Brennan v. Brennan
Brennan v. Brennan
Opinion of the Court
ORDER AND REASONS
The parties in this case have come to the Court requesting a determination of the rights of plaintiff Theodore Brennan (“Ted”)
BACKGROUND
The Court will not attempt to recount the long and complicated history of the Brennan family, the Brennan’s Restaurant on Royal Street in New Orleans’ French Quarter (“the restaurant”), and the family’s corporation, Brennan’s, Inc. Suffice it to say the family is litigious.
Owen Brennan, Sr., the owner and founder of the predecessors to Brennan’s Restaurant and Brennan’s, Inc., passed away in 1955, leaving control of the restaurant and the corporation to his wife, Maude Brennan; their three children, Pip Brennan, Ted Brennan, and James Brennan (“Jimmy”) (collectively, the “brothers”); and various aunts and uncles of the brothers. Brennan’s, 376 F.3d at 358. Settlement of a disagreement in the 1970s between branches of the family led to control of Brennan’s Restaurant and of Brennan’s, Inc. being placed in the hands of Maude, Pip, Ted, and Jimmy, with the aunts and uncles acquiring ownership of other New Orleans restaurants. Id. After Maude’s death in 1988, the three brothers were the sole shareholders in Brennan’s, Inc., with each one holding 196 shares and all three serving as officers and directors of the corporation. From the late 1980s until the mid-2000s, the corporation and restaurant apparently ran smoothly; indeed, the restaurant enjoyed its most profitable years during this time. However, after Hurricane Katrina made landfall in August 2005, devastating the restaurant along with much of the Greater New Or
After Hurricane Katrina, Pip’s sons Blake Brennan (“Blake”) and Bert Clark Brennan (“Clark”), both of whom were former employees of Brennan’s Restaurant, initiated plans to open their own restaurants in Florida and Mississippi. See Brennan’s, Inc. v. Brennan, 289 Fed.Appx. 706, 707 (5th Cir. 2008), cert. denied, 556 U.S. 1127, 129 S.Ct. 1615, 173 L.Ed.2d 994 (2009). Brennan’s, Inc. sued Clark and Blake for trademark infringement and unfair competition. See id. Brennan’s, Inc. also sued Pip in Louisiana state court for unauthorized assignment of a Brennan’s, Inc. trademark to his sons. On March 28, 2006, a meeting of the three shareholders in the corporation — Ted, Jimmy, and Pip — was held.
On February 2, 2010, a special meeting of the shareholders of Brennan’s, Inc. was held.
In July 2010, Jimmy passed away. Pursuant to a stock redemption agreement calling for the corporation to buy Jimmy’s
On December 28, 2010, after several years of intense and protracted litigation, Pip and Brennan’s, Inc. entered into a “Settlement Agreement and Release” (the “December 2010 Settlement”).
The corporation agreed the “value of Pip’s stock [would] be maintained until all payments” set forth in the December 2010 Agreement were made.
Brennan’s, Inc. quickly fell behind on its payment obligations to Pip. Brennan’s, Inc. failed to make most, if not all, payments in a timely fashion.
At no point did Brennan’s, Inc. demand the return or cancellation of any or all of Pip’s stock certificates, and to date, Pip maintains possession of these documents. Likewise, at no point did Brennan’s, Inc. send written notice of redemption of all or part of the shares to Pip.
In light of Brennan’s, Inc.’s failure to pay under the terms of the December 2010 Agreement and its obvious financial troubles,
Meanwhile, in December 2012, a judgment was entered against Ted, on behalf of the corporation, in favor of oblique plaintiffs Edward Tuck Colbert and Kenyon & Kenyon, LLP (collectively, “Kenyon”), in the amount of $4,070,135.84, plus legal interest from December 10, 2012 (the “December 2012 Judgment”).
On April 8, 2013, Pip sent the corporation a written request for a special shareholders meeting.
On April 23, 2013, a special meeting of the Board of Directors of Brennan’s, Inc. was held.
