SFF-TIR, LLC v. Stephenson

262 F.Supp.3d 1165

SFF–TIR, LLC; Stuart Family Foundation, Inc.; Alan Stuart 2012 GST Family Trust; Stuart 2005 GST Family Trust; Celebration, LLC; Anurag Agarwal ; Peter Buckley ; Vincent Signorello and Rodney M. Reynolds, Plaintiffs,

v.Charles C. STEPHENSON, Jr.; Cynthia A. Field; Peter Boylan, III; Lawerence Field; Cypress Energy Partners–TR, LLC; CEP Capital Partners, LLC; Cypress Energy Holdings, LLC and Tulsa Inspection Resources, LLC, Defendants.

No. CIV 14–0369 JB/FHM

United States District Court, N.D. Oklahoma.

Signed July 5, 2017

Jamison A. Diehl, Akin Gump Strauss Hauer & Feld LLP (NY), New York, New York—and—R. Stratton Taylor, Mark H. Ramsey, Clinton Derek Russell, Taylor Burrage Foster Mallett Downs Ramsey & Russell, Claremore, Oklahoma—and—Stuart Kagen, Daniel A. Cohen, Joshua C. Gillette, Kyla Janine Grant, Kagen & Caspersen, New York, New York, Attorneys for the Plaintiffs.

Toney Daniel Foster, Taylor Burrage Foster Mallett Downs Ramsey & Russell, Claremore, Oklahoma, Attorneys for Plaintiff Stuart 2005 GST Family Trust.

Frederic Dorwart, Paul DeMuro, Sarah Wishard Poston, Nora Rose O'Neill, Fredric Dorwart Lawyers, Tulsa, Oklahoma, Attorneys for the Defendants.

MEMORANDUM OPINION AND ORDER

James O. Browning, UNITED STATES DISTRICT JUDGE

THIS MATTER comes before the Court on Plaintiffs' Motion for Bench Trial on Plaintiffs' First Through Fourth Claims for Relief, and Brief in Support, filed February 17, 2017 (Doc. 253)("Motion for Bench Trial"). The Court held a hearing on April 26–27, 2017. The primary issues are whether: (i) the Plaintiffs' breach-of-fiduciary-duty claims against the Defendants are equitable or legal claims; (ii) the Plaintiffs' breach-of-fiduciary-duty claims fall within the scope of the Seventh Amendment's civil jury trial right; and (iii) the Defendants consequently enjoy a constitutional right to a jury trial rather than a bench trial with regard to the Plaintiffs' breach-of-fiduciary-duty claims. To resolve these issues, the Court applies a two-prong test that the Supreme Court of the United States devised in Granfinanciera v. Nordberg, 492 U.S. 33, 109 S.Ct. 2782, 106 L.Ed.2d 26 (1989). The first prong consists of an historical evaluation of whether breach-of-fiduciary-duty claims were within the jurisdiction of English law or equity courts in 1791, the year of the Seventh Amendment's ratification. See Granfinanciera v. Nordberg, 492 U.S. at 42, 109 S.Ct. 2782. The second prong consists of an assessment of the nature of the remedies that the Plaintiffs seek with their breach-of-fiduciary-duty claims. See Granfinanciera v. Nordberg, 492 U.S. at 42, 109 S.Ct. 2782. After a lengthy historical analysis, which includes review of 346 English law and equity cases between 1789 and 1791, the Court concludes with regard to the first prong that breach-of-fiduciary-duty claims were equitable in England in 1791. Analyzing the nature of the Plaintiff's remedies under the second prong, the Court determines those remedies to be legal in nature. Both because of the Granfinanciera v. Nordberg Court's instructions to weigh the second prong more heavily than the first prong and because of a strong judicial tradition of wariness to wrest issues from the jury in borderline cases, the Court concludes that: (i) the Plaintiffs' claims fall within the Seventh Amendment's scope; and (ii) the Defendants enjoy a right to a jury trial in this case with regard to the breach-of-fiduciary-duty claims. Accordingly, the Court denies the Plaintiffs' Motion for Bench Trial.

