United States District Court, E.D. Virginia, Alexandria Division
CSR, INCORPORATED, in its corporate capacity and in its capacity as fiduciary of the CSR, Incorporated Employee Stock Ownership Plan. Plaintiff,
JOHN FOSTER-BEY, Defendant.
C. Cacheris, UNITED STATES DISTRICT COURT JUDGE
matter is before the Court on Plaintiff CSR,
Incorporated's Motion to Dismiss [Dkt. 77] Defendant John
Foster-Bey's Amended Counterclaims. For the reasons that
follow, the Court will deny Plaintiff's Motion.
following allegations of fact from Foster-Bey's
Counterclaims are taken as true for purposes of
Plaintiff's Motion. See E.I. du Pont de Nemours &
Co. v. Kolon Indus., Inc., 637 F.3d 435, 440 (4th Cir.
has served as CEO and President of CSR, as well as Trustee of
CSR's Employee Stock Ownership Plan (ESOP), since
December of 2011. Am. Counterclaim [Dkt. 75] ¶ 8. In
2012, he was made a member of CSR's Board of Directors.
Id. Under Foster-Bey's leadership, CSR returned
from near-insolvency to “profitability and a strong
balance sheet.” Id. ¶¶ 12-13.
2013, Foster-Bey appointed Thomas Edgar and Robert Neil to
CSR's Board. Id. ¶ 16. He appointed Cynthia
Marsden to the Board in 2015. Id. The terms of Neil
and Edgar were, by resolution, set to expire on September 30,
2016, while Marsden's term is due to expire September 30,
2017. Id. ¶ 17.
2013 on, Foster-Bey “spent a significant amount of time
on business development” and successfully grew
CSR's business. Id. ¶¶ 18-20. In April
of 2015, however, Foster-Bey became ill and was forced to
take a leave of absence for several weeks, during which he
worked from the hospital. Id. ¶ 23. Upon being
discharged from the hospital, Foster-Bey's doctor
cautioned him that he should work from home to the extent
possible - a practice Foster-Bey had generally permitted
among his employees. Id. ¶¶ 24-25. Upon
learning of Foster-Bey's plans to work from home, Neil
and Edgar first suggested that Foster-Bey retire, then
insisted that he take another month away from the office,
during which Foster-Bey worked from home. Id.
this incident, Foster-Bey became concerned that Neil and
Edgar were attempting to pressure him to quit - a concern
that grew acute after those two Board members attempted to
reduce Foster-Bey's annual bonus by half without good
cause. Id. ¶¶ 29-36. Foster-Bey's
suspicions were substantiated when the other Board members
attempted to oust him from his various positions at CSR.
meeting in secret, the outside Board members sent Foster-Bey
an email on September 7, 2016 asking him to attend a special
Board meeting regarding “Business Development and
Corporate governance.” Id. ¶¶ 38-39,
47-52. After a cryptic email exchange, Foster-Bey grew
concerned about the meeting and sought advice from CSR's
legal counsel regarding the process for dissolving the Board.
Id. ¶¶ 49-54. Counsel for CSR, however,
declined to provide legal advice, as he deemed the issue a
dispute between management and the Board. Id.
attended the special Board meeting on September 12, 2016, and
was surprised to learn that the subject of the meeting was
the Board's decision to remove him from his various
positions at CSR over “business development”
concerns. Id. ¶¶ 57-60. Foster-Bey pointed
out his successes in business development and suggested that
the Board provide him with specific benchmarks for business
development. Id. ¶¶ 63-64. The Board
agreed to provide a memo outlining their expectations, and
the meeting concluded without the Board taking any action or
setting a future meeting date. Id. ¶¶
Board sent Foster-Bey the promised memorandum several days
later. Id. ¶ 69. Among other things, it
required that Foster-Bey reappoint Edgar and Neil as Board
members upon the expiration of their membership terms - a
provision Foster-Bey deemed a bridge too far. Id.
¶¶ 72-73. In light of this and the Board's
other irregular activities, Foster-Bey appointed two new
Board members to replace Edgar and Neil - Garland Yates and
James Hymen. Id. ¶¶ 74-75.
Foster-Bey thought it best in light of the September 12
meeting to cancel an appointment scheduled for September 19,
2016, during which Foster-Bey was to meet with “two
newly retained business development consultants.”
Id. ¶¶ 77-79. Upon learning that the
meeting was cancelled, Edgar protested and asked in an email
dated September 18, 2016, that Foster-Bey meet with the
entire Board the following day. Id. ¶ 79.
Foster-Bey was not provided with any notice regarding what
the topic of the meeting would be. Id. ¶ 80. In
light of all that had come before, Foster-Bey retained
independent counsel and wrote letter informing Edgar and Neil
that they would be replaced as Board members, mistakenly
believing their terms to have already run. Id.
appeared at the September 19, 2016 meeting with counsel and
provided Edgar and Neil with the letters he had written.
Id. ¶¶ 85-86. At the meeting, counsel for
Foster-Bey discussed the situation with counsel for
Plaintiff, but they were unable to reach a resolution and
agreed to speak again at a later date. Id. ¶
86. The meeting ended without the Board having taken any
action. Id. ¶¶ 88-89.
September 21, 2016, the Board sent Foster-Bey notices of
termination regarding his positions as CEO and Board member
of CSR through counsel. Id. ¶ 96. Several days
later, on September 26, 2016, the Board communicated that
those notices had become effective, and that Foster-Bey would
additionally be terminated from his position as Trustee of
CSR's ESOP. Id. ¶¶ 110-14. At no point
was a Board meeting formally convened at which
Foster-Bey's termination from his various positions was
discussed and decided upon. I ...