaint are incorporated herein by reference. 1?. The telephone conversation between Plaintiff and Defendants is a wire communication as defined by the Wiretapping and Electronic Surveillance Act (hereinafter "Act."} 13. Defendants intentionally recorded the call between themselves and Plaintiff. 14. 'The Act makes it a felony to ``intentionally intercept... any wire... communication." 1 ~. "The Act provides for a civil cause of action against a person who violates the Act. 1 b. As a result of Defendants' violation of the Act, Plaintiff has incurred additional attorney ~=ees related to the dispute between Plaintiff and Defendants,. 17. Specifically, Defendants have claimed the substance of the conversation between Plaintiff and Defendants to constitute an oral agreement, and have provided the transcript thereof to support their claim. 18. Additionally, the Act provides that Plaintiff is entitled to no "less than the sum of S> 1.000." 19. The Act also provides that P aintiff is entitled to recover "reasonable attorney fees and other litigation costs reasonably incurred." WHEREFORE, Plaintiff respectfully requests this Honorable Court enter judgment in his favor and against Defendants Michael Eggiman and Michael Howard in an amount in excess of the amount required for reference to statutory arbitration. COUNT II -Civil Conspiracy 24. All paragraphs of this Complaint are incorporated herein by reference. 21. Defendants acted with the common purpose of engaging Plaintiff in a telephone conversation which was recorded in violation of the Act. 22. Defendants in fact recorded their conversation without Plaintiff's consent in violation of the Act. 23. Plaintiff incurred damages as described above in detail as a result of Defendants' actions. 24. Defendants acted willfully and with reckless disregard for Plaintiff's rights under the Act. 25. Defendants' attempts to the use the transcript from the conversation between themselves and Plaintiff show that Defendants acted maliciously toward Plaintiff in recording the conversation. WHEREFORE, Plaintiff respectfully requests the Honorable Court enter judgment in his favor and against Defendants Michael Eggiman and Michael Howard for his actual damages and for punitive damages in an amount in excess of the amount required for reference to statutory arbitration. Respectfully submitted, Matthew D. Menges, Esquire Sup. Ct. ID No. 208132 Menges & McLaughlin, PC 145 East Market Street York, PA 17401 (717) 843-8046 Fax (717) 854-4362 nlmen~es(a;~~o~~rlawlirm~Forlife.con~ VERIFICATION I verify that the statements made in this Complaint are true and correct. I understand that false statements herein are made subject to the penalties of 18 Pa. C.S. Section 4904, relating to unsworn falsification to authorities. r ~-, -~- Dated: ~ r~ Z `'( ~ Zo ~ 2 IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA CIVIL DIVISION FREDDIE BLISH„ Plaintiff, No.. v. MICHAEL EGGIMAN and MICHAEL HOWARD, Defendants. CERTIFICATE OF SERVICE I, Brian Blais, Paralegal to Matthew D. Menges, Esquire do hereby certify that I am this day serving the copy of the foregoing Civil Complaint upon the Defendants named below, via certified mail, return receipt requestc;d. Michael Eggiman 18797 NW L)airy Creek Road North Plains, Oregon Dated: 11/1 /2012 Michael Howard 11812 NW Rockton Drive Brian Blais, Paralegal to: Matthew D. Menges, Esquire 145 East Market Street York, PA 17401 Phone: (717) 843-8046 Hillsboro, Oregon Respectfully Submitted, ,. M E: Freddie Freddie: Hey Mike! M H : Good morning Freddie, I' m here too FB: good morning Mike. Good, how you guys doing? ME: Good. FB: (faint) Good ME: I was just about to call you cause I hadn't heard you...., it was getting late so.... F>~: Well I was ah driving and had to pull over to the side of the road to ahh to stop ME ok FB : didn't want to hazard to ah cut in and out and loose the signal. ME: yeah, ah that's a good plan. FB : Yeah. ME: well have you made a decision how you want to go? FB: well I've talked to my accountant and he looked at it and he thinks that we're we're you know under valued in PLAINTIFF'S EXHIBIT the sense that ah you know taking into account the value of our brand name which is really starting to kinda come a long way we spent seven years building the name but you know I'm not going to drag my feet. Ahh I know you guys seen to be you know intent on ah making this happen sooner than later, Om I mean I think it's worth more than that I mean if I were to come to you two and offer you 20 thousand dollars to buy the both of you out I' m not so certain you'd accept that. But ah you know for the sake ahhh you know friendships and everything else I'll go ahead and I' 11 take the 10 thousand. I' 11 take the ah you know the hours ommm and ah you know I do want to reserve rights to the designs of what we where our existing targets are not I plan on making anything nor am I planning on selling them to anybody but I would like to be able to have those you know and rights to the exiting designs anything you do beyond that is yours of course. MIS: and which targets are those? FB: what's that? MIJ: and which targets, which designs are those? FB : ah I' m just talking about ah the DOD mill spec base ah you know large reactor base and ah ohm those things`? MF;: and you designed those? FB : well ah there're one third owned by all of us, I mean they're all part of what I'm saying is that by designed I mean that you know we have rights like anyone would have in this company. Ah I mean unless you designed those and patented them under your name Mike I'm not certain. , . ME: there are not patents so so I cannot stop you from copying anything we do at any point so... FB: well and that's what I thought so too but I just wanted to make sure that you guys that you guys were comfortable understanding that too. Believer me I' m not going anywhere I'm not going to have to ...but I just wanted to so that down the road if I wanted to manufacture my own targets ah, you know I figured that I `d like to you know not that I' d like to use those designs but I' d like to know that we're all in agreement about that. ME: yeah, well anything that isn't patented you can certainly copy so...... FB : yeah, yeah, yeah, ME: that makes sense: FB: Yeah, yeah but I just wanted to make sure that yeah that it wasn't like 5 years from now or something you guys aren't like hey how come you are using our design? You know, yeah. ME: yeah, we would have no legal claim so.... That's not a big deal.... FB: Yeah, yeah, that's not the case . but by then Mike I'm sure you'll have designed better stuff so.... It wouldn't like I' d be a threat. ME: yeah, we're a it's a.... moving target that's for sure. FB: yeah, yeah, you've done a superb job with the design and like I've said not in a position nor am I interested in this point establishing another steal target company it's not in my radar screen at the moment. So.. ME: okay FB : but ah I figured you know what for the sake of everything it's not worth squabbling over things not worth that if you guys have an offer for the company that I'm not aware of it would negate these things. ME: yeah we have no offers for the company as you know FB : yeah, yeah, yep, but other than that, that' pretty much it. I think that's the best we can do. Because I mean I just you know as my as my accountant was saying you gotta have independent tests coming in but it's spending: money we don't need to spend., Ah.... Can you do the trust but verify. Sure ahh but at this point you know we should be where we are. ME: okay so ah we're going to consider this a ah official corporate meeting where we buy out your shares of the cornpany for 10 thousand dollars. FB : Right plus the hours of owed and ah and the 3 thousand dollars worth of targets I'll just hang on to those ommm. ME: why, why don't you just return those to us Freddie`? FB : Ahhh I' m not I' m I' 11 try to do that but it can costyau a lot of money to return them.... ME; well it will cost me less than 3000 dollars. I'd rather, Freddie I' d rather have you return them or I can charge you for' them because they were suppose to be sold they were not freebee give-aways. FB: yeah if I tell you what just charge them to me at the employee price 50% off retail ME: okay, I' 11 send you an accounting of ah of everything the 10 thousand for the purchase of the company ah we' 11 pay you for the back hours that you're owed and we' 11 deduct for the targets. FB: okay just deduct for the targets at the employee discount price off my hours and we'll call it. ME: okay, now ommm, what I had done on the ah hours is I estimated that you hacl 20 hours for the last 2 months cause you hadn't turned any hours in so I just used those that' s FB : yeah ME: that's how I came up with those numbers if that's ah a reasonable assumption we'll just go with that ----okay`.' FB : ahh j ust a minute ... I' m sorry . MIE: so we show we owe you 24, ------$2,460 dollars. FB: let's see did you, cause I submitted hours up thru Jan, I didn't do hours for Feb and March and so what you're saying is 20 hours for Feb and march. MF : that is correct. FB : okay, yeah I' m comfortable with that. MIJ: okay. All right, that sounds good Freddie... FB : all right. ME: well ah, I'll draft l~~p an email that ah you know confirms all this and we'll move ahead. FB : all right well good luck to you guys. ME: and good luck to you and your new company. FB: yep MH: we wish you well Freddie. FB : what's that? MH: we wish you well. FB: all right same to you guys you'll do well, the door is just starting to move forward. Yeah, yeah, MH: via, condios FB : I'll let you guys go. MF: Alright thanks Freddie FB : all right by ME: if he's in a car....what was the background noise? Transcribed by Betty E 9-12-11 r •,, y °"_ y CIPRIANI & WERNER, P.C. ~r#, © Rµ~,.~:' Hugh M. Emory, Esq. ~ ~ ... ~c rv ~'r" =~, ~~- . Attorney ID No. 16129 ~~ -- : -" ~ P' 450 Sentry Parkway -Suite 200 ; ,.-~ ;~ ~= ~ ~ -P- Blue Bell, Pennsylvania 19422 = ' `~' r^ r -- . ~; Telephone: 610-567-0700 . ~°Y . c~a Attorneys for Defendants `~~' IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY FREDDIE BLISH Plaintiff, :CIVIL ACTION vs. :DOCKET NO. 12-6711.-CIVIL MICHAEL EGCGIMAN and :JURY TRIAL DEMANDED MICI~IAEL HOWARD Defendants NOTICE TO PLEAD YOU ARE HEREBY NOTIFIED TO PLEAD TO THE ENCLOSED PRELIMINARY OBJECTIONS WITHIN TWENTY (20) DAYS FROM SERVICE HEREOF OR A DEFAULT JUDGMENT MAY BE ENTERED AGAINST YOU. CIPRIANI & WERNER, P.C. By: ~~~~~ Hu M. Emory, Esquire Attorney for Defendants Dated: November 19, 2012 CIPRIANI & WERNER, P.C. Hugh M. Emory, Esq. Attorney ID No. 16129 450 Sentry Parkway -Suite 200 Blue Bell, Pennsylvania 19422 Telephone: 610-567-0700 Attorneys for Defendants IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY FREDDIE BLISH Plaintiff, CIVIL ACTION vs. MICHAEL EGGIMAN and MICHAEL HOWARD Defendants DOCKET NO. 12-6711-CIVIL JURY TRIAL DEMANDED DEFENDANTS' PRELIMINARY OBJECTIONS Defendants file these Preliminary Objections pursuant to Pa. R.C.P. 1028 on the following grounds: I. Lack of Jurisdiction 1. As alleged in the Complaint, both of the Defendants are residents of the State of Oregon. 2. As alleged in the Complaint, the act giving rise to the Complaint was the recording of a telephone conversation by the Defendants when the Defendants were in the home of Michael Eggiman in North Plains, Oregon. 3. No act giving rise to the alleged cause of action was performed by either of the Defendants in Pennsylvania. 4. There is no indication in th.e transcript of the recorded conversation, Exhibit A to the Complaint, that either of the Defendants were aware that the Plaintiff was in Pennsylvania, and. in fact, neither of them was. 5. The injury or harm which the Plaintiff alleges arose from the recorded conversation, as alleged in Paragraphs 10, 16 and 17 of the Complaint, was the incursion of additional legal fees in a business dispute between Plaintiff and Defendants. 6. The business dispute in question was the case of Salute Products, Inc , Plaintiff v Freddie S. Blish, Defendant and Freddie S. Blish, individually and on behalf of Salute Products, Inc., Third-Party Plaintiff v. Michael Eggiman, an individual and Michael Howard, an individual, Third-Party Defendants, filed in the Circuit Court of the State of Oregon for the County of Washington, Case No. C114703CV. Plaintiff was represented in that action by David P. Smith, Esq., of West Linn, Oregon. 7. It is not illegal in Oregon for a person to record a conversation as long as that person is a participant in the conversation. ORS 165.540(1)(a). 8. The legality of the recording of the conversation was specifically raised by Defendants in "Plaintiff's Motion for Partial Summary Judgment and Third-Party Defendants' Motion for Summary Judgment" filed in the Oregon matter. A copy of said Motion is attached as Exhibit "A". See especially page 21. x ~ 9. Plaintiff filed an "Opposition to Motion for Partial Summary Judgment", a copy of which is attached as Exhibit "B". At no point in it does he allege that the recording of the conversation was illegal. 