Tierney v. De Wet

695 F.Supp.3d 69

Christopher Scott TIERNEY, et al., Plaintiffs, v. Barclay DE WET, et al., Defendants.

Civil Action No.: 21-cv-1714 (RC)

United States District Court, District of Columbia

Signed September 29, 2023

Benjamin G. Chew, Andrew Crawford, Brown Rudnick LLP, Washington, DC, for Plaintiffs.

Thomas Edward Shakow, Aegis Law Group, LLP, Washington, DC, for Defendants Barclay Dewet, Lawrence Smith.

Ian T. Ramsey, Philip W. Collier, Pro Hac Vice, Stites & Harbison, PLLC, Louisville, KY, Robin E. McGuffin, Pro Hac Vice, Stites & Harbison, Lexington, KY, for Defendant Peyton Tierney.

Joseph M. Ward, Frost Brown Todd LLC, Charleston, WV, for Defendant Ann Tierney Smith.

Isaac R. Forman, Pro Hac Vice, Michael Brian Hissam, Hissam Forman Donovan Ritchie PPLC, Charleston, WV, John Peter Glaws, IV, Paul J. Maloney, Carr Maloney, P.C., Washington, DC, for Defendants Douglas Woloshin, Duane Morris LLP.

MEMORANDUM OPINION

GRANTING DEFENDANTS' MOTIONS TO DISMISS

RUDOLPH CONTRERAS, United States District Judge

I. INTRODUCTION

Plaintiffs once more bring this shareholder derivative action based on alleged mismanagement of two closely held family corporations. See First Am. Verified S'holder Derivative Compl. ("Am. Compl."), ECF No. 52. The Court dismissed a previous complaint for lack of subject-matter jurisdiction but permitted jurisdictional discovery to allow Plaintiffs to establish diversity. See Order Granting Defs.' Mot. Dismiss, ECF No. 44; Order Granting Pls.' Mot. Limited Disc., ECF No. 49. The Defendants again move to dismiss for lack of subject-matter jurisdiction, and also for lack of personal jurisdiction and for failure to state a claim. The Court finds that it has subject-matter jurisdiction to hear the case by dismissing a dispensable party. The Court also finds that it has personal jurisdiction over all Defendants. Proceeding on, the Court determines that res judicata and a prior settlement agreement preclude Plaintiffs from pressing their claims here. Thus, for the reasons stated below, the Defendants' motions to dismiss are GRANTED.

II. BACKGROUND

A. Relevant History and the Parties

This is a case about family members disputing control of two closely-held corporations, the Tierney Corporation and the Leatherwood Company (together, the "Companies"). See Am. Compl. ¶¶ 11-13. The Tierney Corporation owns 62% of the Leatherwood Company, which is therefore a majority-owned subsidiary of the Tierney Corporation. Id. ¶ 13. The Companies originally engaged in land and mineral reserve ventures, but later expanded operations to include television and radio stations, medical device development, and commercial and residential real estate. Id. ¶¶ 11, 22. The facts of this case concern the Companies' real estate operations.

The relevant history begins with Colonel Laurence E. Tierney, Sr., who owned and operated the Companies in the first half of the twentieth century. Id. ¶ 11. Following Colonel Tierney's death, ownership and control of the companies passed on through his lineage. In recent decades, the Tierney Corporation has been primarily owned by three branches of the family. Id. ¶ 12. The first relevant branch descends from the late Ann Tierney Smith. She and her immediate family, including her children Barclay de Wet and Laurence Smith, have owned approximately 27.5% of the Tierney Corporation.¹ Id. The next is C. Matthew S. Tierney ("Matt Tierney") and his immediate family, including his son Peyton Tierney, who have owned approximately 21.1% percent. Id. Finally, the late L. Clark Tierney, Jr. ("Clark Tierney") and his immediate family, including his late-wife Carolyn K. Tierney Griesemer ("Carol Griesemer") and his children Christopher Scott Tierney ("Chris Tierney"), Lee Mountcastle Kenna Tierney ("Kenna Tierney"), and Lewis Tierney, have owned approximately 21%. Id. ¶¶ 12, 18.

These family branches strongly disagree about control of the Companies. Id. ¶ 15. After Clark Tierney passed away in 2000, his wife Carol Griesemer took over his seat on the Tierney Corporation Board, but not his seat on the Leatherwood Company Board or the Executive Committee. Id. Instead, Ann Tierney Smith appointed her personal attorney Douglas Woloshin, who is a District of Columbia licensed attorney and a partner at Duane Morris LLP, to fill those positions. Id. ¶¶ 15, 33. The Plaintiffs allege that this maneuver began multiple decades of self-dealing by Ann Tierney Smith and Matt Tierney and their families, and by Mr. Woloshin. Id. ¶¶ 15, 23.

