Donna K. Rains; Alice Belle Laurendine Plaintiffs-Appellants
Oscar Homer "O.H." Jones, III, et al. Defendants-Appellees
Submitted: April 10, 2018
from United States District Court for the Eastern District of
Arkansas - Little Rock
SMITH, Chief Judge, WOLLMAN and LOKEN, Circuit Judges.
a dispute among six siblings primarily over ownership and
control of OKISDA, Inc. (OKISDA), a family corporation their
mother, Eunice Ashabranner, established in 1974. In their
First Amended Complaint, the Plaintiffs, sisters Donna Rains
and Alice Laurendine, assert multiple claims against OKISDA,
their brother, Oscar Homer Jones, III ("O.H."), and
sisters Karen Loden, India Huddleston, and Sandra Ballard.
After substantial, contentious discovery, the district
court concluded that "nearly all [the
claims] hinge on whether the transfer of Class A [voting
common] stock from [Ashabranner's revocable] Trust to Mr.
Jones was valid." The court held the transfer valid and
granted Defendants summary judgment dismissing all claims.
Plaintiffs appeal, contending the court made five reversible
errors. Reviewing the grant of summary judgment de
novo, we disagree and affirm.
Background and Procedural History.
1974, Ashabranner (nee Eunice Jones) incorporated OKISDA to
own and operate roughly 1, 100 acres of farmland in Jefferson
County, Arkansas. The Articles of Incorporation authorized
OKISDA to issue 26, 000 shares of Class A voting common stock
and 26, 000 shares of Class B non-voting common stock. At the
June 1, 1974, organizational meeting, attended by
incorporator Ashabranner and her attorney, the corporation
resolved that Ashabranner would be the sole director; that
Ashabranner would serve as President, Vice President, and
Secretary-Treasurer; and that Ashabranner subscribed for the
authorized 26, 000 shares of Class A voting common stock and
26, 000 shares of Class B non-voting common stock in exchange
for her interest in the Jefferson County farmland. Later that
year, Ashabranner transferred 4, 333 shares of Class B
non-voting stock to each of her six children. As of December
1974, Ashabranner owned 26, 000 Class A shares and two Class
B shares, and each child owned 4, 333 Class B shares.
than twenty-five years later, Ashabranner transferred her 26,
000 Class A voting shares and two Class B non-voting shares
to the Eunice K. Ashabranner Trust, a revocable trust drafted
by an attorney in Conway, Arkansas. But by 2008, trustee
Ashabranner was dissatisfied with the Trust's successor
trustee provision and consulted her accountant, Kirk Stone,
and attorney Ted Drake, who had drafted a prior will in the
1980s and served as counsel to OKISDA. Drake testified that
the Conway attorney "had done a revocable trust that
wasn't at all what Miss Ashabranner wanted." It
bothered Ashabranner that the Trust "favored Donna and
made her trustee and gave her control over OKISDA." On
February 1, 2011, Ashabranner signed a Second Restatement to
the Trust drafted by Drake. Among other changes, the restated
Trust appointed O.H. the primary successor Trustee, followed
by Loden and Huddleston. Drake's notes from the meeting
state: "Mrs. A was alone and obviously mentally
competent. We went over trust and . . . order of trustees.
She said that is what she has always wanted. O.H. knows the
business. Other two girls know it next best."
March 2012, Ashabranner met with Stone, expressed concern
that her daughters might pressure O.H. to sell the farm, and
said she wanted to give O.H. control of OKISDA. After
confirming that Ashabranner understood the import of a
decision to give up her sole control of the corporation,
Stone emailed Ted Drake that "[Ashabranner] would like
to gift O.H. all the voting stock. . . . She understands this
gives O.H. control now. She is ok with O.H. having control.