10. The recording of a telephone conversation by a person located in Oregon and with. a device located in Oregon is not a violation of the Pennsylvania Wiretapping Act. 11. Neither of the Defendants has even minimal contact with Pennsylvania such as to confer personal jurisdiction over them. 12. With respect to Defendant Michael Eggiman: a. Mr. Eggiman has never been in Pennsylvania. b. Mr. Eggiman does not own any property, real or personal, in Pennsylvania. c. Mr. Eggiman does not transact any business in Pennsylvania. d. Mr. Eggiman is not employed by any business located in Pennsylvania and has never worked in Pennsylvania. 13. With respect to Michael Howard: a. As a member of the United States Military, Mr. Howard travelled to Gettysburg, Pennsylvania on a few occasions in the 1970s, 1980s and 1990s. The last time he travelled to Pennsylvania was a trip as a civilian in 2008 when he took his children to Gettysburg. b. Mr. Howard does not own any property, real or personal, in Pennsylvania. c. Mr. Howard does not transact any business in Pennsylvania. d. Mr. Howard is not employed by any business located in Pennsylvania and has never worked in Pennsylvania 14. There is absolutely no basis for personal jurisdiction over either of the Defendants in Pennsylvania. WHEREFORE, Defendants move that this case be dismissed for lack of jurisdiction. CIPRIANI & WERNER, P.C. By: Hug .Emory, Esquire Date: November 19, 2012 VERIFICATION I, Michael Howard, Defendant in this action, hereby certify that the statements in the foregoing Preliminary Objections to PlainfYff's Complaint axe true and correct to the best of my knowledge, information and belief, including information provided to me by employees of this organization. This statement and verification is made subject to the penalties of 18 Pa.C.S.A. §4904 relating to unsworn falsification to authorities, which provides that if I knowingly make false statements, I may be subject to criminal penalties. Signature Dated: j,~ X.jl~`~~~I~~~~. ~~, VERIFICATION 7, Michael Eggirnan, Defendant in this action, hereby certify that the statements in the foregoing Preliminary Objections to Plaintiffs Cam~laint are true and correct to the best of my knowledge, information and belief, including information provided to me by employees of this organization. This statement and verification is made subject to the penalties of 18 Pa.C.S.A. X4904 relating to unsworn falsification to authorities, which prarides that if I knowingly make false statements, I may 13e subject to criminal penalties. Dai_r-~: EXHIBIT "A" 1 2 3 4 5 6 1N THE CIRCUIT COURT OF THE STATE OF OREGON 7 FOR THE COUNTY OF WASHINGTON 8 SALUTE PRODUCTS, INC., Case No. C114703CV 9 Plaintiff, PLAINTIFF' S MOTION FOR PARTIAL SUMMARY JUDGMENT AND THIRD 10 v. PARTY DEFENDANTS' MOTION FOR SUMMARY JUDGMENT 11 FREDDIE S. BLISH, 12 Defendant. Oral Argument Requested 13 Court Reporting Services Not Required I4 FREDDIE S. BLISH, individually and on behal of SALUTE PRODUCTS, INC. Time Estimate: 30 Minutes 15 Third-1?arty Plaintiff, 16 v. 17 MICHAEL EGGIMAN, an individual, and 18 MICHAEL HOWARD, an individual, 19 Third-Party Defendants. 20 21 MOTION 22 Pursuant to ORCP 47C, plaintiff Salute Products, Inc. ("Salute") and third-party 23 defendants Michael Eggiman ("Eggiman") and Michael. Howard ("Howard") (collectively the 24 "Shareholders") move this Court for an order granting judgment in their favor on both Salute's 25 individual contract claims and defendant's/third-party plaintiff Freddie Blish's ("Blish") third-party 26 claims on the grounds that there are no genuine issues of material fact and that Salute and the Pale 1 - PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT AND THIRD PARTY DEFENDANTS' MOTION FOR SUMMARY JUDGMENT FARLEIGH WADA WITT C \Users\whinesWppData\Local\Ivficrosoft\Windows\Temporary Internet Files\ConCent.OutlooklUZGWJ9LJR13BG0874- Attorneys 3t LaW Plaintiffs Motion for Summary Judgment (2).DOC 121 SW Morrison Street, Suite 604 Portland, Oregon 97204-3136 Telephone: (503) 228-6044 Facsimile: (503) 228-1741 4 1 Shareholders are entitled to judgment as a matter of law. This motion is supported by the Points 2 and Authorities, below, and the Declarations of Michael Eggiman ("Eggiman Dec."), Michael 3 Howard ("Howard Dec.") and Kimberley Hanks McGair (,"McGair Dec."), filed herewith. POINTS AND AUTHORITIES 5 I. Summary of Argument. 6 This is a simple contract case in which Salute seeks to enforce Blish's promise to 7 sell his stock in Salute back to Salute. Salute is a closely-held corporation which was formed by 8 Eggiman, Howard and Blish as equal shareholders in 2004. It makes steel shooting targets. At 9 the time of formation, each shareholder agreed to perform certain duties for Salute without 10 compensation other than yearly distributions of net profit, if any. Blish's duties included all 11 sales and marketing for Salute. In 2011, defendant Blish accepted a sales position with LaRue 12 Tactical, a Texas company that makes a target which directly competes with Salute's products. 13 As a result of that employment, Blish could no longer perform his end of the shareholders' 14 bargain because he could not sell both LaRue and Salute targets. Consequently, Salute (by and 15 through Eggiman and Howard) approached Blish and offered to buy his shares in Salute for 16 $10,000, twice his initial capital investment. After a month of consideration, Blish agreed to sell. 17 This agreement was made in a recorded corporate meeting so that there is no dispute whatsoever 18 as to what was said in that meeting. Despite his agreement to sell, which he later confirmed in 19 an email, Blish has refused to execute the necessary assignment documents, has tried to back-out 20 of his agreement with Salute and has demanded that Salute pay him more than six times the 21 agreed-upon amount for his shares. 22 Salute brought this action for specific performance to compel Blish to perform his 23 agreement to sell his shares. In response, Blish has alleged every imaginable defense. as well as 24 asserted third-party claims against the Shareholders which are baseless. Because there is no 25 factual dispute that Blish agreed to sell his shares to Salute for $10,000, Salute now seeks 26 summary judgment enforcing that promise and dismissing Blish's meritless claims and defenses. Page ? - PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT AND THIRD PARTY DEFENDANTS' MOTION FOR SUMMARY JUDGMENT FARLEICH WADA WITT C\lJsers`,whines\AppData\L,ocal\Ivlicrosoft\Windows\Temporary Internet FilesiContent.Outlook\UZGWJ9UR\3BG0874- Attorneys at Law Plaintiffs Motion for Summary Judgment (2).DOC 121 SW MOt71SOn Street, Suite 600 Portland, Oregon 97204-3136 Telephone: (503) 228-6044 Facsimile: (~03) 228-1741 1 II. Statement of Facts. 2 A_. Formation of Salute Products, Inc. 3 On Christmas Day 2003, while home in Helvetia between deployments to Iraq, 4 Howard had the idea to start a company manufacturing free-standing steel shooting targets. 5 Howard Dec. ¶ 2. His idea was borne partially from his own life-long frustration with shooting 6 at paper targets, and partially from his assignment in Iraq to assist with the training of the new 7 Iraqi armed forces, for whom paper targets were not effective. Id. Sitting in his home after the 8 holiday festivities, Howard had the idea to start a company that would design and produce steel 9 targets for both military and individual firearm enthusiasts. Id. Shortly after he came up with 10 the concept, he spoke with Eggiman, a friend from church. Id. Eggiman is an engineer and had 11 just completed a successful career as one of the founders of DeMarini Sports, the maker of the 12 famous DeMarini softball bat. Id.; Eggiman Dec. ¶ 2. Eggiman was immediately intrigued with 13 the idea and began to work on designing a free standing target. Id. The next person. that Howard 14 spoke to about the project was Blish. Id. Howard and Blish have known each other since 1996 15 when they were both serving in the U.S. Marine Corps. Howard Dec. ¶ 2. Because Blish had 16 conducted firearms training throughout his career in the military, and had worked as an adjunct 17 instructor at a private firearms academy, Gunsite Academy, Howard felt he would be a valuable 18 addition to this new venture. Howard Dec. ¶ 2. 19 The three men agreed to form a small corporation to design, produce and sell steel 20 targets and plaintiff Salute is the entity that they formed. Howard Dec. ¶ 2; Eggiman Dec. ¶ 3. 21 Salute was formed in June 2004. Howard Dec. ¶ 3; Eggiman Dec. ¶ 4, Ex. A. Originally, 22 Eggiman and Howard each held 1,200 shares of Salute stock and Blish held 600 shares, but Blish 23 purchased another 600 shares in 2006 so that the three men were equal shareholders. Howard 24 Dec. ~ 3; Fggiman Dec. ¶ 4. They agreed to grow the company from the ground up, without 25 taking on debt, and to make sure that it was self-supporting at all times. Howard Dec. ¶ 4; 26 Eggiman Dec. ¶ 5. In order to do this, and avoid hiring employees, the founders agreed to Page 3 - PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT AND THIRD PARTY DEFENDANTS' MOTION FOR SUMMARY JUDGMENT F,9RLElGH WADA W/TT C\Users',whines\AppData\Local\Ivlicrosoft\Windows\Temporary Internet FileslContent.0utlook`,IIZGWJ9UR\3BG087i- Attorneys at Law Plaintiffs Motion for Summary Judgment (2).DOC 121 SW Morrison Street, SUite 600 Portland, Oregon 97204-3136 Telephone: (503) 228-6044 Facsimile: (503) 228-L741 1 perform work for the company with their only compensation to be potential year-end 2 distributions. Howard Dec. ¶ 5; Eggiman Dec. ¶ 5; McGair Dec., ¶ 1, Exhibit 1 ("Blish Depo."), 3 p. 28. line 22 - p. 29, line 3; p. 34, lines 5 - 20. Each shareholder agreed to be responsible for a 4 particular area of the business. Howard Dec. ¶ 4; Eggiman Dec. ¶ 5. Because he was the metals 5 engineer, Eggiman was responsible for the design and production of the targets. Blish Depo., p. 6 27, lines 14-21; Howard Dec. ¶ 4; Eggiman Dec. ¶ 5. Eggiman also handled all of the financial 7 management for Salute. Howard Dec. ¶ 4; Eggiman Dec. ¶ 5. Blish was responsible for sales 8 and marketing. Blish Depo.; p. 27, lines 14-21. Id. Howard was to assist with the production, 9 ordering and shipping process. Howard Dec. ¶ 4; >~;ggiman Dec. ¶ 5. Each shareholder's 10 performance of services in their designated area was critical to the formation and success of 11 Salute. Howard Dec. ¶ 5; Eggiman Dec. ¶ 6. Salute was not designed, nor expected, to be a 12 passive investment opportunity for any of the three shareholders, but was rather aclosely-held 13 corporation where the shareholders themselves must perform services in order for the company 14 to operate and grow. Id. 15 B. Salute Begins Operations. 16 Salute did slowly grow. Eggiman, with. the advice of Howard and, to a lesser 17 extent, Blish, made significant design improvements to the original idea of afree-standing target, 18 including designing aspring-loaded base, designing a mechanism that allowed the target to re-set 19 itself and increasing the angle at which the target leans forward which allows the use of higher- 20 caliber firearms. Howard Dec. ¶ 6; Eggiman Dec. ¶ 7. Originally, Salute out-sourced the 21 production of its targets. Howard Dec ¶ 6; Eggiman Dec. ¶ 7. It then started a small 22 manufacturing facility inside an old airplane hangar on Eggiman's property in North Plains. 23 Howard Dec ¶ 6; Eggiman Dec. ¶ 7. After several moves, it is now operating out of a large shop 24 and barn on property Eggiman owns in Helvetia. Howard Dec ¶ 6; Eggiman Dec. ¶ 7. 25 Throughout this time, Salute has rented both space and a plasma cutter (a piece of equipment 26 used to cut the steel targets from sheets of steel) from Eggiman because it lacked the funds to Page 4 - PL,AINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT AND THIRD PARTY DEFENDANTS' MOTION FOR SUMMARY JUDGMENT F.9RLE/GHWADA WITT C:`User,',whines'AppData`d.ocal\Ivlicrosofr\Windows\Temporary Internet FileslContent.Outlook\UZGWJ9UR\3BG0874- Attorneys at Law Plaintiffs Motion for Summary Judgment (2).DOC 121 S W Morrison Street, Suite 600 Portland, Oregon 97204-3136 Telephone: (503) 228-6044 Facsimile: (503)228-1741 1 lease space on the open market or to purchase a plasma cutter. Howard Dec ¶ 8; Eggiman 2 Dec. 1J 9. These financial arrangements have been fully-disclosed to Blish and he has never 3 raised any objection to them. Blish Depo., p. 31, line 6 - p. 33, line 1.2. 