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A commercial court acted within its discretion in appointing a master to enforce the terms of a settlement agreement reached in a shareholder lawsuit, the Court of Appeals of Indiana affirmed Tuesday.
According to court records, in 2019, James McConnell filed a derivative shareholder lawsuit against the then-board of directors of F. McConnell & Sons. In May 2022, McConnell and the appellees executed a settlement agreement pursuant to which FMS would redeem shares held by McConnell and sever his connection with the company.
McConnell, however, began refusing to perform according to the terms of the agreement and was eventually held in contempt of court for failure to obey several court orders.
On June 17, 2022, FMS received correspondence from McConnell indicating that he had transferred 18 of his shares in FMS to eight individuals.
The appellees moved to enforce the agreement, find McConnell in contempt of court, order return of funds and award them attorney fees.
McConnell also refused to engage with Greenwich Capital Group, the investment banker chosen to perform the per-share valuation, to perform the valuation as required pursuant to the agreement. Additionally, he had refused to authorize his then-counsel to agree to file the stipulation to appoint Greenwich as a commercial court master, or CCM, to perform the valuation.
On Aug. 12, 2022, the parties filed a stipulation to appoint a CCM, and the commercial court appointed Greenwich. But McConnell failed to provide Greenwich with an appropriate and reasonable engagement letter because he repeatedly suggested terms that contradicted the terms of the agreement.
The appellees eventually requested the appointment of a CCM pursuant to Indiana Commercial Court Rule 5 and Indiana Trial Rule 70 to fulfill the terms of the agreement, including undertaking any action necessary to transfer McConnell’s shares in FMS and unwinding his transfer of his FMS shares.
On Dec. 20, 2022, the commercial court issued its order appointing Edward E. Beck to be CCM to enforce the terms of the agreement.
McConnell appealed, arguing that the commercial court abused its discretion in appointing a CCM and that the agreement is an unenforceable “agreement to agree” at a later date.
The Court of Appeals disagreed and affirmed the judgment of the commercial court.
Judge Cale Bradford wrote the opinion for the appellate court.
Bradford wrote that the court had little hesitation in concluding the commercial court acted within its discretion pursuant to Commercial Court Rule 5 when it appointed Beck.
“The commercial court’s order does nothing more than grant CCM Beck the power to do the things that McConnell has been ordered to do but has refused — and only those things,” Bradford wrote.
Bradford added that the record indicates clearly that McConnell refused to act in accordance with the terms of the agreement, stipulate to the appointment of Greenwich as a CCM to complete the per-share valuation, execute the engagement letter with Greenwich and unwind his purported transfers of shares.
The record also does not support McConnell’s contention that the agreement is unenforceable, the COA held.
“First, the trustee’s counsel outlined several options that the parties could consider in redeeming McConnell’s trust shares. Moreover, McConnell, through former counsel, admitted to the commercial court that the parties had options for redeeming McConnell’s trust shares. The record simply does not support McConnell’s contention that it is impossible to redeem his trust shares in FMS,” Bradford wrote.
Finally, “Read as a whole, the Agreement clearly indicates an intent by McConnell and Appellees to be bound by an agreement that FMS would redeem McConnell’s shares, severing his connection with the company,” the COA concluded. “Because the language McConnell cites has no effect on the essentials of the Agreement, he has failed to establish that it is an unenforceable ‘agreement to agree.’”
Judges Patricia Riley and Leanna Weissmann concurred.
The case is James K. McConnell v. Martha A. Doan; Marilyn S. Hall; David Fee; Jerome Henry, Jr.; Thomas B. Walsh; Tim Miller; and Nicolas Ciocca, 23A-CT-145.
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