On April 26, 2013, the special shareholders meeting called by Pip was held.
Shortly after the meeting, Pip, Clark, and Blake, and others, entered Brennan’s Restaurant, declaring that Bridget and Ted had been ousted from the corporation as a result of the meeting; that Pip, Clark, and Blake had taken control of the corporation; and that Pip, Clark, and Blake would be running the restaurant.
On April 29, 2013, Ted, Bridget, and the corporation filed a petition in state court seeking a temporary restraining order, preliminary and permanent injunctive relief, and a declaratory judgment.
(1) a preliminary and permanent injunction enjoining Pip, Clark, and Blake, and any person acting in concert with them, from entering the premises of the Brennan’s Restaurant; and/or purporting to take any action as a shareholder, director, or officer of Brennan’s, Inc;
(2) a Declaratory Judgment that the April 26, 2013 meeting was invalid, unlawful and of no force and effect because Pip was not a shareholder in Brennan’s, Inc., and, as such, had no authority to call the meeting;
(3) a Declaratory Judgment that Pip, Clark, and Blake are not shareholders, directors, or officers of Brennan’s, Inc. and have no authority to act on behalf of the corporation;
(4) a Declaratory Judgment that the Brennan’s, Inc. registered office and registered agent were not changed as a result of the actions taken at the April 26, 2013 meeting; and
(5) a Declaratory Judgment that the Defendants have no authority to change Brennan’s, Inc.’s registered office or registered agent and that any purported changes at the April 26, 2013 meeting to the corporation’s registered office or registered agent are null and void.59
On this same date, defendants filed an amended counterclaim, requesting the following relief:
*713 (1) a writ of mandamus against Brennan’s, Inc. and/or Ted and/or Bridget ordering them to recognize the rights of the corporation’s members or shareholders;
(2) a writ of mandamus against Brennan’s, Inc. and/or Ted and/or Bridget recognizing the rights of Pip as a shareholder to call April 26, 2013 meeting and to vote Pip’s 196 shares at that meeting;
(3) a writ of mandamus against Brennan’s, Inc. and/or Ted and/or Bridget ordering them to show cause as to the ability of Ted to vote his shares at the April 26, 2013 meeting;
(4) a writ of mandamus against Brennan’s, Inc. and/or Ted and/or Bridget ordering that an election of officers and directors take place based on the status of the voting stock of Brennan’s, Inc. as of the date of the filing of the Amended Counterclaim;
(5) a writ of mandamus against Brennan’s, Inc. and/or Ted and/or Bridget ordering that the corporate books of Brennan’s, Inc. be corrected as of April 26, 2013, to properly show the status of Pip and Ted’s Brennan’s, Inc. voting stock on that date; and
(6) a writ of mandamus against Brennan’s, Inc. and/or Ted and/or Bridget ordering that the corporate books of Brennan’s, Inc. correctly reflect the current status of the voting stock of Pip Brennan and Ted Brennan prior to this Court’s directing a writ of mandamus ordering the new election of officers and directors.60
ANALYSIS
As a threshold matter, the Court notes that because the Court is sitting in diversity, the Court applies the substantive law of Louisiana, the forum state. See, e.g., Holt v. State Farm Fire & Cas. Co., 627 F.3d 188, 191 (5th Cir. 2010) (citing Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938)). The parties agree Louisiana law governs this case.