4 Blish retired from the military in 2007 and began working for Aimpoint 5 Incorporated, which manufactures electronic sights for firearms. Blish Depo., p. 11, line 22 - p. 6 12, line 3. During the time that he worked for Aimpoint, he also agreed to, and did, perform 7 sales and marketing services for Salute. Blish Depo., p. 35, lines 9-23. This was possible 8 because Aimpoint and Salute are not direct competitors as they make different product lines 9 within the firearms industry. Eggiman Dec. ¶ 10; Howard Dec. ¶ 9. During this time, Eggiman 10 and Howard handled all aspects of the design, production, ordering, shipping and administration 11 of Salute. Howard Dec. ¶ 9: Eggiman Dec. ¶ 10. In 2009, Howard recognized that, because 12 Eggiman oversaw the day to day production, as well as the finances of the company. Eggiman 13 was contributing far more time to the company than either Howard or Blish and that it was unfair 14 for Eggiman to continue to receive only the same one-third of the year end distributions for what 15 was a proportionally larger contribution of time and energy. Howard Dec. ¶ 10. He suggested 16 that all. three shareholders begin keeping track of their hours and receive compensation at the rate 17 of $20 per hour for their work, with the remaining net profits to be distributed equally at the end 18 of each year. Howard Dec. ¶ 10; Eggiman Dec. ¶ 11; Blish Depo. p.:54, lines 1~-24, p. 56, lines 19 4-14. All three shareholders were in agreement with this plan and Blish never raised any 20 objection to the amount of compensation received by either of the other shareholders. Blish 21 Depo., p. 56, line 25 - p. 57, line 13. 22 C. Blish Accepts Employment with Competitor. 23 In February 2011, Blish left Aimpoint's employ and began discussions with 24 another company in the firearms industry, Austin Precision Products Incorporated dba LaRue 25 Tactical ("LaRue"), about becoming employed in the sales and marketing area of that company. 26 Blish Depo.. p. 14, line 25 - p. 15, line 12. He ultimately accepted employment with LaRue Page 5 - PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT AND THIRD PARTY DEFENDANTS' MOTION FOR SUMMARY JUDGMENT FARLEIGH WADA WITT C_\Users\wliinesl.4ppData\Local\Microsofr\Windows\Temporary Internet FileslContent.Outlook\UZGWJ9[JR\3BG0874- Attorneys at LaW Plaintiffs Motion for Summary Judgment (2).DOC I21 SW Morrison Street, Suite 600 Ponland, Oregon 97204-3136 Telephone: (503) 228-b044 Facsimile: (503) 228-1741 1 2 3 4 5 6 7 8 9 10 11 12 13 14 effective March 15, 2011 as the Director of Government Sales for LaRue. Blish Repo., p. 13, lines ~-9. Unlike Aimpoint, LaRue manufactures and sells a target that is "similar'' and a director competitor of Salute's products. Blish Depo., p. 62, line 2 - p. 64, line 20; Howard Dec ¶ 11; Eggiman Dec. ¶ 12, Ex. B. Because LaRue was a direct competitor of Salute, Eggiman and Howard. raised concerns about how Blish could continue to be a shareholder at Salute and perform his sales and marketing obligations, while also being obligated to perform the same sales and marketing services for LaRue for a competing target. Howard Dec. ¶ 12; Eggiman Dec. ¶ 13; Blish Depo. p. 59, line 5 - p. 60, line 10. Blish conceded during those calls that he could not sell Salute targets once he took a position with LaRue. Howard Dec. ¶ 12; Eggiman Dec. ¶ 13; Blish Depo., p. 71, lines 6-15. Blish stated in his deposition that, once he agreed to take the job at LaRue, he wanted to either "sell. his shares or become a silent partner" in Salute. Blish Depo., p. 65, lines 9-24. In other words, he acknowledged that he could not perform the sales and. marketing obligations he had agreed to perforrr> as a shareholder of Salute. Salute would. either need to hire someone to do that work, or the other Shareholders would need 15 to take it on. Blish wanted to either sell his shares to Salute or the Shareholders, or remain a 16 17 18 19 20 21 22 23 24 25 26 "silent partner," where he could continue to collect one-third of the net profits of the company generated by Howard and Eggiman without actually contributing any time or effort. Not surprisingly, the `'silent partner" option was unacceptable to Eggiman and Howard as it was both contrary to the long-standing agreement between the three men when they started the company, and fundamentally unfair. Howard Dec. ¶ 12; Eggiman Dec. ¶ 13. After discussing it amongst themselves on a number of occasions, the Shareholders agreed that the best option to address Blish's need to accept the job offer at LaRue was to simply have Salute buy, or redeem, Blish's shares. Howard Dec. ¶ 14; Eggiman Dec. ¶ 15. The Shareholders agreed that Salute would offer to purchase Blish's 1,200 shares of Salute stock (the "Shares") for $10,000, doubling the investment that Blish had made in Salute. Howard Dec. ¶ 14; Eggiman Dec. ¶ 15; Blish Depo., p. 75, line 11 - p. 76, line 7, Ex.. 2. On March 3, 2011, the Page 6 - PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT AND THIRD PARTY DEFENDANTS' MOTION FOR SUMMARY JUDGMENT FARLEIGH WADA WITT C:`Users\whines\AppData\LocallMicrosoft\Windows\Temporary Internet Files\Content.0utlook~UZGWJ9UR\3BG0874- Attorneys at LaW Plaintiffs Motion foir Summary Judgment (2).DOC 121 SW Morrison St[eet, Suite 600 Portland, Oregon 9 7204-3 1 3 6 Telephone: (503) 228-6044 Facsimile: (503) 228-1741 1 Shareholders extended a written offer to Blish to purchase his Shares for $10,000. Blish Depo., 2 Ex. 2. Blish did not respond. Eggiman Dec. ¶ 16. On Apri13, 2011, Eggiman sent Blish an email, 3 reminding him that the three men had agreed to resolve the issue of Blish working for LaRue, and 4 thus being unable to fulfill his sales and marketing obligations for Salute, by the end of March and 5 requesting that Blish respond to the offer to purchase his Shares for $10,000. Blish Depo., Ex. 5. 6 A few days later, Eggiman again contacted Blish requesting a decision. Blish Depo., Ex. 6. In that 7 email, Eggiman expressed what he believed were the only two options available to the 8 shareholders and Salute given Blish's acceptance of employment at the competing company, 9 LaRue: l) the buyout of Blish's shares for $10,000; or 2) dissolution of Salute as it could not 10 continue with Eggiman and Howard contributing their substantial "sweat equity'' and Blish doing 11 nothing for the company, selling a competitor's targets, but still wanting one-third of the net 12 proceeds. Id. In that email, Salute set a corporate meeting for April 8, 2011 at 10 AM to discuss 13 resolution of the issue. Id. Blish raised no objection to the occurrence of a meeting, nor the timing 14 or location of the meeting and agreed to attend the meeting by telephone. Blish Depo,, Ex. 7. 15 D. Blish Agrees to Sell Shares to Salute. 16 The Salute corporate meeting took place on April 8, 2011 at approximately 10 AM. 17 Eggiman Dec. ¶ 17; Howard Dec. ¶ 15; Blish Depo., Ex. 8. It began with Eggiman asking Blish if 18 he had made a decision about Salute's offer to redeem the Shares. Blish Depo., p. 85, lines 22-25, 19 Ex. 8 ("Call Transcript"), p. 1. Blish responded that he had considered the offer and that his 20 accountant told him that he thought the offer undervalued Blish's Shares.l Call Transcript, p.2. 21 Nonetheless, Blish accepted Salute's offer to sell his Shares for $10,000. Call Transcript, p.2. 22 Specifically, he said, "...I'll go ahead and I'll take the 10 thousand. I'll take the .,.hours...and 23 I do want t:o reserve right to the designs of ...our existing targets." Id. (emphasis supplied). The 24 25 'Notably, in his deposition, Blish conceded that this statement was not true, that his accountant had not expressed any opinion of value and, in fact, refused to express an opinion of value because he did 26 not believe he was qualified to do so. Blish Depo., p. 77, line 16 - p. 78, line 13. Page 7 - PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT AND THIRD PARTY DEFENDANTS' MOTION FOR SUMMARY JUDGMENT C^.Userslwhines\AppData\Local\MierosoftlWindows\Temporary Internet Files\Content.Outlook\UZGWJ9UR\3BG0874- FgR~ErcH wAnA wrrT PlaintiFfs Motion for Summary Judgment (2).DOC Attorneys at Law 121 SW Morrison Street, Suite 600 Portland, Oregon 97204-3136 Telephone: (503) 228-6044 Facsimile: (503) 228-1741 1 three rnen continued the discussion with Blish stating that it was not worth "squabbling over 2 things," and that his accountant recommended an independent valuation, but paying for a 3 valuation was "spending money we don't need to spend." Call Transcript, p. 4. Eggiman 4 confirmed the arrangement, saying "we're going to consider this an official corporate meeting 5 where we buy out your shares of the company for $10,000." Icl. Blish confirmed that was 6 correct, plus certain wages owed to him. Id. at p. 5. The three men then went on to discuss what 7 to da with certain Salute targets in his possession and he and Salute agreed that he would buy 8 those from the company for $1,500. Id. Blish requested that the cost of the targets be deducted 9 from his wages and Salute agreed. Id. at pp. 5-6. Eggiman agreed to draft an email confirming 10 the agreement. Id. at p. 6. In sum, there is no question, that based on the written transcript of the 11 April 8t" meeting (which all parties agree is accurate), Blish agreed to sell the Shares to Salute 12 for $10,000. At no time during the meeting did he suggest a different price, make a counteroffer, 13 indicate that he did not want to sell his Shares or express any disagreement whatsoever with the 14 concept and specific terms of the buyout. 15 On April 15, 2011, Eggiman sent B1ish a final accounting of amounts to be paid 16 to him, along with a formal Assignment of Shares for Blish to execute assigning his Shares to 17 Salute. Blish Depo., Ex. 9. That email also included formal corporate meeting minutes of the 18 April $th meeting and necessary notice waivers. Id. Blish concedes that this was the formal 19 email he expected confirming the meeting. Blish Depo., p. 122, lines 1-8. On April 21, 2011, 20 Blish sent a response to Eggirnan's April 15th email in which he confirmed the agreement to sell 21 his Shares to Salute and stated that he "will get a signed copy of the assignment of shares and 22 minutes mailed to you shortly." Slish Depo., Ex. 10 (emphasis supplied). Despite his promise 23 to do so, Blish did not return the executed assignment and, more than a month later, on May 14, 24 2011, Blish sent Eggiman an email indicating that he wanted to have professional valuation 25 performed at Salute's expense. Eggiman Dec. ¶ 1$, Ex. D. This is the same valuation that he 26 specifically rejected as too costly on April $th. Call Transcript, p. 4. Page 8 - PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT AND THIRD PARTY DEFENDANTS' MOTION FOR SUMMARY JUDGMENT FAxcEtcH w~nA w~rr C_ Users whines AppData`~LocaPMicrosoftlWindowslTemporazy InCemeC FileslContenC.Outloak'.UZGWJ4UR13BGCS74' Attorneys at Law Plaintiff s Motion for summary Judgment (2).DOC 121 SW iVlorrison Street. ~~^`° '" Port(an~+ (` 1 E. Blish Fails to Perform Agreement to Sell Shares. 2 Ultimately, Blish failed and refused to execute the written assignment of his shares, 3 despite numerous requests from Salute that he do so. While Salute considers the sale of Shares to 4 have occurred and reflected as much in its 2011 tax returns, the formal documentation has not been 5 completed to transfer the Shares on Salute's books and thus the payment has not been made. 6 Eggiman Dec. ~ 19. After being unable to resolve this matter amicably, Salute commenced this 7 suit to enforce the agreement reached during the April 8t" meeting. Blish has asserted a myriad of 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 2~ baseless defenses and third party claims. Salute, Eggiman and Ht>ward now seek summary judgment on Salute's breach of contract claims and against Blish's third party claims. II. Legal Argument. A. Standard of Review. Summary judgment is appropriate if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. ORCP 47C. The Court views ``the facts and all reasonable inferences that may be drawn from them in favor of the nonmoving party." Scott v. State Farm Mut. Auto Ins. Co., 345 Or 146, 148, 190 Pad 372 (2008). No genuine issue of material fact exists, however, if, based upon the record before the Court, "no objectively reasonable juror could return a verdict for the adverse party on the matter that is the subject of the motion for summary judgment." ORCP 47C. A party opposing summary judgment `'may not rest upon the mere allegations or denials of that party's pleading,'' but rather "must set forth specific facts showing that there is a genuine issue as to any material fact for trial." ORCP 47D. Summary judgment is particularly appropriate in a case like this one, where there are no disputes as to the material facts related to the parties' agreement that Salute would purchase Blish's Shares for $10,000. B. Salute is Entitled to Prevail on its Breach of Contract Claims. The requirements of contract formation are familiar black-letter law: 1) an "offer 26 containing a promise far a consideration to do an act;'' 2) "unqualified and unequivocal Page 9 - PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT AND THIRD PARTY DEFENDANTS' MOTION FOR SUMMARY JUDGMENT FARLEIGH WADA WITT C:'Users\whines\AppData\L,ocal\Ivticrosoft\Windows\Temporary Internet Files\ContentOutlook\UZGWJ9UR\3BG0874- Attorneys at Law Plaintiffs Motion for Summary Judgment (2).DOC 121 SW Morrison Street, Suite 600 Portland, Oregon 97204-3136 Telephone: (503) 228-6044 Facsimile: (503) 228-1741 1 acceptance" by the offeree. Shaw Wholesale Co. v. Hackbarth, 102 Or 80, 94, 201 P 1066 2 (1921). All of these elements are satisfied by the communications between the parties at the 3 April 8t" meeting, and the emails both before and after the meeting. On March 3, 2011, Eggiman 4 and Howard conveyed an offer to Blish purchase the Shares for $10,000. Blish Depo., Ex. 2. 