United States District Court, E.D. Virginia, Alexandria Division
ROBERT NEIL, in his capacity as Trustee of the CSR, Incorporated Employee Stock Ownership Plan, et al., Plaintiffs,
JOHN FOSTER-BEY, Defendant.
C. Cacheris United States District Court Judge
case arises out of a struggle between the Board and
management of CSR, Incorporated (“CSR”). It is
before the Court now on the Motion for Preliminary Injunction
[Dkt. 4] filed by Plaintiffs CSR and Robert Neil, in his
capacity as Trustee of CSR's Employee Stock Ownership
Plan. Also before the Court is Plaintiffs' Motion to
Strike Defendant's Opposition [Dkt. Nos. 23, 29] as
untimely. For the reasons that follow, the Court will deny
a “government contractor providing professional and
technical consulting services and research.” Compl.
[Dkt. 1] ¶ 7. Defendant joined CSR in 2008 as Project
Director, and within three years was promoted to Vice
President of Operations. On December 2, 2011, Defendant was
elected as both CEO and sole member of CSR's Board of
maintains an Employee Stock Ownership Plan - “a
qualified, defined contribution, stock bonus (or combination
stock bonus plan and money purchase pension) plan governed by
ERISA” that owns “100% of the outstanding common
stock of CSR.” Id. ¶¶ 8-9. The Plan
is administered “for the exclusive benefit of eligible
employees and their beneficiaries.” Id. ¶
9. On June 20, 2012, Defendant was appointed Trustee of the
Employee Stock Ownership Plan, assuming the fiduciary duties
appurtenant to that position.
August of 2013, Defendant appointed Thomas Edgar and Neil to
CSR's Board. Cynthia Mardsen was added to the Board in
January of 2016. Of the four Board members, only Defendant
served as both Board member and management.
allege that, beginning in early 2015, Defendant's
performance as President, CEO, and Trustee began to
deteriorate. Among other things, Defendant ceased keeping
regular business hours and “failed to engage in the
business development activities required of him as
CEO.” Mot. for Prelim. Inj. [Dkt. 4] at 2. After
repeated warnings, the other Board members informed Defendant
on September 12, 2016, that they intended to terminate him as
President, CEO, and Board member of CSR, and as Trustee of
CSR's Employee Stock Ownership Plan.
asked that the other Board members reconsider. They responded
with a “memorandum of understanding” setting
forth “specific mandates for [Defendant] going
forward” and providing for a six month probationary
period. Mot. [Dkt. 4] at 3. Plaintiffs delivered this
memorandum to Defendant on September 14, 2016. The Board also
scheduled a meeting with Defendant to take place on September
19, 2016, to discuss the issue of Defendant's employment.
the second meeting, on September 16, 2016, Defendant wrote
letters to two individuals - Garland Yates and James Hymen -
offering them the positions on the Board then occupied by
Edgar and Neil. Mistakenly believing that the Board
membership terms of Edgar and Neil had expired, Defendant
stated that the positions offered Yates and Hymen would
commence the day of the scheduled Board meeting. Yates and
Hymen accepted the appointments.
appeared late to the meeting on September 19, 2016, and
rejected the Board's mandates. In particular, Defendant
took issue with the requirement that he be present in the
office for six hours a day, four days a week. As a result,
the other Board members informed Defendant that they would
terminate him from his various positions at CSR.
responded that he would not recognize the Board's
authority to remove him because the membership terms of Edgar
and Neil had expired the prior month. The Board, however, had
earlier voted unanimously to extend those members' terms
to the end of September. Reminded of this resolution,
Defendant stated that he would not renew those Board
members' terms when they expired at the end of September,
and would use his position as Trustee to elect new Board
members who would retain him.
September 21, 2016, the other Board members sent Defendant a
formal notice terminating him from his roles as President,
CEO, and Board member of CSR. The notice included the caveat
that it would not become effective while the parties
attempted to reach an amicable resolution. Shortly
thereafter, it became apparent that no such resolution would
be possible. On September 26, 2016, the other Board members
notified Defendant that the earlier notice had become
effective, and provided him with a separate notice purporting
to terminate him as Trustee of the Employee Stock Ownership
Plan. The same day, the remaining Board members appointed
Neil as interim successor Trustee of the Plan.
nonetheless continued to hold himself out as President and
CEO of CSR, as well as Trustee of the Employee Stock
Ownership Plan. Plaintiffs allege that this has caused
confusion, damaging the company's business and with it
the value of the Employee Stock Ownership Plan.
September 28, 2016, Plaintiffs brought suit alleging that
Defendant's actions violated his fiduciary duty under
ERISA as Trustee of the Employee Stock Ownership Plan.
Plaintiffs filed the instant Motion for a Preliminary
Injunction contemporaneously with their Complaint, seeking an
injunction holding that, pending the resolution of this case,
(1) Defendant is no longer the CEO of CSR or the trustee of
CSR's Employee Stock Ownership Plan, (2) Plaintiff Neil
is the trustee of CSR's Employee Stock Ownership Plan,
and (3) the sole members of CSR's Board of Directors are
Neil, Edgar, and Marsden.
weeks after Plaintiffs filed suit, Defendant called a meeting
of what he viewed as CSR's legitimate Board members -
Yates and Hymen (his recent appointees), Mardsen, and
himself. Mardsen did not attend. At the meeting, Defendant,
Yates, and Hymen voted to rescind the Board's prior
decisions terminating Defendant from his various positions at