I. The Requested Injunctive Relief is Denied
The Court will first address plaintiffs’ requests for preliminary and permanent injunctive relief. Under Louisiana law, an injunction is a “harsh, drastic, and extraordinary remedy, and should only issue where the party seeking it is threatened with irreparable loss or injury without adequate remedy at law.” Lafreniere Park Foundation v. Friends of Lafreniere Park, Inc., 97-152 (La.App. 5 Cir. 7/29/97); 698 So.2d 449, 452, writ denied, 97-2196 (La.11/21/97); 703 So.2d 1312. “In order to obtain a preliminary injunction a plaintiff must show that he will suffer irreparable harm if the injunction is not granted, that he is entitled to relief sought, and he must make a prima facie showing that he will prevail on the merits.” Id. If the action complained of is unlawful, however, the plaintiff need not show the action will cause the plaintiff irreparable harm. Id. The trial court has “great discretion” to grant or deny a request for preliminary injunctive relief. Id. A preliminary injunction maintains the status quo until final determination on the merits of the case. See id.; see also La. Granite Yard, Inc. v. LA Granite Counter-tops, L.L.C., 45,482 (La.App. 2 Cir. 8/18/10); 47 So.3d 573, 581, writ denied, 10-2354 (La.12/10/10); 51 So.3d 733 (internal citation omitted). In this case, the parties agreed to consolidate hearings on plaintiffs’ requests for preliminary and permanent injunctive relief and have those requests heard simultaneously and in a summary proceeding. Because the parties agreed to maintain the status quo until the merits of this case could be decided, plaintiffs’ request for preliminary injunctive relief is moot.
Unlike a preliminary injunction, the issuance of a permanent injunction takes place only after a trial on the merits, and the party seeking the permanent injunction must prove its entitlement to the
II. Declaratory Relief
Plaintiffs’ requests for declaratory relief fall into two categories: (1) the rights of Pip, Clark, and Blake as shareholders, officers, and directors in Brennan’s, Inc.; and (2) the validity of the April 26, 2013 meeting. The Court will address each category in turn.
A. Blake and Clark are Not Shareholders, Officers, or Directors; Pip is a Shareholder but not an Officer or Director
Plaintiffs seek a declaration that neither Pip nor his sons Clark and Blake are shareholders, officers, or directors in Brennan’s, Inc. As explained below, Pip is a shareholder in the corporation, so plaintiffs’ request for declaratory judgment is denied insofar as it seeks a declaration to the contrary. There has been no argument or evidence presented that Clark or Blake are shareholders in the corporation, so plaintiffs’ request for a declaratory judgment that neither Clark nor Blake is a shareholder is granted.
With respect to plaintiffs’ request for a declaratory judgment as to Pip’s, Clark’s, and Blake’s status as officers or directors in the corporation, the undisputed evidence at the hearing was that Pip was removed as officer and director in the corporation in 2006, and, as explained below, the April 26, 2013 meeting at which Pip, Clark, and Blake were purportedly elected as officers and directors in the corporation was not proven to be properly called or conducted. As a result, neither Pip nor Clark nor Blake has been validly elected to the position of officer or director in Brennan’s, Inc., and plaintiffs’ request for a declaratory judgment on this issue is granted. Pip, Clark, and Blake are not officers or directors in Brennan’s, Inc. at this time.
B. The April 26, 2013 Meeting Was Not Properly Called or Conducted
The April 26, 2013 special shareholders meeting called by Pip was not properly called or conducted and, as a result, none of the corporate resolutions or elections voted on at that meeting is of any
1. The Registered Office and Registered Agent of Brennan’s, Inc.
Were Not Changed
Because the April 26, 2013 meeting was invalid, the corporate resolutions adopted and elections held during that meeting are null and void, including the resolutions to change the corporation’s registered office and agent. Accordingly, plaintiffs’ request for a declaratory judgment that neither the registered office nor the registered agent of the corporation was changed as a result of the meeting is granted.
2. Pip, Clark, and Blake Did Not Have Authority to Change the Registered Office or Registered Agent of Brennan’s, Inc. at the April 26, 2013 Meeting
In addition to the April 26, 2013 meeting being invalid, which means that Pip, Clark, and Blake had no authority to change the registered officer or agent of the corporation at that meeting, Clark and Blake are not shareholders, officers, or directors in the corporation with the right to vote on corporate matters. Plaintiffs’ request for a declaratory judgment that Pip, Clark, and Blake had no authority to change the registered office and registered agent of the corporation at the April 26, 2013 meeting is granted.