5 There is no question. that there was consideration for the offer. During the April 8`" meeting, 6 Blish communicated an unqualified and unequivocal acceptance of ghat offer when he said that 7 he would ``take the $10,000." Call Transcript, p. 2. This offer and acceptance was confirmed in 8 the April 15 and April 21 emails when Eggiman sent the formal assignment documents and Blish 9 agreed that he would execute them. Blish Depo., Exs. 10 and 1 1. Thus, as of April 8t", there was 10 an offer, acceptance of that offer and consideration. Consequently, there was a binding contract I 1 formed between Salute and Blish, which Blish is obligated to perform. 12 Having established the existence of an enforceable contract, the next question is 13 the remedy to which Salute is entitled. Salute seeks, and is entitled to, specific performance. 14 Specific performance is appropriate when the contract involves a unique subject matter for which 15 money damages are inadequate. CONTRACT LAw IN OREGON, § 3.6 (2003). That is the case here. 16 Just as specific performance is always an appropriate remedy for a contract for the conveyance 17 of real property, it is the appropriate remedy in this case as the Shares are unique and the promise 18 to convey them cannot be remedied by money damages. See Robertson v. Jones, 280 Or 507, 19 511, 571 P2d 905 (1977) (specific performance available for real property contracts). 20 Consequently, Salute is entitled to specific performance in the form of a decree that Salute owns 21 Blish's Shares. 22 The same analysis applies to Salute's claim related to the sale of the targets to 23 Blish. Blish offered to buy them for $1,500 and Salute agreed. Call Transcript., p. ~. Blish 24 retained the targets for his personal use and Salute is entitled to the agreed-upon sales price. 25 Blish has raised a myriad of affirmative defenses in an effort to avoid the simple 26 and clear result mandated by applying black letter contract law to the transcribed April Stn Page 10 - PLAINTIFF' S MOTION FOR PARTIAL SUMMARY JUDGMENT AND THIRD PAKTY DEFENDANTS' MOTION FOR SUMMARY JUDGMENT FARLEICH WADA WITT C:'.Users' whines\.4ppData.\Local~licrosoft\WindowslTemporary Internet Files\Content.0utlook\UZGWJ9UR`3BGQ874- Attorneys at Law Plaintiffs Motion for Summary Judgment (2).DOC 121 SW Morrison Street, Suite 600 Portland, Oregon 97204-3136 Telephone: (503) 228-6044 Facsimile: (503 228-1741 1 meeting and associated email communications. Salute will address each of these affirmative 2 defenses separately, below. 3 1. Statute of Limitations. The statute of limitations for a contract action in 4 Oregon is six years. ORS 12.0$0. This case was filed within a few months of the breach. 5 Salute's claims are not barred by the statute of limitations. 6 2. Laehes. While specific performance is an equitable claim, thereby 7 introducing the potential of laches, the applicable time period for a laches defense is presumed to 8 be the same as the most closely analogous legal counterpart. Oregon State Bar v. Wright, 309 Or 9 37, 41-42, 785 P2d 340 (1990). Here, the applicable legal counterpart is breach of contract, 10 which carries asix-year statute of limitations. ORS 12.080. Consequently, laches is equally 11 inapplicable because this case was filed less than six months after Blish failed to perform his 12 contractual obligations. 13 3. Statute of Frauds. Plaintiff claims that the contract by which Blish 14 agreed to sell his Shares must be in writing. Defendant's Amended Answer. Affirmative 15 Defenses and Third Party Complaint ("Answer"), ¶¶ 30 and 33. This is not correct under Oregon 16 law. Blish does not identify any legal authority for this defense. ORS 41.580 sets forth the 17 agreements which must be in writing in order to be enforceable, which are generally limited to 18 agreements to sell land, agreements that cannot be performed within one year by their terms and 19 agreements to guaranty the debt of another. An agreement to sell corporate stock is not covered 20 by the plain. language of that statute. Consequently, defendant's Fourth Affirmative Defense 21 fails with respect to Blish's agreement to sell his Shares. 22 Defendant has also argued that the agreement reached dtu~ing the April 8th meeting 23 is not enforceable because the parties expected to memorialize their agreement in a formal written 24 document. That argument also fails because the law in Oregon is clear that the mere contemplation 25 of a formal written documents does not render the oral agreement void or unenforceable. Wagner 26 v. Rainier A1fg. Co., 230 Or 531, 538, 371 P2d 74 (1962). In Wagner, the court held that, "if all the Page 1 I - PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT AND THIRD PARTY DEFENDANTS' MOTION FOR SUMMARY JUDGMENT FARLEIGH WADA W7TT C:\Users~whines`AppData\Local\Microsoft\WindowslTemporary Internet Files\Content.0ut1ooklUZGWJ9LJR13BG0874- Attorneys at Law Plaimiffs Motion for Summary Judgment (2).DOC 121 S W Morrison Street, Suite 600 Portland, Oregon 97204-3136 "Telephone: (503) 228-6044 Facsimile: (503) 228-1741 1 material terms which are to be incorporated into a future writing have been agreed upon, it may be 2 inferred that the writing to be drafted and delivered is a mere memorial of the con ract, which is 3 already final by the earlier mutual assent of the parties to those terms." Icy (internal citations 4 omitted). Thus, the fact that a formal assignment document was contemplated does not render the 5 oral agreement reached in the April 8t" meeting void. That oral agreement contained all of the 6 material terms, including the subject matter of the contract and the amount to be paid. There were 7 no other terms to be negotiated, as evidenced by Blish's Apri121, 2011 email in which he agreed to 8 execute the assignment and return it to Salute. Blish Depo., Ex. 10. 9 Finally, Blish argues that the sale of the targets he had taken from Salute for 10 $1,500 was required to be in writing under ORS 72.2010 because it was a sale of goods for more 11 than $50C-. However, a verbal agreement is binding if the goods have been accepted by the l2 buyer. ORS 72.2010(3)(c). Here, Blish is no longer conducting any sales activities on behalf of U Salute (which is the only valid reason other than his purchase for him to have the targets in his 14 possession). yet he concedes that he has the targets, that he moved them to his new home in 15 Texas and that he currently "uses them for personal use.'' Blish Depo., p. 97, lines 13-21. Thus, 16 there is no genuine issue of material fact that Blish accepted the targets, thereby satisfying the 17 statute of frauds in ORS 72.2010(3)(c). 18 4. Void. In his Fifth Affirmative Defense, defendant claims that the 19 agreement is "void," but identifies no factual or legal basis for this claim. Answer, ¶ 3 L In his 20 deposition, Blish testified that he believes the agreement he made in the April 8t" meeting is void 21 because it was '`between Mike Howard, Mike Eggiman and myself, and it was not done 22 according to the bylaws of the corporation." Blish Depo., p. 100, lines 9-13. Both of these 23 claims are re-asserted in the Ninth and Tenth Affirmative Defenses and are addressed below. 24 Thus, for all of the reasons set forth herein, this defense fails. 2~ 5. Essential Terms. Defendant claims that the agreement reached at the 26 April 8t" meeting did not "contain all of the essential terms for such an agreement.'' Answer, Page 12 - PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT AND THIRD PARTY DEFENDANTS' MOTION FOR SUMMARY JUDGMENT FARLErcx wAOA wiTT G'Users,whines\AppDatalLocal\Microsoft~Windows\Temporary Internet Files',Content.Outlook\UZGWJ9UR\3BG087d- Attorneys at Law Plaintiffs Motion for Summary Judgment (2).DOC 121 S W Morrison Street, Suite 600 Portland, Oregon 97204-3 1 3 6 Telephone: (503) 228-6044 Facsimile: (503) 228-1741 1 ¶ 33. Again, his defense fails to specify what "essential terms" are missing. In his deposition, 2 Blish repeatedly stated that the parties had not come to "fiill agreement," but he could not 3 identify, despite repeated questioning, even one term that was stall under discussion. Blish 4 Depo., p. 101, line 4 -- p. 104, line 23. Moreover, Blish's April 21, 2011 email, where he 5 receives both the minutes of the meeting confirming the sale, as well as the written assignment, 6 and promises to sign and return those documents, destroys any claim he has that there were 7 essential terms missing and/or still under negotiation. 8 6. Bylaws. In his Eighth and Ninth Affirmative Defenses, defendant claims 9 that the agreement to sell his stock was "required to be in writing pursuant to the bylaws," and that 10 Salute, Eggiman and Howard "failed to follow the required procedure for the sale of stock under 11 Salute's bylaws." Answer, ¶¶ 34 and 35. Notably, neither in his Answer nor in his deposition has 12 Blish identified any provisions of the bylaws he believes have been violated. While Salute's 13 bylaws do contain restrictions on the transfer of shares to third parties, those restrictions do not 14 apply to a transfer of shares to the corporation itself. Eggiman Dec., ¶ 4, Ex. A. Indeed, the 15 restriction provisions begin. with an obligation by the shareholder to offer the shares to the 16 corporation first. IcI at p. 8. Thus, because this transaction was between Salute and Blish, the 17 transfer restrictions in the bylaws are inapplicable. Finally, while Blish tries to avoid this 18 conclusion. by arguing that the transfer was between the Shareholders in their individual capacity, 19 on the one hand, and Blish, on the other hand, rather than between Blish and Salute. there is no 20 evidence to support that claim. The initial offer states that the Shareholders would "have the 21 company purchase your shares for $10,000." Blish Depo., Ex. 2. The minutes and formal 22 Assignment document, which Blish assented to and agreed to sign, all refer to the sale occurring 23 between Blish and Salute. Blish Depo, Ex. 9. There is no genuine issue of material fact that the 24 transaction was between Blish and Salute, and that, therefore, the transfer restrictions in the bylaws 25 are not applicable. 26 /// Page L3 - PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT AND THIRD PARTY DEFENDANTS' MOTION FOR SUMMARY JUDGMENT FABLE/GH WADA W/TT C \Userslwhines\AppData\Local\Microsofr\Windows\Temporary Internet Files\Content.0utlook\tiZGWJ9UR13BGQ874- Attorneys at LaW PlainCiffs Motion for Summary Judgment (2).DOC 121 S W Morrison Street, Suite 600 Portland, Oregon 97204-31.36 Telephone: (503) 228-6044 Facsimile: (503) 228-1741 1 7. Fraudulent Inducement. As his Tenth Affirmative Defense, Blish 2 contends that the Shareholders fraudulently induced Blish to agree to sell his Shares because they 3 "hid the real value of the company" from Blish and they "represented the value to be far less than 4 its real value." Answer, ¶ 36. The elements of actionable fraud allowing a party to avoid a 5 contract are as follows: (1) A representation; (2) Its falsity; (?~) Its materiality; (4) The 6 speaker's knowledge of its falsity or ignorance of its truth; (5) The speaker's intent that it should 7 be acted on; (6) The injured party's ignorance of its falsity; (7) The injured party"s reliance on 8 the truth of the representation; and (8) The injured party's right to rely on its truth. Gardner v. 9 Meiling, 280 Or 665, 671, 572 P2d 1012 (1977). In his deposition, Blish admitted that the 10 Shareholders did not make any false representations to him: 11 Q: ...on page 6, it's paragraph 36, it's the tenth affirmative defense, you contend that Mike Eggiman and Mike Howard hid the real value of 12 the company from you. And what is the basis of that allegation? 13 A: Well, the fact that they only offered me $10,000 would tell me that they either misunderstood the value of the company or believed the 14 company was worth more; thought that, you know, through coercion they could force me to sell it for less than it was worth. 15 Q: Did either of them ever refuse to provide you any financial 16 information that you requested? 17 A: I don't recall that, but there were times there were long delays. 