FACTUAL BACKGROUND

The Court adopts the factual background it previously stated in its Memorandum Opinion and Order, filed April 25, 2017 (Doc. 274). Defendant "Charles Stephenson is the owner of Regent Private Capital." Defendants' Motion for Summary Judgment on Acquiescence Defense and Brief in Support ¶ 1, at 7, filed April 3, 2015 (Doc. 83)("Defendants' Acquiescence MSJ")(stating this fact).¹ See Plaintiffs' Memorandum of Law in Opposition to Defendants' Motion for Summary Judgment on Acquiescence Defense ¶ 1, at 8, filed April 20, 2015 (Doc. 84)("Response to Defendants' Acquiescence MSJ")(not disputing this fact). "Defendant Cynthia Field is the daughter of Defendant Charles Stephenson." Plaintiffs' Memorandum of Law in Support of Motion for Partial Summary Judgment on Breach of Fiduciary Claims ¶ 1, at 3, filed September 14, 2015 (Doc. 157)("Plaintiffs' MSJ")(stating this fact).See Defendants' Response in Opposition to Plaintiffs' Motion for Partial Summary Judgment on Breach of Fiduciary Duty Claims (Doc. 157), at 2, filed October 5, 2015 (Doc. 170)("Response to Plaintiffs' MSJ")(not disputing this fact). "Defendant Lawrence Field is the husband of Defendant Cynthia Field and the son-in-law of Defendant Charles Stephenson." Plaintiffs' MSJ ¶ 2, at 3 (stating this fact). See Response to Plaintiff's MSJ at 2 (not disputing this fact). "Defendant CEP–TIR, LLC['s] ... principals are Defendants Stephenson, Cynthia Field and Peter Boylan, [sic] III." Plaintiffs' MSJ ¶ 3, at 3 (stating this fact).² "In 2009, Regent and Mr. Stephenson individually became together TIR Inc.'s largest shareholder owning approximately 40% of the TIR Inc. shares." Defendants' Acquiescence MSJ ¶ 1, at 7 (stating this fact).³ "At the same time a number of the Plaintiffs associated with Alan Stuart acquired a minority interest in TIR Inc." Defendants' Acquiescence MSJ ¶ 3, at 7 (stating this fact).⁴ "Alan Stuart is a 'seasoned, successful, long-term investor with more than 40 years' experience in business development, investment management, and corporate governance.' " Defendants' Acquiescence MSJ ¶ 4, at 7 (stating this fact).⁵ "The Defendant Lawrence Field, the son-in-law of Mr. Stephenson and an officer of Regent, became the chairman, and Alan Stuart became a member of the board of directors of TIR Inc." Defendants' Acquiescence MSJ ¶ 5, at 7 (stating this fact). See Response to Defendants' Acquiescence MSJ ¶ 1, at 8 (not disputing this fact). "In February 2013, Alan Stuart prepared a proposal for Mr. Field, which he named 'Project Poirot' to acquire control of TIR, Inc. at $369,507 per share which he later increased to $385,175." Defendants' Acquiescence MSJ ¶ 6, at 7 (stating this fact).⁶ "On February 11, 2013, Stuart purchased individual shareholder J.W. Lorett's TIR Inc. shares for $275,000 per share." Defendants' Acquiescence MSJ ¶ 7, at 7 (stating this fact).⁷ "On March 21, 2013, Stuart presented an offer to the TIR board for TIR Inc. shares of $380,382 per share." Defendants' Acquiescence MSJ ¶ 8, at 7 (stating this fact).⁸ "On May 16, 2013, Alan Stuart revised his offer to the board, increasing the repurchase price to $413,143 per share." Defendants' Acquiescence MSJ ¶ 9, at 8 (stating this fact).⁹ "The Defendants [Charles C.] Stephenson, [Peter] Boylan, and [Cynthia A.] Field were principals in Cypress Energy Partners–TIR, LLC ("Cypress Energy Partners"). Defendants' Acquiescence MSJ ¶ 10, at 8 (stating this fact)(brackets added). See Response to Defendants' Acquiescence MSJ ¶ 1, at 8 (not disputing this fact). "In 2013, two TIR Inc. directors (Alan Stuart on the one hand and Lawrence Field on the other hand) [sought] to acquire control of TIR Inc." Defendants' Acquiescence MSJ ¶ 11, at 8 (stating this fact)(relying on Videotape Deposition of Rodney Reynolds Taken on Behalf of the Defendants (taken November 17, 2014), filed April 3, 2015 (Doc. 83–11)("Reynolds Depo.").¹⁰ "In June 2013, the Defendants [completed] the bidding process to acquire control of TIR Inc." Defendants' Acquiescence MSJ ¶ 13, at 8 (stating this fact)(relying on Affidavit of Randall Lorett, filed April 3, 2015 (Doc. 83–2)("Lorett Aff.").¹¹

"On June 26, 2013, Defendant CEP–TIR, LLC acquired 26.45 shares of TIR from certain other shareholders, known as the Pooled Shareholders, in voluntary sales transactions." Plaintiffs' MSJ ¶ 4, at 3 (emphasis in the original)(stating this fact).See Response to Plaintiffs' MSJ at 2 (not disputing this fact). "Defendants subsequently referred to this share acquisition as the 'Control Acquisition.' " Plaintiffs' MSJ ¶ 5, at 3 (stating this fact). See Response to Plaintiff's MSJ at 2 (not disputing this fact). "Between June 2013 and October 2013, CEP–TIR LLC also [acquired] certain other outstanding shares of TIR." Plaintiffs' MSJ ¶ 6, at 3 (stating this fact).¹² "As a result of these transactions, Defendants CEP–TIR, LLC, Stephenson, and Cynthia Field ... became, collectively, the majority shareholders of TIR, owning at least 69.4% of the outstanding shares." Plaintiffs' MSJ ¶ 7, at 3 (stating this fact). See Response to Plaintiffs' MSJ at 2 (not disputing this fact). CEP–TIR, LLC, Stephenson, and Field "thereby collectively gained control of TIR." Plaintiffs' MSJ ¶ 8, at 4 (stating this fact). See Response to Plaintiffs' MSJ at 2 (not disputing this fact).

"From June 2013 through December 23, 2013, the Plaintiff SFF–TIR, LLC was represented by legal counsel." Defendants' Acquiescence MSJ ¶ 14, at 8 (stating this fact).¹³ "From June 2013 through December 23, 2013, the Plaintiffs Stuart Family Foundation, Inc.; Alan Stuart 2012 GST Family Trust; Stuart 2005 GST Family Trust; and Celebration, LLC were represented by legal counsel." Defendants' Acquiescence MSJ ¶ 15, at 8 (stating this fact).¹⁴ "Each of the individual Plaintiffs executed and delivered a proxy to SFF–TIR, LLC to act on his or her behalf with respect to his or its TIR Inc. shares which proxies were in effect on November 2, 2013." Defendants' Acquiescence MSJ ¶ 16, at 8 (stating this fact).¹⁵ "[T]he Plaintiffs, led by Alan Stuart, attempted to negotiate a sale of their minority block of shares to Cypress for a substantially higher share price." Defendants' Acquiescence MSJ ¶ 19, at 9 (stating this fact).¹⁶

"Following the June 26, 2013 Control Acquisition, and after certain resignations, TIR's Board of Directors had three members as of October 31, 2013: Defendant Lawrence Field, Defendant ...