She does not want to worry about the daughters being able to
s[ell] the farm without O.H.'s approval." Drake then
orchestrated a series of actions to implement
15, 2012, Ashabranner as sole voting shareholder elected
herself, O.H., Huddleston, and Loden to OKISDA's Board of
Directors. The next day, at a special meeting, the expanded
Board elected new officers and added a provision to the Bylaws
allowing "Informal Action" without a meeting if a
majority of the Board signed written consents describing the
actions taken. The following month, the Board amended the
Articles of Incorporation to authorize the issuance of 26,
000 shares of Class C non-voting stock "with
distribution on liquidation of the corporation limited to
[$1.00 per share] par value." By contrast, the Class A
and Class B shares continued to have a par value of one
dollar per share, but there was no limit to the per share
distribution they would receive upon liquidation. At the same
meeting, the Board authorized OKISDA to exchange 25, 998
Class C shares for 25, 998 Class A voting shares held by
Ashabranner's revocable Trust. After this exchange, only
two Class A voting shares remained outstanding, held by the
Trust. On September 24, 2012, with Ashabranner as sole
Trustee, the Trust transferred these two shares to O.H.
Laurendine, and Ballard received no notice of these 2012
transactions. On August 14, 2013, Ashabranner sent Rains,
Laurendine, and Ballard a letter expressing "my
disappointment in each of you" and declaring:
"Nothing has been done behind anyone[']s back as I
am the sole owner of OKISDA, Inc., to this point and
will remain so until my death . . . ." Plaintiffs allege
that, by August 16, two days later, they learned the Trust
had transferred the only two outstanding voting shares to
O.H. in September 2012. Ashabranner died on April 30, 2014.
2015, attorney Gene Ludwig sent all six siblings a letter
stating that he owned land adjacent to the OKISDA property
and expressing interest in buying any of the siblings'
interests in the land. Rains replied that she, Laurendine,
and Ballard would be willing to sell. On April 15, 2016,
Plaintiffs represented by Ludwig filed their initial
complaint against O.H. and OKISDA. Plaintiffs alleged that
the Trust's September 2012 transfer of two Class A shares
violated the share transfer restriction in OKISDA's
Bylaws. Plaintiffs sought specific enforcement of the
restriction and also asserted damage claims against O.H. for
unjust enrichment, conversion, breach of contract, and fraud
committed by the share transfer and later actions. Defendants
asserted various affirmative defenses including that claims
were barred by the statute of limitations and the action
should be dismissed for failure to join necessary parties.
filed the First Amended Complaint on September 23, 2016,
adding Loden, Huddleston, and Ballard as defendants.
Plaintiffs alleged that O.H., Loden, and Huddleston breached
their fiduciary duties as OKISDA directors by facilitating
the September 2012 share transfer without notice to
Plaintiffs; approving a loan from OKISDA to O.H. at a
below-market interest rate; mismanaging leasing of OKISDA
farmland; authorizing O.H. to drive a corporate truck; and
having OKISDA indemnify them for the costs of defending
Plaintiffs' suit. Plaintiffs sought a declaration that
Loden and Huddleston had waived any claim to the two Class A
shares and added Ballard as a necessary party defendant to
assert any interest she had in those shares. Plaintiffs also
sought a statutory right to inspect OKISDA's financial
records and expanded their fraud claim against
O.H. to include an allegation that he made misleading
disclosures to the federal government regarding his work
farming the OKISDA land.
months of discovery, all parties except Ballard moved for
summary judgment. All sought summary judgment on
Plaintiffs' claim that the September 2012 transfer
violated the share transfer restriction in OKISDA's
Bylaws. The district court granted the Defendants'
motions for summary judgment. Central to its decision was the
court's conclusion that Plaintiffs' breach of
contract, breach of fiduciary duty, conversion, unjust
enrichment, and fraud claims, and much of the relief sought,
turned on the validity of the September 2012 transfer of
Class A shares from the Trust to O.H. The court held that the
share transfer did not violate the Bylaws' transfer
restriction. The court also concluded that the unlawful share
transfer claim, and all of Plaintiffs' tort claims ...