18 Q: Okay, so other than their offering the $10,000, is there anything else that...any other things that they actually did that go into 19 this allegation that they hid the real value of the company from you? 20 A: Not that I'm aware of. 21 Blish Depo, p. 105, line 11 - p. 106, line 13 (emphasis supplied). Blish went on to explain that 22 the sole basis of his claim that the Shareholders "knew" that Salute was worth more than they 23 had offered was that the Shareholders had: 1) indicated their willingness to sell the company if 24 there was a `'valid offer;" and 2) they had indicated that they thought the company was worth six 25 figures. Blish Depo., p. 106, line l~ - p. 107, line 14. Of course., even if true, these were 26 statements made about the company as a whole, not a minority one-third interest. Page 14 - PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT AND THIRD PARTY DEFENDANTS' MOTION FOR SUMMARY JUDGMENT FARLEIGH WADA WITT C:\Users'~whines\AppDara\Local\Microsofr\Windows\Temporary Internet Files\Content.0ut1ooklUZGWJ9LIR\3BG0874- Attorneys at Law PlaincifFs Motion for Summary Judgment (2).DOC 121 S W Morrison Street, Suite 600 Portland, Oregon 97204-3136 Telephone: (503) 228-6044 Facsimile: (503) 228-1741 1 Taken as a whole, this testimony conclusively bars Blish's fraudulent inducement 2 defense. First, with respect to the claim that matters were hidden from him, he not only admits 3 that he received all of the financial information that he ever requested, but the sole evidence he 4 offers to support his allegation that the "real value" was "hidden" from him is that the 5 Shareholders, on behalf of Salute, offered him $10,000 for his shares.. An offer that the offeree 6 finds unacceptable does not constitute fraud and any claim that it does is preposterous. 7 Similarly, Blish then goes on to admit that not only did the Shareholders not ``hide" their 8 opinions of value, but Blish concedes that they disclosed those opinions to him years ago.2 9 In short, there is no genuine issue of material fact that Blish had the same 10 financial information that the Shareholders had. They made no representations whatsoever to 11 Blish in connection with his sale of his Shares, and certainly no factual representations sufficient 12 to support a fraud claim. Indeed, the only representation at all that they made to him was ] 3 regarding Mike Eggiman's opinion of the liquidation value of the hard assets. Blish Depo., Ex. 14 6. Blish was free to disagree with that opinion. It was certainly not a representation of fact. He 15 was equally free to reject Salute's offer to purchase his Shares. While he expressed concerns 16 about value in the telephone conversation, he then made a voluntary., fully-informed decision to 17 sell his Shares for $10,000. He is bound by that acceptance and cannot undo it now. For all of 18 these reasons, Blish's fraudulent inducement defense fails as a matter of law. 19 8. Duress. In his Eleventh Affirmative Defense, Blish alleges that his 20 agreement to sell his Shares is voidable because he was under duress on account of the 21 Shareholders' "threat' to dissolve Salute and "destroy the value of the company." Answer, ¶ 37. 22 "Duress" is defined as the threat of physical or economic harm compelling a person to enter into 23 a contract that he or she would not otherwise have entered. Port of Nehalem v. Nicholson, 122 24 Or 523, 530, 259 P 900 (1927). "In order for duress to be a defense in an action to enforce a 25 -While it is immaterial, the Shareholders deny they ever believed ~~r stated that Salute was worth 26 sip figures. Page 1 ~ - PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT AND THIRD PARTY DEFENDANTS' MOTION FOR SUMMARY .JUDGMENT FAltLElGH WADA W7TT C~lUsers\whineslAppDatalLocallMicrosoftlWindowslTemporary Internet Files\Content.OutlooklUZGWJ9UR\3BG0874- Attorneys at LaW Plaintiffs Motion for Summary Judgment (2).DOC 121 SW Momson Street, Suite 600 Portland, Oregon 97204-3136 Telephone: (503) 228-6044 Facsimile: (503) 228-1741 1 contract the conduct complained of as constituting duress must be wrongful." Pio v. Kelly, 275 2 Or 585, 589, 552 P2,d 1301 (1976). Blish claims that the duress he allegedly suffered was 3 because of the Shareholders' threat to dissolve Salute. This defense fails for two independent 4 reasons. First, the Shareholders' threat to dissolve Salute was not '`wrongful," because Blish's 5 acceptance of employment with LaRue did constitute a breach of Blish's duty of loyalty that 6 made continuation of the business of Salute impossible. Second, even if the Shareholders were 7 incorrect about the impact of Blish's employment with LaRue, they had an absolute right to 8 recommend dissolution under ORS 60.627 as the Board of Directors, which recommendation 9 could be voted on by the shareholders. These issues will be discussed separately, below. 10 As the communications between Blish and the Shareholders demonstrate, the 11 Shareholders believed that Blish's employment with LaRue presented an irreconcilable conflict 12 of interest. Blish Depo., Exs. 2 and 6. They were correct. While shareholders in large 13 corporations do not have fiduciary duties to each other, the rule is different in a close 14 corporation. Many courts have analogized the relationship among shareholders in closely-held 15 corporations to that of partners in a partnership. See Pedro v. Pedro, 489 NW2d 798, 801 16 (Minn App 1992): see also McGaughey, OREGON CORPORATE LAw HANDBOOK, § 7.11(B). 17 "Because close corporations are like partnerships, there has been a trend for courts to hold all 18 shareholders in close corporations owe a fiduciary duty to the corporation and to each other." 19 McGaughey, §7.11(c) (collecting cases). The same is true in Oregon, where the appellate courts 20 have recognized that equal shareholders owe each other fiduciary duties, including the duty of 21 loyalty. Delaney v. Georgia Pacific Corp., 278 Or 305, 311, 564 P2d 277 (1977). In Delaney, 22 the court held, 23 "Whether we consider the corporation as organized to carry out the purposes of a continuing joint venture, or simply regard the parties 24 as equal owners of a close corporation, their relationship was such that each was entitled to the other's performance of fiduciary 25 duties of loyalty, good faith and full disclosure." 26 /// Page ] 6 - PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT ANL> THIRD PARTY DEFENDANTS' MOTION FOR SUMMARY JUDGMENT F.4RLE[GH WADA WITT C:\Users`,whines\AppData\Local\Ivficrosoft\Windows\Temporary Internet Files\Content.Outlook\UZGWJ9UR\3BG0874- Attorneys at Law Plaintiffs Motion for Summary Judgment (2).DOC 121 S W Morrison Street, Suite 600 Portland, Oregon 97204-3136 Telephone: (503) 228-6044 Facsimile: (503) 228-1741 1 Id.; see also Locati v. Johnson, 160 Or App 63, 980 P2d 173, rev den 329 Or 287 (1999) and Lee 2 v. Mitchell, 152 Or App 159, 175, 953 P2d 414 (1998). 3 Blish's acceptance of employment with LaRue, a direct competitor of Salute, 4 constituted a breach of the duty of loyalty that gave the Shareholders and Salute a claim for 5 damages against Blish. That damage claim is substantial in that Blish concedes that: his duty as a 6 shareholder was to sell Salute's targets. Blish Depo.; p. 27, lines 14-21. He further concedes 7 that he could not do that after he accepted employment with LaRue. Blish Depo., p. 71, lines 6- 8 15. Rather, he would be engaged in having customers purchase LaRue's targets, not Salute's 9 targets. This is a clear breach of the duty of loyalty which Blish owed Salute and the 10 Shareholders as an equal shareholder in a close corporation. Yet, rather than suing Blish for the 11 substantial damage that his breach of loyalty could have caused, the Shareholders agreed to buy 12 him out. Blish Depo., Ex. 2. The importance of this cannot be understated. Rather than suing 13 Blish for breaching his fiduciary duties to them, the Shareholders offered to pay Blish double his 14 investment in Salute so that he could be free to take a position with LaRue. Id. In short, the 15 Shareholders" indication that they would move to liquidate the company was not wrongful 16 because it was suggested as a remedy for Blish's breach of his fiduciary duties, and liquidation to 17 avoid a further and continuing breach of fiduciary duties is an appropriate remedy. 18 Blish contends that because he was only aone-third shareholder, he had no fiduciary 19 duties to the Shareholders. While the Shareholders disagree with this analysis, it is immaterial. 20 Even if Blish was not breaching his duty of loyalty, the Shareholders had an honest and valid belief 21 that he was. Eggiman Dec. ¶¶ 13-14; Howard Dec. ¶~ 12-13; Blish Depo., Ex. 6. More 22 importantly. under ORS 60.627, as the directors, they were entitled to refer a proposal to dissolve to 23 the shareholders, which would then be decided by majority vote. Consequently, under the express 24 terms of the statute, their proposal to dissolve Salute if Blish rejected Salute's offer to redeem his 25 Shares was not wrongful because they had an absolute right to pursue dissolution. Therefore, it 26 cannot, as a matter of 1<~w, be the basis of a defense of duress because it was not "wrongful." Page 17 - PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT ANI) THIRD PARTY DEFENDANTS' MOTION FOR SUMMARY JUDGMENT C\Userslwhines\AppData'~L ocal\Microsoft\Windows\Temporary Internet Files\Conrent.Outlook\UZOWJ9CIR\3800874- F.9RLElCH WADA WITT Plaintiffs Motion for Summary Judgment (2).DOC Attorneys at Law 12 ( SW' Morrison Street, Suite 600 Portland, Oregon 97204-3136 Telephone: (503) 228-6044 Facsimile: (503) 228-1741 1 9. Unclean Hands. In his Twelfth. Affirmative Defense, Blish claims that 2 Salute's claims are barred by the doctrine of unclean hands. Answer, ¶ 38. He states no factual 3 allegations to support this defense. The defense fails because, as set forth above, neither Salute 4 nor the Shareholders did anything improper in connection with their offer to Blish. 5 10. Waiver. As his Thirteen Affirmative Defense, Blish alleges that Salute 6 "waived any rights it may have had to the relief sought by express and implied waivers and 7 consents, including the continued negotiation of terms following the alleged time o~f agreement." 8 Answer, ¶ 39. In his deposition, Blish stated that the sole evidence to support this claim of 9 "continued negotiation'' is an email that he sent on May 14, 2011, more than a month after the 10 contract was formed, asking that a valuation of Salute be perfornied. Blish Depo., p. 110, 11 line 11- p. 111, line 1 l; Eggiman Dec. ~ 18, Ex. D. Waiver occurs when the party against whom 12 the defense is asserted expresses an intent to waive his rights under a. contract. Smith v. Martin, 13 94 Or 132, 141, l 85 P 236 (1919). "Waiver depends upon what one himself intends to do." Id. 14 "The question of waiver is mainly a question of intention... waiver must be manifested in some 15 unequivocal manner. and to operate as such it must in all cases be intentional.'' Id. Blish 16 concedes that his defense is based solely on an email that Blish sent, not on any action that 17 Salute took. Indeed, he concedes that, in response to his attempt to re-open negotiations, Salute 18 did the exact opposite of waiver - it told Blish to execute the documents that he had agreed to 19 execute and that, in exchange, Salute would pay him the consideration it had agreed to pay. 20 Blish Depo., p. 110, line 11- p. 111, line 11. For its part, Salute never took any action or 21 expressed any intention not to perform, nor did indicate any intent not to require that Blish 22 perform, the agreement reached in the April 8th meeting. Eggiman Dec. ~ 19; Howard Dec. ¶ 16. 23 Thus, Blish's waiver defense fails on his own testimony. 24 11. Estoppel. Continuing his recitation of all potential affirmative defenses 25 regardless of whether a factual basis exists to support each defense, =Blish alleges that Salute is 26 estopped from enforcing the April 8th agreement. To prove estoppel, Blish must prove the Page 18 - PLAINTIFF' S MOTION FOR PARTIAL SUMMARY JUDGMENT AND THIRD PARTY DEFENDANTS' MOTION FOR SUMMARY JL"DGMENT F.4RLEIGHWADA N'ITT C:\[Jsers\whines\AppData\Local\Microsoft\Windows\Temporary Internet Files`,Content.0utlook\UZGWJ9UR\3BG0874- Attorneys at Law Plaintiffs Motion for Summary Judgment (2).DOC 121 SW Morrison Street, Suite 600 Portland, Oregon 9 7204-3 1 3 6 Telephone: (503) 228-6044 Facsimile: (503) 228-U41 1 following elements: 1) plaintiff made a false representation of existing material fact; 2 2) plaintiffs false representation was made with knowledge of the facts; 3) defendant did not 3 know- plaintiff s representation was false; 4) plaintiff made the false representation with the intent 4 that defendant would act on it; and 5) defendant was induced to act based upon plaintiffs false 5 representation. Day v. Advanced M&D Sales, Inc., 336 Or 511, 519, 86 Pad 678 (2004). 