III. Writ of Mandamus
The Court now turns to defendants’ prayers for relief in the amended counterclaim, all of which fall under the umbrella of the writ of mandamus set forth in Louisiana Code of Civil Procedure articles 3861-3866.
A. Ted is a Shareholder in Brennan’s, Inc.
The Court finds that Ted was the record owner of 196 shares of stock in Brennan’s, Inc. as of May 11, 2013. While his stock certificates were seized pursuant to a writ of fieri facias by counsel for Kenyon, it is undisputed that Kenyon has not taken the steps necessary under Louisiana law to sell the shares of stock represented by those certificates. A writ of fieri facias directs the seizure and sale of property. A seizing creditor, by the mere act of seizure, acquires a privilege on the property seized but does not acquire ownership. See La.Code Civ. Proc. Ann. arts. 2291-2343. Under Louisiana law, an owner of shares of stock retains his right to vote those shares of stock unless and until the ownership of those shares is formally transferred to another person or entity. See Foreman v. Hines, 314 So.2d 460, 464 (La.App. 4 Cir. 1975). While a certificate of stock serves as prima facie evidence of corporate ownership, actual ownership and shareholder status is determined from all the facts and circumstances of a case. Vicknair, 822 So.2d at 50. In this case, the stock is still registered in Ted’s name and Ted has established from all the facts and circumstances of this case that he remains the owner of the shares, even if he does not have them in his possession. Thus, Ted maintains his right to vote those shares.
B. Pip is a Shareholder in Brennan’s, Inc.
The Court finds that Pip was the record owner of 196 shares of stock in Brennan’s, Inc. as of May 11, 2013. On that date, all 196 shares remained of record in Pip’s name,
Furthermore, Pip has not been divested of his ownership by virtue of the December 2010 Agreement. The Court finds that the December 2010 Agreement, with the 1983 Stock Redemption Agreement attached as Exhibit A, was a stock redemption agreement within the meaning of Section 75A of the Louisiana Business Corporations Law (“Section 75A”). Under Section 75A, a shareholder of record is entitled to vote each of his shares at every shareholders’ meeting, and even if the corporation has decided to redeem the shares, the shareholder maintains his right to vote those shares until the entire redemption price is paid or a sum sufficient to redeem the shares is deposited. See La.Rev.Stat. Ann. § 12:75A.
Under certain circumstances, prima facie evidence of stock ownership may be rebutted upon a showing from all the facts and circumstances of the case that actual ownership is otherwise. Vicknair, 822 So.2d at 50. In this instance, Ted and Bridget have the burden of proving facts and circumstances to rebut Pip’s presumption of ownership of the shares as of May 11, 2013. Ted’s and Bridget’s sole argument is that the December 2010 Agreement was not a stock redemption agreement within the meaning of Section 75A but instead was a completed sale which immediately divested Pip of ownership. Thus, they argue, Section 75A does not apply.
Even if Bridget and Ted were given the benefit of the doubt, and the Court found that the December 2010 Agreement was ambiguous on this front, the Court would find the intent of the parties was for the agreement to be a stock redemption agreement within the meaning of Section 75A. Under Louisiana law, “[i]nterpretation of a contract is the determination of the common intent of the parties.” La. Civ.Code Ann. art. 2045. When a contract’s terms are clear and explicit and lead to no absurd consequences, no further interpretation may be made in search of the intent of the parties. La. Civ.Code Ann. art. 2046. However, when the contracting parties’ intent is less than clear, the “agreement shall be construed according to the intent of the parties, which is to be inferred from all of the surrounding circumstances.” New Orleans Jazz and Heritage Foundation, Inc. v. Kirksey, 09-1433 (La.App. 4 Cir. 5/26/10); 40 So.3d 394, 401-02 (citing Derbes v. GBS Properties, 04-1460 (La.App. 5 Cir. 4/26/05); 902 So.2d 1109, 1111).
If the December 2010 Agreement were ambiguous, the Court would have to attempt to determine the intent of the parties. Kirksey, 40 So.3d at 401.