The composition of the Boards has continued to change over the years, and none of the individuals mentioned in the preceding paragraph remain on the Board of either of the Companies. Ann Tierney Smith served as President of the Boards of both Companies and on the Executive Committee from 2000 until December 2017, when she was replaced by her daughter, Barclay de Wet. Id. ¶ 17. Matt Tierney retired from the Boards of both Companies and the Executive Committee in October 2016 and was replaced by his wife Patricia Tierney, who was in turn replaced by her son Peyton Tierney on January 8, 2020. Id. Meanwhile, Ms. Griesemer served on the Board of the Tierney Corporation from 2001 until she was replaced by her son Lewis Tierney in 2016, and she is now deceased. Id. ¶ 18. Mr. Woloshin stepped down in 2022 pursuant to a court-approved settlement, which will be discussed in greater detail below.² As a result, the Tierney Corporation Board is currently composed of five members, including Barclay de Wet, Peyton Tierney, Laurence Smith, and Lewis Tierney.³ Id. ¶ 19. Barclay de Wet and Peyton Tierney are also Executive Committee officers and possess a "significant amount of control (if not total control) over the company."⁴ Id. ¶ 19.

This lawsuit was brought by Chris Tierney, Kenna Tierney, and the Estate of Carol Griesemer (collectively, "Plaintiffs") and the defendants are Barclay de Wet, Peyton Tierney, Laurence Smith, the Estate of Ann Tierney Smith, Douglas Woloshin, and Duane Morris LLP (collectively, "Defendants").⁵ Because this lawsuit is a shareholder derivative action, the Tierney Corporation and the Leatherwood Company are also nominal defendants.⁶ Barclay de Wet, Peyton Tierney, and Laurence Smith appear to be generally aligned with each other, while Lewis Tierney and his siblings Chris Tierney and Kenna Tierney are aligned as an opposing faction. Id. ¶¶ 23, 74-78.

B. The 2009 Horse Farm Transfer

In 2009, the Companies exchanged a Walgreens for a horse farm owned by Ann Tierney Smith. Am. Compl. ¶¶ 61, 66-67. Before the exchange, the Companies commissioned an appraisal of the horse farm that valued it at $5,200,000. Id. ¶ 55. However, the May 2008 appraisal was subject to an assumption that the horse farm would receive a $20,648,750 infrastructure investment that never occurred, as well as an assumption that the property would be re-zoned. Id. ¶ 57-59. Plaintiffs allege Mr. Woloshin misrepresented the appraisal by failing to inform the Leatherwood Board of the assumptions behind the valuation. Id. ¶ 60. Ann Tierney Smith was also allegedly aware that the appraisal was inaccurate but colluded with Mr. Woloshin to misinform the Leatherwood Board. Id. ¶ 65. The Leatherwood Board approved the transaction on October 7, 2009.⁷ Id. ¶ 66.

On October 9, 2009, the Companies held their annual directors meeting, where Ms. Griesemer questioned Mr. Woloshin in front of the Board about the valuation of the horse farm. Am. Compl. ¶ 67. Mr. Woloshin allegedly misrepresented the valuation and falsely equated the value of the horse farm to the Walgreens. Id. ¶ 68. Ms. Griesemer requested to see the appraisal and all documentation that the decision was based on, and Mr. Woloshin noted the request. Id. ¶ 69. Mr. Woloshin, Ann Tierney Smith, and Matt Tierney never gave Ms. Griesemer a copy of the appraisal. Id. Her son Lewis Tierney continued to request a copy when he joined the Board in October 2016 and at times thereafter, but Ann Tierney Smith, Ms. de Wet, Mr. Woloshin, and other Board members would not provide it. Id. ¶ 71.

C. Prior Litigation

1. The First Lawsuit

On March 10, 2017, Lewis Tierney, Chris Tierney, Ms. Griesemer, and two trusts f/b/o Carol Griesemer filed a shareholder derivative action on behalf of the Companies in the Circuit Court of Kanawha County, West Virginia (the "First Lawsuit"). See Tierney v. Tierney, No. 17-C-346 (Cir. Ct. Kanawha Cnty.). In six counts, the Plaintiffs alleged a series of wrongful acts by Defendants Ann Tierney Smith and Mr. Woloshin, seeking to have them removed as Directors of the Companies. See generally Compl. in Tierney v. Tierney, No. 17-C-346, Ex. 3 to Mem. P. & A. Supp. Defs. Duane Morris LLP's & Douglas Woloshin's Mot. Dismiss ("Mem. P. & A. Woloshin") at 22-29, ECF No. 9-5.⁸ Plaintiffs also alleged breach of fiduciary duty, gross negligence, mismanagement, self-dealing, and corporate waste against the director Defendants. See id. In other charges, Plaintiffs targeted Mr. Woloshin and Duane Morris LLP, alleging a breach of fiduciary duty and several alternative claims for excessive legal fees. See id. The case was transferred to the Business Court Division, which dismissed the case for failure to comply with the demand requirements of West Virginia Rule of Civil Procedure 23.1.⁹ See Business Court Order, December 7, 2017, Ex. 4 to Mem. P. & A. Woloshin, ECF No. 9-6.

2. The Second Lawsuit

On January 26, 2018, the plaintiffs who filed the first lawsuit made a demand on the Companies' board of directors and the shareholders. See Am. Compl. ¶ 42. Shortly afterward the plaintiffs filed a second lawsuit, again in the Circuit Court of Kanawha County, West Virginia, which had allegations that were largely duplicative of the first lawsuit. See Tierney v. Tierney, No. 18-C-90 (Cir. Ct. Kanawha Cnty.) (the "Second Lawsuit"); see also Compl. in Tierney v. Tierney, No. 18-C-90 ("Second Lawsuit Compl."), Ex. 5 to Mem. P. & A. Woloshin, ECF No. 9-7.

In response to the demand and...