6 Estoppel only protects those who materially change their position in reliance on another's acts or 7 representations. Kahl v. Pool, 47 Or App 43, 49, 613 P2d 1078 (1980). Finally, reliance by the 8 breaching, party is a necessary element of estoppel. IcI Blish's estoppel defense fails for the 9 same reasons as his fraudulent inducement defense: Blish cannot identify any false 10 representations made by Salute or the Shareholders. None of the other required elements of 11 estoppel are present either. 12 12. Mutual Mistake of Fact. As his final affirmative defense, Blish alleges 13 that "both plaintiff and defendant were basing the agreement on a mutual mistake of fact," 14 including that Blish's employment at LaRue represented a conflict of interest. Whether or not 15 Blish's employment with LaRue is a breach of the duty of loyalty (which is discussed above), the 16 belief is not a '`fact," but rather a legal conclusion. Consequently, by its very nature, it cannot be 17 a ``mutual mistake of fact." Oregon law is clear that ignorance, or inaccuracy, about the law is 18 not a defense to a contract. Farnsworth v. Feller, 256 Or 56, 62, 471 P2d 792 (1970) (holding 19 that seller's representations that property could be used for sand and gravel business, when in 20 fact property had been zoned for residential use, was a mistake of law, not fact, and thus not 21 actionable). For this reason, defendant's final affirmative defense fails as a matter of law. 22 C. Bush's Third Party Claims Fail as a Matter of Law. 23 Blish has asserted third party claims against the Shareholders. Those claims also 24 fail as a matter of law. 25 /// 26 /// Page 19 - PL,AINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT AND THIRD PARTY DEFENDANTS' MOTION FOR SUMMARY JUDGMENT F,aRZ.Ercx wAnA wrTT C'1Jsers\whines\AppData\Local\Microsofr\Windows\Temporary Internet Files\Content.Outlook\UZGWJ9[JR\3BG0874- Attorneys at Law Plaintiff's Motion for Summary Judgment (2).DOC J,21 SW Morrison Street, Suite 600 Portland, Oregon 97204-3136 Telephone: (503) 228-6044 Facsimile: (503) 228-1741 1 1. The Shareholders Did Not Breach Their Fiduciary Duties. 2 The Shareholders do not dispute that they owe fiduciary duties to Blish as 3 directors of Salute, and that they owe the same fiduciary duties to each other and Blish that he 4 owes to them under Delaney. They have not, as a matter of law, breached those fiduciary duties. 5 While Blish alleges numerous acts which he contends constitute breaches of fiduciary duty, he 6 conceded in his deposition that he has no facts to support those claims. 7 Blish first alleges that: the Shareholders have "hired their friends and relatives and 8 paid those friends and relatives with company funds." Answer, p. 8,'~ 7. While the Shareholders 9 do not deny that Salute has employed friends and relatives of the Shareholders to perform 10 production work at Salute, those friends and relatives performed work for which they were paid 11 reasonable hourly wages. Howard Dec. ¶ 7; Eggiman Dec. ¶ 8. Blish was aware that Eggiman's 12 and Howard's children had been hired, he knew their rate of pay and he raised no objection 13 whatsoever to either their hiring or their rate of pay. Blish Depo., p. 44, line 4 - p. 46, line 13. 14 Notably, Salute also hired Blish's son and one of his friends to work at a trade show. Blish 15 Depo., p. 46, lines 14-16. Hiring friends and family is not a breach of fiduciary duties so long as 16 they are paid a reasonable wage for actual work performed. There is no question that is what 17 occurred here. 18 Blish next alleges that the Shareholders "caused'' Salute ``not to show all of the 19 profit the company has made and have caused the company to pay them profits" that should have 20 been paid to all shareholders as distributions. Answer, p. 8, ¶ 8. Blish admits that he has no basis 21 for this claim. Blish Depo., p. 116, line 8 - p. 118, line 3.3 Blish also alleges that the 22 Shareholders have received "excessive salaries and bonuses." Answer, p. 8, ¶ 9. He similarly 23 has no factual basis for this claim. Blish Depo. p. 119, line 4. 'The Shareholders have not 24 In his deposition, Blish claimed that his attorney had asked for, and not received, certain 25 financial documents. Blish's counsel has not issued any Requests for Production of Documents in this case, nor has he requested any financial documents. McGair Dec. ¶ 3. Blish was given timely annual 26 financial statements and tax returns for each year that he was a shareholder. Eggiman Dec. T 21. Page 20 - PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT AND THIRD PARTY DEFENDANTS' MOTION FOR SUMMARY JUDGMENT F,4RLEIGH WADA WITT C:'.Users`,whines`,AppData~J,ocal\Microsoft\Windows\Temporary Internet Files\Content.Outlook\UZGWJ9UR\3BG08~d- Attorneys at Law Plaintiffs Motion for Summary Judgment (2).DOC l21 SW Morrison Street, Suite 600 Portland, Oregon 9 7204-3 1 3 6 Telephone: (503) 228-6044 Facsimile: (503) 228-1741 1 received any compensation other than the hourly wages that all of the shareholders agreed to be, 2 and were, paid, along with yearly distributions that are reflected on the books and records of 3 Salute. Howard Dec. ¶ 17; Eggiman Dec. ¶ 20. Salute paid officer compensation in 2011 of 4 $7,000 each to Howard and Eggiman, which compensation is reflected on the books and records 5 of Salute. Id. Even then, the Shareholders were forced to loan their distributions back to Salute 6 so as to provide it sufficient cash flow, further demonstrating the fallacy of Blish's claims as to 7 the value of Salute. Id. 8 Blish also alleges that the Shareholders have received purchase and,/or investment 9 offers that they have not disclosed to Blish. Answer, p. 8, ¶ 10. Again, Blish concedes that there 10 is no factual basis for this allegation. Blish Depo. p. 119, lines ~~-25. There have been no 11 purchase or investment offers received for Salute, which is not surprising given that it is a very 12 small company operating out of a converted barn that lacks even. a central heating system. 13 Eggiman Dec. ¶ 7; F;x. B. Thus, this claim also fails as a matter of law because there is no 14 evidence to support it. 15 In the litany of allegations set forth in his Answer, Blish also alleges that the 16 Shareholders breached their fiduciary duties to him by "secretly" recording the April 8tl' meeting. 17 Answer, p. 19, ¶ 12. Blish fails to explain how the recording of a conversation is a breach of 18 fiduciary duty. The only reason that Blish would object to the recording is if he did not intend to 19 keep and perform the promises made in that conversation, which raises concerns about fraud and 20 good faith and fair dealing on Blish's part. From a legal. standpoint, there is nothing improper or 21 illegal about the recording of the April 8th meeting because the meeting took place in Oregon, 22 Blish made a call to Oregon for the meeting, the meeting involved the sale of the Shares in an 23 Oregon corporation and two of the three parties to the call knew it was being recorded. Because 24 recording of a call under those circumstances is legal in Oregon, it does not create a breach of 25 fiduciary duty. ORS 165.540(1)(a) (providing that a person may record a "telecommunication" 26 so long as the person is a participant in that telecommunication). Page 21 - PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT AND THIRD PARTY DEFENDANTS' MOTION FOR SUMMARY JUDGMENT FARLE7GH WADA WITT C:~Users\whines\AppData\Local\Microsoft\Windows\Temporary InterneC Files\Content.Outlook\UZGWJ9UR\3BG0874- Attorneys at Law Plaintiffs Motion for Summary Judgment (2).DOC 121 SW Morrison Street, Suite 600 Portland, Oregon 97204-3 1 3 6 Telephone: (503) 228-6044 Facsimile: (503) 228-1741 1 Blish's final allegation of breach of fiduciary duty relates to the offer to purchase 2 Blish's Shares. Answer, p. 9, ¶ 12. All of the factual allegations related to this claim, including 3 whether Blish had breached his duty of loyalty by working for LaRue, whether the Shareholders 4 had the absolute right to liquidate Salute under ORS 60.627 and the offer by Salute to buy 5 Blish's shares and Blish's considered and unequivocal acceptance of that offer, are addressed in 6 detail, above. The contract between Blish and Salute was arms-length. Blish concedes that he 7 was given all of the financial information that he requested. Blish Depo, p. 105, line 11 - p. 106, 8 line 13. Neither of 1:he Shareholders kept or hid any information regarding Salute from Blish. 9 Eggiman Dec. ¶ 21; Howard Dec. ¶ 18. Blish had more than a month to consider Salute's offer, 10 as well as ample opportunity to seek advice of his accountant and lawyer, and, in fact, sought and 11 received the advice of his accountant. After receiving that advice, and acknowledging that he 12 could not continue to perforni his sales and marketing duties which were part of his obligations 13 under the shareholders' agreements with each other, he agreed to sell his Shares for $10,000. 14 Notably, while Blish claims that he was forced to sell his shares at a "steeply discounted price," 15 he never made a counteroffer. Eggiman Dec. ¶ 17; Howard Dec. ¶ 1:>. His after-the-fact change 16 of heart does not create a breach of fiduciary duty. Notably, while the Shareholders do owe 17 fiduciary duties to Blish, those duties do not prohibit them from dealing in corporate stock, 18 which is what occurred here. T>^yon v. Smith, 191 Or 172, 180, 229 P2d 251 (1951). 19 Blish is expected to argue that the Shareholders' threat to liquidate Salute if he did 20 not sell his Shares constitutes a breach of their fiduciary duties to him. This claim fails as a 21 matter of law under established Oregon law. First, Blish's breach of the duty of loyalty by 22 working for a competitor permitted the Shareholders to seek a remedy, including dissolution of 23 the corporation. Dissolution is expressly permitted under ORS 60.627. While Oregon cases 24 have held that the exercise of the absolute right to dissolve can constitute a breach of fiduciary 25 duty in certain circumstances, those cases are limited to circumstances where the majority 26 shareholders attempt to "squeeze out" the minority by selling the corporate assets to another Page 2? - PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT AND THIRD PARTY DEFENDANTS' MOTION FOR SUMMARY JUDGMENT FARLEIGH WADA WITT C: Users\whinesiAppData\Local`Microsofr\Windows\Temporary Internet Files\Content.Outlook\UZGWJ9UR\3BG0874- AttArneys at Law Plaintiffs Motion for Summary Judgment (2).DOC 12 L S W Morrison Street, Suite 600 Portland, Oregon 97204-3 1 3 6 Celephone: (503) 228-6044 Facsimile: (503)228-1741 1 entity that the majority shareholders own or control. Noakes v. Schoenborn, 116 Or App 464, 2 473-475, 841 P2d 682 (1992). That did not occur here. Rather, the Shareholders proposed that, 3 if a deal could not be reached on a buy-out, they would simply wind up Salute's business, sell the 4 equipment at auction and distribute the proceeds, which is precisely what is allowed and required 5 under ORS 60.626 through ORS 60.641. Thus, their indication that, as directors they would 6 recommend dissolution of Salute, and as shareholders they would vote to dissolve Salute, rather 7 than continue to work at far below reasonable compensation while Blish did nothing, sold 8 competing targets for his new employer, yet still collected one-third of the profits each year, was 9 not a breach of fiduciary duty. This is because it was not an attempt to squeeze out Blish. 10 Rather, it was an attempt to resolve the problem created by Blish's own breach of his fiduciary 11 duties. 12 Not only does Blish's breach of fiduciary duty claim fail because the Shareholders 13 did not take any action which was improper under Oregon law, it also fails because Blish has not 14 suffered any damages. The Shareholders did not dissolve Salute. Rather, Blish voluntarily 15 agreed to sell his Shares to Salute for $10,000. He was free to refuse that offer, sue to enjoin a 16 dissolution or bring a claim for damages following dissolution, but he did not do any of those 17 things. Rather, "for the sake of friendships and everything else,'' he agreed to "take the ten 18 thousand'' dollar offer to sell his Shares. Blish Depo., Ex. 8, p. 2. "This is an action to enforce 19 that voluntary contract. Breach of fiduciary duty is not a defense to enforcement of that contract 20 and, having voluntarily chosen to sell his Shares, he has no claim arising from a threat of 21 dissolution that did not actually occur. This is, in part, because it would be impossible to 22 measure the damages arising from a dissolution that did not occur. 