Finally, the Court notes that the parties dispute the amounts that have been paid and/or forgiven, and whether all such amounts are in consideration for the sale of Pip’s stock. As a result, the redemption price has not been paid full nor has a sum sufficient been deposited. The case of Guidry v. Gulf Coast Coil Tubing, 09-621 (La.App. 3 Cir. 12/9/09); 24 So.3d 1019, involved a dispute over the price to be paid under a redemption agreement similar to the situation presented by the case at bar. Id. at 1021-25. In affirming the trial court, the appellate court noted that Section 75A provides a holder of redeemable shares of stock maintains his right to vote those shares unless and until a sum sufficient has been deposited. In that case, the amended articles called for redemption of shares at “book value” and the redemption letters called for redemption at a rate of $1.00 per share — two values that are not necessarily the same. Thus, the sum sufficient for redemption had not been determined. Id. Because the sum sufficient had not been determined, the redemption was never effected, and the ousted directors maintained their rights as shareholders. Id.
In this case, Ted and Pip disagree as to the consideration to be paid Pip for his stock. Since the corporation’s monetary obligations to Pip in connection with the redemption agreement are unclear, the stock has not been redeemed. See Guidry, 24 So.3d at 1025.
To the extent defendants request a writ of mandamus ordering the corporation to recognize that Pip was the record owner of 196 shares as of May 11, 2013, the request is granted.
Defendants’ request for a writ of mandamus is granted. The corporation is ordered to recognize Pip as the record owner of 196 shares of stock in Brennan’s, Inc., with the right to vote those shares, as of May 11, 2013. The corporation is further ordered to recognize Ted as the record owner of 196 shares of stock in Brennan’s, Inc., with the right to vote those shares, as of May 11, 2013.
CONCLUSION
IT IS ORDERED that plaintiffs’ request for preliminary injunctive relief be and hereby is DISMISSED AS MOOT.
IT IS FURTHER ORDERED that plaintiffs’ request for permanent injunctive relief be and hereby is DENIED.
IT IS FURTHER ORDERED that plaintiffs’ request for declaratory judgment be and hereby is GRANTED IN PART and DENIED IN PART, as set forth above.
IT IS FURTHER ORDERED that defendants’ requests for writs of mandamus be and hereby are GRANTED IN PART and DENIED IN PART, as set forth above.
. For ease of reference, the Court refers to the parties and their family members by their first names.
. For a more detailed examination of the history of the Brennan family and Brennan's Restaurant, see, e.g., Brennan’s, Inc. v. Dickie Brennan & Co., Inc., 376 F.3d 356, 359-61 (5th Cir. 2004). Additional litigation involving various family members has been filed since that time.
. See Joint Bench Book Exhibit 47 (Minutes of March 28, 2006 meeting).
. See id.
. See id.
. See Joint Bench Book Exhibit 46 (Minutes of December 19, 2006 meeting).
. See id.
. See Joint Bench Book Exhibit 48 (Minutes of January 4, 2007 meeting).
. Id.
. See Joint Bench Book Exhibit 52 (Minutes of February 2, 2010 meeting).
. Id.
. Id.
. See Joint Bench Book Exhibit 2A.
. See Joint Bench Book Exhibit 13 (October 15,2010 Promissory Note).
. See Joint Bench Book Exhibit 12 (October 15, 2010 Pledge and Security Agreement).
. Id.
. See Joint Bench Book Exhibit 2.
. Id.
. See id.; see also Joint Bench Book Exhibit 2A.
. Joint Bench Book Exhibit 2.
. Id.
. Id.
. Id.
. Joint Bench Book Exhibit 2; Joint Bench Book Exhibit 2A.
. Id.
. Id.
. See Joint Bench Book Exhibit 28 (Pip's handwritten record of payments made by Brennan's, Inc.).
. See id.; see also Joint Bench Book Exhibits 26-27.
. Joint Bench Book Exhibit 28.
