Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Neil v. Foster-Bey

United States District Court, E.D. Virginia, Alexandria Division

October 27, 2016

ROBERT NEIL, in his capacity as Trustee of the CSR, Incorporated Employee Stock Ownership Plan, et al., Plaintiffs,
v.
JOHN FOSTER-BEY, Defendant.

          MEMORANDUM OPINION

          James C. Cacheris United States District Court Judge

         This 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 both Motions.

         I. Background

         CSR is 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 Directors.

         CSR 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.

         In 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.

         Plaintiffs 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.

         Defendant 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.

         Before 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.

         Defendant 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.

         Defendant 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.

         On 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.

         Defendant 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.

         On 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.

         Two 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 CSR.

         II. ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.