23 In short, Blish's claims of breach of fiduciary duty fail. The Shareholders made 24 an offer to Blish, on behalf of Salute, to buy his Shares. After receiving full financial 25 information, consulting his accountant and having more than a month to consider the offer, he 26 accepted. The Shareholders' suggestion that they would have na choice but to follow the Page 23 - PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT AND THIRD PARTY DEFENDANTS' MOTION FOR SUMMARY JUDGMENT FARLEIGH WADA WITT C: Users\whines\.4ppData\Local\Microsoft\Windows\Temporary Internet Files\Content.0utlook\UZGWJ9UR\3BG087a- Attorneys at Law Plaintiffs Motion for `iummary Judgment (2).DOC 121 SW MOrr1SOn Street, SUlte 600 Pi~rtland, Oregon 97204-3136 Telephone: (503) 228-6044 Facsimile: (503) 228-1741 1 statutory procedure t:o dissolve the corporation if he did not sell his Shares is not a breach of 2 fiduciary duty for a number of reasons, most notably because it did not actually occur and 3 because it was authorized under ORS 60.627. For these reasons, Blish's breach of fiduciary duty 4 claim fails as a matter of law. 5 2. Blish's Accounting Claim Should Be Dismissed Because it is Premised 6 on his Breach of Fiduciary Duty Claim. 7 Blish's second claim is for an accounting. This claim is expressly- dependent on 8 Blish's breach of fiduciary duty claim and thus fails for that reason alone. Moreover, Blish 9 concedes that he received full financial reporting from. Salute and that he never requested any 10 financial information which he did not receive. Consequently, there is no basis for his 11 accounting claim and it should be dismissed. 12 3. Blish's Shareholder Derivative Action Must Be Dismissed. 13 In his final claim for relief, Blish asserts a shareholder derivative claim against the 14 Shareholders for alleged profits that they and their friends and relatives improperly took from 15 Salute. Answer, p. 11, ¶ 22. As set forth above. Blish concedes he has no evidence to support 16 this claim. See, p. 20, supra. The hourly wages paid to production employees were reasonable 17 and Blish never objected to them. Blish Depo., p. 44, line 4 - p. 46, line 13.. As for the 18 compensation paid to the Shareholders as wages, it was at the same rate as the compensation 19 paid to Blish himself, which is undeniably below the amount of compensation which is 20 reasonable for the services that the Shareholders provided. Blish Depo., p. 56, line 25 - p. 57, 21 line 13; Eggiman Dec. ¶ 11; Howard Dec. ¶10. Blish knew about the compensation being paid 22 to the Shareholders and never raised any objection. Id. All other profits through calendar year 23 2010 were split equally among the three shareholders. Eggiman Dec. ¶ 1 l; Howard Dec. ¶ 10. 24 While the Shareholders did receive $7,000 in officer compensation in 2011, which Blish did not 25 receive because he had sold his Shares and was not an officer, that compensation was in lieu of 26 annual distributions in 2011 and was immediately loaned back to Salute in order to meet the Page 24 - PLAINTIFF'S 'MOTION FOR PARTIAL SUMMARY JUDGMENT AND THIRD PARTY DEFENDANTS' MOTION FOR SUMMARY JUDGMENT FARLEIGNWADA WITT C: Users\whines\AppData\Local'1~Iicrosoft\Windows\Temporary Internet Files\Content.Outlook\UZGW~i9UR`3BG087d- Attorneys at Law Plaintiffs Motion for Summary Judgment (2).DOC 12 L S W Morrison Street, Suite 600 Portland, Oregon 9'7204-3136 'telephone: (503) 228-6044 Facsimile: (503) 228-1741 1 company's cash flow obligations. Id. Consequently, there is situp y no evidence to support a 2 shareholder derivative claim arising from excessive profits or bonuses and that claim should be 3 dismissed as a matter of law. 4 IV. Conclusion. 5 At its core, this is a very simple case. Salute made an offer to redeem Blish's 6 Shares, which he accepted after having an opportunity to consider it and seek legal advice. The 7 offer was supported by consideration. As such, the basic black letter law elements of contract 8 are satisfied and Salute is entitled to specific performance of that promise. The same is true of 9 the contract claim for the purchase price of the targets. That effectively ends the case. While 10 Blish has asserted every conceivable defense, along with many defenses which lack any basis in 11 law or fact, none of those defenses immunize him from his duty to perform the contract to sell 12 his Shares. Similarly, his third party claims against the Shareholders fail as a matter of law 13 because they did not do anything improper in either the operation of Salute, nor in their offer to 14 redeem Blish's Shares. For these reasons, Salute's claims for breach of contract and specific 15 performance should be granted as a matter of law and all of Blish's third-party claims should be 16 dismissed. 17 DATED this _ day of November, 2012. 18 FARLEIGH WADA WITT 19 20 By: Kimberley Hanks McGair, OSB #984205 21 (503) 228-6044 kmcgair@fwwlaw.com 22 Attorneys for Plaintiff and Third-Party Defendants 23 24 25 26 Page 25 - PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT AND THIRD PARTY DEFENDANTS' MOTION FOR SUMMARY JUDGMENT F~ncElcx wAna wlrr C ~Users\whines`,AppData\Local\Microsofr\Windows\Temporary Internet Files\Content.0utlook\UZGW.I9UR\3BG087J- Attorneys at Law Plaintiffs Motion for Summary Judgment (2).DGC l2l SW Motrison S[reet, Suite 600 Portland, Oregon 97204-3136 Telephone: (503)228-6044 Facsimile: (503) 228-1741 1 CERTIFICATE OF SERVICE 2 I hereby certify that on November 19, 20112 I served the foregoing PLAINTIFF'S 3 MOTION FOR PARTIAL SUMMARY JUDGMENT AND THIRI) PARTY DEFENDANTS' 4 MOTION FOR SUMMARY JUDGMENT on the following individual by mailing to said 5 individual a true copy thereof, addressed to his last known regular address and. deposited in the 6 Post Office at Portland, Oregon: 7 David P. Smith The Srnith Firm, P.C. 8 1754 Willamette Falls Drive 9 West Linn, OR 97068 10 Attorneys for Defendant and Third-Party Plaintiff Freddie S. Blish 11 Dated: November 19, 2012. 12 FARLF,IGH WADA WITT 13 14 By: 15 Kimberley Hanks McGair, OSB #984205 (503) 228-6044 16 kmc airnfwwlaw.com Attorneys for Plaintiff and Third-Party 1 ~ Defendants 18 19 20 21 22 23 24 25 26 Page ] -CERTIFICATE OF SERVICE FARLEIGH WADA WITT Attorneys at Law 121 SW Morrison Street, Suite 600 Portland, Oregon 97204-3136 Telephone: (503) 228-6044 Facsimile: (503) 228-1741 EXHIBIT "B" 4 IN THE CIRCUIT COURT FOR THE STATE OF OREGON FOR THE COUNTY OF WASHINGTON to 11 12 13 l4 15 16 17 1$ 19 20 21 22 23 24 25 SALUTE PRODUCTS, INC., ) Plaintiff, } vs. ) FREDDIE S. BLISH } Defendant. ) FREDDIE S. BLI5H, for himself individually ) and on behalf of SALUTE PRODUCTS, ) INC., derivatively, ) ) Cross-complainant, ) ) ) vs. } MICHAEL EGGIMAN, an individual, and ) MICHAEL HOiJ~~ARD, an individual, ) Cross-defendants ) Case No.: Cl 14703C;V OPPOSITION TO MOTION FOR PARTIAL SUMMARY JUDGMENT INTRODUCTION Plaintiff, Salute Products, Inc. ("Salute") claims that a roadside conversation among defendant Freddie Blish ("Blish"), Michael Howard (``Howard") and Michael Eggiman ("F,ggiman") on April 8, 2012, constituted both a shareholders meeting and a contract. Salute has alleged that the contract was between Salute and Blish for Blish to sell his shares in the Page 1-OPPOSITION TO MOTION FOR PARTIAL SUMMARY JUDGMENT TxE sNnTx Fieiri, r.c. Atlor&eys nt Lrtw 1754 Willamette Falls Drive West Linn, QR 97068 (503}657-6550 Faz: (866) 7I0-0666 Email: dave tr thesmithfirmpacom 1 z 3 4 5 6 7 8 9 to 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 company to Salute. But the operative words used in the conversation relate to the two individuals and not the company as the purchaser. Furthermore, the correspondence both before and after the conversation make clear that what was being discussed was a sale of Blish's shares to Howard and Eggiman and not to Salute. The Bylaws i.'or the company require that agreements for the sale of shares be in writing and there was no writing, Beyond the fact that the conversation did not contemplate a sale to plaintiff, the conversation was tentative and not intended to be a binding agreement. Furthermore, both Eggiman and Howard were threatening to dissolve the company and pay Blish only $3,000 unless he agreed to sell them his shares for $10,000. Blish has an affitrative defense of duress. In addition, Eggiman and Howard were telling Blish that he could not remain as a shareholder of Salute if he went to work for LaRue Technologies because that would be a conflict o_f interest. That is an incorrect statement of the law and, if it was not. made fraudulently then at least it is the basis of a mutual mistake of fact as to what the law was. Blish has an affirmative defense of fraud in the inducem.er_t or mistake. The roadside conversation also discussed the sale of targets for S 1,500 and is alleged to be a part of the same agreement. But a sale of goods in excess of $500 requires a writing. Triable issues of fact require that this Court deny plaintiff's Motions. ARGUMENT A. 7:'he Roadside Conversation Discussed the Sale of Shares to Eggiman and Howard l and Not to Salute. In an email from Eggiman to Blish on Apri16, 2012, Eggiman sets forth the offer he and Howard were making. In pertinent part, the email stated: Our corporate attorney has advised us that there are two option (sic) to divest your interests in Salute Products, Inc. • Option 1: Sell your share of the company to Mike Howard and Mike Eggiman for a designated amount. We offered you $10,000. Page 2-OPPOSITION TO MOTION FOR PARTIAL SUMMARY JUDGMENT rHE snnTx F~emr, P.c. dnon:eyr „~ zR,~, 1754 Willamette Fatls Drive West Linn, OR 97068 (503) 657-6550 Fax: (866) 710-0666 Email: love r(ythesmithfirmpc.com 2 3 4 5 6 7 8 9 10 11 ]2 13 14 15 16 17 ~, 18 19 20 21 22 23 24 25 • Option 2: Shut down the company and. distribute the remaining assets to each of the partner by percentage of ownership. Eggiman further states that he and Howard scheduled a partners meeting for April 8, 2011. (Exhibit 1 to Notice of Lodgment). 'f wo days after that email was sent to Blish, while B1ish was travelling in Pennsylvania, Blish called Eggiman and Howard. He had to pull off the road he was on to make the call. The conversation was recorded by Eggiman and Howard without Blish's knowledge. The transcript of that conversation was prepared by plaintiffs and is attached as Exhibit * to its motion papers. It is also Exhibit 2 to the Notice of Lodgment. Nowhere in the transcript does anyone say that Salute will be buying Blish's shares. Instead, Blish states; "I'll take the 10 thousand..." [Exhibit 2, page 2, first para.] While Blish contends that this conversation was preliminary, assuming, arguendo, that this constituted an acceptance of an offer, what was the offer? The only offer was the email sent two days earlier in which Eggiman stated that Option one was to sell his shares "... to Milce Howard and Mike Eggiman for a designated amount. We offered you $10;000." Salute is not a party to that proposed transaction. "Che next statement in the conversation that could be taken as contractual is from Mike Eggiman in which he states, "okay so ah we're going to consider this a ah official corporate meeting where we bray out your share of the company for 10 thousand dollars:" [_F.,xhibit 7_, page 4, last para. Nowhere else are there words of a contractual nature concerning the sale of shares. ~ Nowhere in the entire conversation is the word "Salute" used. Nowhere; is it indicated that the company will buy the shares. Nowhere is the pronotm "it' used to indicate the company. If the conversation represented by Exhibit 2 is a contract, it is a contract between Blish and Eggiman and Howard, not Blish and Salute. Salute is not the proper party to the lawsuit. In any event, it cannot prove a contract and the supposed contract fails to uzclude an essential texm, the name of the purchaser. Page 3- OPPOSITION TO MOTION FOR PARTIAL SUMMARY JUDGMENT THE sronrH EIRIDI, P.e. Aflorne~~s n1l-ntv 1754 Willamette Falls Drive \Vest Linn, OR 97068 (509) 657-6550 Fas: (866) 7;0-0666 fimail: davei7Qthesmithfirmpc.com t Salute cannot prevail on its motions when it cannot even offer proof of the existence of a 2 contract to which it was a party. At the very least, there is a triable issue of fact concerning who 3 the parties to the supposed contract are. 4 B. At Most, The Roadside Conversation Was Preliminary to a Detailed Agreement 5 In the roadside conversation plaintiff claims is a contract, Eggiman stated that he would 6 "...draft up an email that ah you know confirms all this and we'll move ahead." [Exhibit 2, 7 page 6, para 2/3rds down]. No such email was ever delivered. [Exhibit 7, Blish declaration, para. 8 11]. 9 In the draft minutes of the supposed "Special meeting of Directors and Shareholders" 10 [Exhibit 3 to Notice of Lodgment, penultimate paragraph] that plaintiff claims the April 8, 2012, t 1 meeting represented, it states that, "After discussion, it was moved, seconded and passed that 12 Freddie S. Blish is authorized to sell his shares of the corporation to the corporation." While the 13 recording of that meeting reveals that none of that actually took place, it does indicate that on the 14 date of the meeting Eggiman and Howard believed all that had been done at that "meeting" was 15 the authorization for Blish to sell his shares. It is dated the same day as the meeting and was 16 drafted by Eggiman. [Page 40, Lines 22-25 of Eggiman's deposition, Exhibit 9 to Notice of 17 Lodgment] t 8 The authorization to sell anticipates a written agreement to sell. No such agreement was 19 circulated for review. The conversation regarding the potential sale of shares did not include 20 essential. details that the parties would have expected in a final agreement. There is no date of 21 performance indicated, there is no accounting for the undistributed profits earned prior to sale, 22 and there is no provision for tax treatment. 