. Joint Bench Book Exhibit 43. This payment was made by direct deposit into Pip's account without his knowledge. It is unclear what this May 2013 partial payment was intended to pay.
. In addition to the corporation’s other financial difficulties described herein, the building in which Brennan's Restaurant is housed is scheduled to be sold at a Sheriff's sale on May 23, 2013.
. The Court takes judicial notice of Pip's petition and amended petition filed in Case Number 12-9217, Civil District Court for the Parish of Orleans, State of Louisiana.
. This Judgment was entered in Civil Action No. 12-137, a case that is pending before this
. See Civil Action No. 12-137, R. Doc. 203.
. See Civil Action No. 12-137, R. Doc. 241.
. See Joint Bench Book Exhibit 25.
. Joint Bench Book Exhibit 6.
. See id.
. Id.
. Joint Bench Book Exhibit 7.
. Id.
. Joint Bench Book Exhibit 49.
. See id.
. Id.
. See Joint Bench Book Exhibits 8-9.
. Id.
. The validity of the purported proxy given by the Succession to Pip is in dispute.
. See Joint Bench Book Exhibit 9.
. See Joint Bench Book Exhibit 8.
. See R. Doc. 61 (Plaintiffs’ amended complaint).
. Id.
. R. Doc. 1-3.
. R. Doc. 1.
. R. Doc. 17.
. Id.
. R. Doc. 20.
. R. Doc. 29. The parties consented to the plaintiffs’ requests for injunctive and declaratory relief and the defendants’ requests for writ of mandamus being heard in summary proceedings.
. See R. Doc. 57; see also R. Doc. 53 (Order requesting briefing on Rule 19 issue). Before the Court instructed the parties to amend their pleadings, defendants filed a motion to
. R. Doc. 61.
. R. Doc. 58. With the filing of these amended pleadings and amended prayers for relief, the parties are no longer asking the
. R. Doc. 69.
. R. Doc. 70.
. See R. Doc. 71.
. See R. Doc. 72.
. Under the current circumstances, it is unclear who the shareholders are, and, absent an agreement of all interested parties, it appears impossible for there to be a validly noticed and held meeting of the shareholders.
. In the original counterclaim, defendants sought relief in the form of a writ of mandamus and a writ of quo warranto under Louisiana Code of Civil Procedure articles 3901-3902. See R. Doc. 20. In the amended counterclaim, defendants removed their claims for a writ of quo warranto.
. Again, the Court does not address Bridget’s nor the Succession's shareholder status at this time.
. At oral argument on May 14, 2013, counsel for defendants conceded that Kenyon’s seizure of Ted's certificates did not divest Ted of his shares or his ability to vote those shares.
. See Joint Bench Book Exhibit 17 (Pip’s stock certificates).
. See Joint Bench Book Exhibit 1.
. The Court has found, however, that even though Pip had the right to request the meeting, and would have the right to vote his shares at a properly called meeting, Pip did not establish that all shareholders were given proper notice of the meeting and an opportunity to vote at the meeting.
. Section 75A provides as follows:
Except as provided in R.S. 12:136 and R.S. 12:140.12, and except as otherwise provided in the articles, each shareholder of record shall have the right, at every shareholders' meeting, to one vote for each share standing in his name on the books of the corporation; provided that on and after the date on which written notice of redemption of redeemable shares has been mailed to the holders thereof and a sum sufficient to redeem such shares has been deposited with a bank or trust company with irrevocable instruction and authority to pay the redemption price to the holders thereof upon surrender of certificates therefor, such shares shall not be entitled to vote on any matter and shall not be deemed to be outstanding shares.
La.Rev.Stat. Ann. § 12:75A.
. Indeed, a shareholder’s sale of his shares of stock to the corporation in which those stocks are held is the definition of a stock redemption; by definition, the sale of the shares back to the corporation is a redemption of those shares by the corporation.
Reference
- Full Case Name
- Theodore BRENNAN v. Owen E. BRENNAN
- Cited By
- 3 cases
- Status
- Published