23 More importantly, the conversation on the road contemplated a formal agreement with all 24 of the usual terms associated with the transfer of security interests in a close corporation. Mr. 25 Blish only reached preliminary agreement with your clients with the implicit understanding that Page 4- OPPOSITION TO MOTION FOR PARTIAL SUMMARY NDGMENT TxE sivtzTx F tR~t, r.c. AROreeys ntLmv 1754 Willamette Falls Drive West Linn, OR 97068 (503) 657-6550 Fax: (866} 7f0-0666 Email: dave~ilthesmithfirmpcmm 1 2 3 4 5 6 7 8 9 10 it 12 13 14 15 lb 17 18 19 20 21 22 23 24 25 it was not binding until a written agreement was signed. Indeed, Mr. F:ggiman told Mr. Blish that he would be sending a writing. The Restatement 2d of Contracts ~ 27 sets forth the criteria for the finding that the preliminary negotiations are not binding in comments b and c. 'The issues to be considered include whether it is a type of agreement that is usually put in writing. It is unquestionably tnle that the sales of securities in a close corporation are usually in writing. Indeed, until 1995, all sales of securities had to be in writing under the statute of frauds See ORS 78.3190 (repealed), UCC 8-319. Oregon adopted a revised Commercial Code that no Longer contained the writing requirement. That change was, no doubt, to foster the freer trade of public securities. But that does not mean that such transactions are not usually in writing, especially in the case of close corporations. Indeed, the long standing requirement of a writing made such agreements usually in writing even after the requirement fell away. Comment c also suggests that the court determine whether express agreement has been reached as to all terms to be included. That certainly did not happen. Mr. Blish was married at the time and resided in a community property state [Exhibit 7, Blish declaration para. 1], he had been married to his deceased wife at the time he purchased the shares and so it had been community property at the time of her death. At least warranties and indemnities would be expected for the corporation to conclude the deal, The issue of who the purchaser would be was also left unsettled, the time for performance was not addressed and the tax treatment that vitally affected the consideration in contemplation had not been discussed, much less agreed to. Had a final agreement been reached, the minutes prepared by plaintiff's officers and directors would have set that forth in the minutes. An authorization to sell is hardly an agreement to sell. At the very least, there is a triable issue of fact as to whether there was a final understanding regarding a sale of shares. As fitrther confirmation that no Agreement had been reached, Eggiman wrote on May 14, 2011, that if they did not get the paperwork (i.e. the signed transfer of shares and waivers) ".. . Page 5- OPPOSITION TO MOTION FOR PARTIAL SUMMARY JUDGMENT TxE s~nrt~ rc>z~i, r.c. Attorne)~s rtr Lmr ]754 Willamette Fells Drive West Linn, OR 97068 (S03) 657-6550 Fax: (855) 710-0666 EmaiC daveQtltesmithfirmpc.com 1 2 3 4 5 6 7 8 9 10 11 12 13 14 is 16 17 18 19 20 21 2z 23 24 25 we will have to move on with plan B." Plan B was the dissolution of the company, known as ``Option. 2" in Eggirnan's Apri16 email [Exhibit 1]. In the email prior to the roadside conversation, Eggiman told Blish he had to choose between getting $10,000 in a sale to he and Howard or getting $3,000 in a dissolution. In his May 9 email, Eggiman tells Blish that if he does not send the share transfer, he and Howard will proceed with the other option. It is an f I admission that there had been no sale. C. Blish Was Subject to Duress While Engaged in the Roadside Conversation Eggiman and Howard threatened to dissolve the company if Mr. Blish did not agree to sell his shares to them for $10,000. In his Apri16, 2012, email to Blish, Eggiman gives two options, as set forth above: get $10,000 if you sell or get $3,000 if you don't. The threat was made several times even though Mr. Blish told them he thought his share of the company was worth a lot more and he wanted the company to obtain a valuation. The threats finally induced the telephonic conversation on the road to Mechanicsville, Pennsylvania that plaintiff coniends constitutes the agreement. The threat was imminent. If he did not agree, they would dissolve the company and give him $3,000. He was left with no reasonable alternative than to agrcc in principle to the sale. The Restatement 2d of Contracts, § 175{1) states that if a party's manifestation of assent is induced by an improper threat by the other party that leaves the victim no reasonable alternative, the contract is voidable by the victim. Oregon follows this rule. Capps v. CTeorgia- Pacific Corp., 253 Or 248, 453 P.2d 35 (1969). While Mr. Eggiman and Mr. Howard may have had a legal right to dissolve the corporation, Mr. Blish would have no legal remedy available to him since the closing of the company would largely destroy its value as a going business. "[A] threatened use of power for an illegitimate end is improper... [citing the Restatement 2d] Comcast of Oregon lI, Inc, v. City of Eztgene, 211 Or.App. 573, 586-587, 155 P.3d 99. Where a party threatens to do something that will cause damage to the victim while causing little or no Page 6- OPPOSITION TO MOTION FOR PARTIAL SUMMARY Ji7DGMENT THE sroHrH F-x>v>, P.c. Attorneys ntLmr 1754 Willame¢e Falls Drive Nest Linn, OR 97068 (503) 657-6550 ~. Fax:{866) 710-0666 Email daverthesmithfirmpe.com t 1 2 3 4 5 6 7 s 9 to 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 damage to himself, the act is improper. Such acts are common in freeze outs of minority shareholders as occurred here. Here Eggiman and Howard could simply re-start the business without Blish so they would not be hai~rned. However, such an act would amount to breaches of fiduciary duties and would be wrongful. l:n the year prior to the alleged sale, the company had made a profit of $45,000.00 and each shareholder was charged with $15,000 of income [Exhibit 6]. The notion that the company was worth only $30,000 is preposterous. The only reason a reasonable person would consider a sale for less than some multiple of the current income would be because of a threat such as that made by Eggiman and Howard. D. The Alleged Transaction Was Subject to Mutual Mistake of Fact Plaintiff claims that the reason Blish had to sell his shares in Salute was because he could not continue as a shareholder if he worked at LaRue Tactical because there would be a conflict of interest disqualifying him as a shareholder. Plaintiff cites Delaney v. Georgia Pacific Corp., 278 Or 305 (1977) to support its position that Mr. Blish's employment with LaRue Tactical made his continuing status as a shareholder of Salute untenable. That is simply not the case. First, in most: cases a fiduciary for a corporation may compete against the corporation so long as the competition does not damage the corporation. And if it does damage the corporation, the remedy is damages, not the removal of the shareholder. There is no evidence of any damage to the corporation. More important, however, is that Mr. Blish owes no duty of loyalty as a mere minority shareholder. The general rule in Oregon is that directors, officers, and majority shareholders owe fiduciary duties to the minority shareholders. Delaney concerned a situation in which there were two 50°/~ shareholders. In that case, each owed fiduciary duties to the other. That is not the case with Salute. Mr. Eggiman and Mr. Howard own 2/3 of the shares, occupy all of the Page 7- OPPOSITION TO MOTION FOR PARTIAL SUMMARY JUDGMENT THE SMITH FIRM, P.C. Afforneys rt7 Lmn 1754 Willamette Falls Drive West Linn, OR 97068 (503)657-6SS0 Fax: (866) 71D-0666 Email: dave~thesmithfirmpc.com M ' 2 3 4 5 6 7 8 9 10 11 12 I3 14 15 16 ~, 17 18 19 20 21 22 23 24 25 directorships, and all of the offices of the company. They completely control and dominate the corporation. It is they who owe fiduciary duties to Mr. Blish. The rules regarding conflicts of interest under Oregon taw all relate to directoxs and officers [e.g. ORS 6!).361 and 60.377]. The courts have grafted some of those rules onto majority shareholders as well [e.g. Cooke v. Fresh Express Foods Corp., Inc., 169 Or,App. 101, 108, 7 P. 3d. 711(2000); Noakes v. Schoenborn, 116 Or.App. 464,472, 841 P.2d 682 (1992)]. Minority shareholders are unaddressed in both the Oregon statutes and cases. Indeed, Oregon Courts have defined the duty of Loyalty in terms of that duty flowing to the minority shareholders. Viz. Lvcati v. Johnson, 160 Or.App. 63, 980 P.2d 173 (1999): "An essential element of a breach of [the duties of loyalty and fair dealing] is that the controlling shareholder has placed his or her personal interest above those of the minority." Id. at 71. "[O]nly an individual or a small group of shareholders who own a majority of the voting shares, or shareholders who, for other reasons, have domination or control, owe fiduciary obligati.ans to the minority." Stringer v. Car Data Systems, Inc., 108 Or.App. 523, 527, 816 P. 677 (1991). Mr. Blish is tree to compete as much as he likes with Salute. The only issue would he in the event Mr. Blish uses Salute's trade secrets to compete and there he would be in the same position as any other former employee. Salute is under no obligation to share trade secrets with its shareholders and, to the extent it does, it obliterates the secret nature of the information. Mistake is the ground for voiding the purported agreement which. is most generous to plaintiff. It mistakenly believed that Mr. Blish had a conflict of interest that prevented him from continuing as a shareholder. Mr, Blish believed its representatives. The agreement was made, if made at all, based on the mistake of fact (as to what the law was) Rest.2d Contracts, § 151(b). '~ The Restatement 2d. of Contracts, § 152 makes the contract voidable if based on the mistake of both parties. At the very least, there is a triable issue of fact concerning whether there was a mistake of fact which was the basis for the alleged agreement. Page 8- OPPOSITION TO MOTION FOR PARTIAL SUMMARY JUDGMENT Txe sm> Tx >;>R:tii, r.c, ABnrneys nt Lrnn 1754 Willamette Falls Drive Nest Linn, OR 47068 (SO3J 657.6550 Fax: (86ti) 710-0666 Email: dave@thesmithfirmpc.eom M ~` 1 CONCLUSION 2 For the reasons stated, the Court should deny Defendant's Motion for Partial Summary 3 Judgment and proceed to try the case on the merits. 4 Dated this ~ day of August, 2012. 5 THE SMITH FIRM, P.C. 6 7 avid P. Smith, OSB #96430 ~ 1754 Willamette Falls Drive West Linn, OR 97068 9 Telephone: (503) 657-655() ~ o Facsimile: (866} 710-0666 Email: dave@thesmithfirmpacom 1 l Attorneys far Defendant Freddie Blish 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 9- OPPOSITION TO MOTION FOR PARTIAL SUMMARY JUDGMENT TxE s;~xTx >;txivt, r.c. Atlornepa of Lrnv 1754 Willamette Fells Drive West Linn, OR 97068 (503) 657-6550 Fax: (866) 710-0666 Email: dave «thesmithfirmpccom CIPRIANI & WERNER, P.C. Hugh M. Emory, Esq. Attorney ID No. 16129 450 Sentry Parkway -Suite 200 Blue Bell, Pennsylvania 19422 Telephone: 610-567-0700 Attorneys for Defendants r<~ C.~ ' _.? -... ~~ .~+.. PV 'L~ ~. '-mow. I"TS t~ '..~.~ _.... ~_. 1/ i . ' ~ ~ 4..J t-...~ -.~ ~.- -- -- ~ '- $" _._. _: r c.a _.- k..~3 -. IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY FREDDIE BLISH Plaintiff, CIVIL ACTION vs.. MICHAEL EGGIMAN and MICHAEL HOWARD Defendants DOCKET NO. 12-6711-CIVIL JURY TRIAL DEMANDED CERTIFICATE OF SERVICE I, Hugh M. Emory, Esquire, hereby certify that a true and correct copy of the forgoing Preliminary Objections to Plaintiff's Complaint was served this date via First Class Mail, postage pre-paid, in accordance with lennsylvania Rules of Civil Procedure, upon the following: Matthew D. Menges, Esq. Menges & McLaughlin, PC 145 East Market Street York, PA 17401 CIPRIANI & WERNER, P.C. By: ~'~ ug .Emory, Esquire Attorney for Defendants November 19, 2012 ILED-0 F t 1C:. N THE PROTE-ONOTAF�' 2013 MAY 22 PM 1: 56 CUMBERLAND COUNTY PENNSYLVANIA IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY,PENNSYLVANIA CIVIL DIVISION FREDDIE BLISH, No.: 12-6711-CIVIL Plaintiff, V. MICHAEL EGGIMAN and MICHAEL HOWARD, Defendants. PRAECIPE TO DISCONTINUE AND END WITH PREJUDICE TO: THE PROTHONOTARY OF COURT: Please mark this case settled, discontinued and ended with prejudice. DATED: X1211 IS Matthew D. Menges, Esquire Sup Ct ID: 208132 Menges & McLaughlin, P.C. 145 East Market Street York,PA 17401 Attorney for Plaintiff