Berger v. Newhouse

United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS December 9, 2003
FOR THE FIFTH CIRCUIT Charles R. Fulbruge III
_____________________ Clerk
No. 03-10710
Summary Calendar
_____________________
In The Matter Of: PIRANHA INC,
Debtor,
------------------------
RICHARD S BERGER,
Appellant,
versus
ROBERT NEWHOUSE, Chapter 7 Trustee of the Bankruptcy Estate of In
Re: Piranha, Inc, as successor to Piranha, Inc,
Appellees.
---------------------
Appeal from the United States District Court
for the Northern District of Texas
(3:01-CV-2223-D)
---------------------
Before JOLLY, WIENER, and CLEMENT, Circuit Judges.
PER CURIAM:*
Appellant Richard S. Berger appeals the district court’s June
20, 2003 Order affirming an earlier Bankruptcy Court decision on
jurisdiction over a case involving a debtor in bankruptcy, Piranha,
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
Inc. (“Piranha”).1 Berger contends that the Bankruptcy Court has
no jurisdiction to consider Piranha’s bankruptcy filing because the
filing was not a valid action of Piranha’s board of directors under
the company’s bylaws and Delaware state law.2 The Bankruptcy Court
concluded that the filing was valid, vesting that court with
jurisdiction over the case. We affirm.
I. Facts and Proceedings
In May 2001, the chairman of Piranha’s board of directors,
Edward Sample, called a special board meeting for May 25 to
consider restructuring Piranha’s management. In addition to
Sample, Piranha’s directors were Michael Steele, Larry Greybill,
and Berger. Claiming lack of sufficient notice, Berger protested
the May 25 meeting and refused to attend. The other directors held
the meeting despite Berger’s objection, as they had a quorum
without him, and voted to adopt a number of resolutions. If valid,
those resolutions accepted the resignations of Greybill and Steele
and appointed Mike Churchill a director. Greybill submitted his
written resignation following the May 25 meeting, as required by
Piranha’s bylaws and Delaware law.3 Steele, however, did not.
1
The original Bankruptcy Court decision was handed down in
2001, but protracted (and ultimately unsuccessful) settlement
negotiations delayed the appeal to district court.
2
See Price v. Gurney, 324 U.S. 100 (1945).
3
See 8 Del. Code Ann. § 141(b) (2003) (“Any director may
resign at any time upon notice given in writing or by electric
transmission to the corporation.”).
2
Appellees contend that Steele did not do so because the directors
knew about Berger’s challenge to the meeting’s validity and wanted
to maintain control of Piranha in the event Berger’s notice claims
proved to be valid.4
Piranha’s counsel later informed the directors, however, that
insufficient notice probably rendered the May 25 meeting a nullity.
To effect the changes that had not been validly made at that
invalidly called meeting, Sample furnished notice to the other
directors (Steele and Berger, according to Appellees) for a June 15
meeting. Berger also protested the June 15 meeting and again did
not attend. At the June 15 meeting, Sample and Steele voted to
elect Churchill a director, and on June 16 Steele tendered his
written resignation.5 At a June 20 meeting Piranha’s board of
directors (then consisting of Sample, Berger, and Churchill,
according to Appellees) voted to file for bankruptcy relief under
Chapter 11.
II. Analysis
A. Standard of Review
4
There are underlying allegations in this case that Berger
absconded with Piranha funds without prior Board approval. We do
not pass on the substance of these allegations, but note that their
existence supports Appellees’ arguments, made before the Bankruptcy
Court, that all of the Board meetings and changes in Board
membership at issue here were attempts to ensure that Appellees
retained control of the Board so that any remedial measures
regarding the missing funds could be implemented.
5
Steele waited until June 16 to get Piranha’s legal counsel’s
opinion as to the validity of the June 15 meeting before submitting
his resignation.
3
Findings of fact underlying Bankruptcy Court orders are
reviewed for clear error. Conclusions of law are reviewed de
novo.6
B. Berger’s Contentions
Berger argues that, even though Steele did not tender a formal
written resignation prior to June 15, his resignation was effective
on May 29, 2001, the date on which Piranha’s legal counsel filed a
Form 8-K with the Securities and Exchange Commission (“SEC”)
indicating, inter alia, that Steele had resigned. Berger argues
that, because that document contained Steele’s electronic
signature, under the Uniform Electronic Transaction Act (“UETA”)7
Steele cannot disavow the document; as such, it served as a written
resignation effective May 29. Berger contends that by virtue of
the invalidity of Churchill’s election, he and Sample were the sole
remaining directors as of 6/15. According to Berger, this means
that the June 20 vote to proceed with the Chapter 11 filing was
invalid, as Berger did not vote for that action and Churchill was
not a director, because he had not been validly elected at either
the May 29 or June 15 meeting. This case therefore turns on the
effective date of Steele’s resignation.
C. Steele’s Resignation Date
The Bankruptcy Court implicitly found that Steele did not
6
See, e.g., Krafsur v. Scurlock Permian Corp. (In re El Paso
Refinery, L.P.), 171 F.3d 249, 253 (5th Cir. 1999).
7
6 Del. Code Ann. §§ 101-117 (2003).
4
resign until June 16, 2001, having refrained from submitting his
written resignation until that date.8 The court further found that
Steele did not resign orally —— a question of intent —— because his
conduct was inconsistent with his having done so.9 The district
court agreed with the Bankruptcy Court, deciding that its
construction of the UETA was correct and its factual findings not
clearly erroneous. We agree.
1. Steele’s Form 8-K
Berger’s primary contention is that, because the Form 8-K
filed with the SEC contains Steele’s electronic signature, he may
not disavow it now under § 107(a) of the UETA, and it must
therefore stand as the written resignation required by Piranha’s
bylaws and Delaware law. Berger points to Section 107(a)’s dictate
that “[a] record or signature may not be denied legal effect or
8
As the district court notes, the Bankruptcy Court neither
explicitly stated that Steele did not resign until June 16, nor
squarely addressed the question whether the Form 8-K filed with the
SEC constituted a written resignation. Its overall decision,
however, must by implication include a finding that Steele did not
resign until he submitted his written resignation in tangible form
on June 16. And, we will infer that the trial court made a finding
that is necessarily included in a broader holding, even if not
explicitly stated. See, e.g., Clinkenbeard v. Central Southwest
Oil Corp., 526 F.2d 649, 651-52 (5th Cir. 1976).
9
The Bankruptcy Court had noted that the Tenth Circuit,
interpreting a Kansas statute similar to the Delaware law here at
issue, ruled that the requirement of a writing is permissive rather
than mandatory, and an oral resignation can be effected if intent
to resign is evident. See Wylie v. Marley Co., 891 F.2d 1463, 1469
(10th Cir. 1989).
5
enforceability solely because it is in electronic form.”10 Steele,
however, does not attempt to deny the legal effect of his signature
“solely because it is in electronic form,” but because he did not
“execute[], adopt[] or authorize[]” it as required by Treasury
Regulation S-T.11 In essence, Steele contends that the Form 8-K was
filed in error, three hours after being forwarded to him via email
by Piranha’s legal department for his review.
As the district court noted, sections 109(a) and (b) of the
UETA indicate that a document bearing an electronic signature may
be contested on these very grounds. Section 109(a) states that an
“electronic signature is attributable to a person if it was the act
of the person;”12 section 109(b) explains that “[t]he effect of an
electronic record or electronic signature attributed to a person
under subsection (a) of this section is determined from the context
and surrounding circumstances at the time of its creation,
execution, or adoption ....”13 Section 109(b) makes clear that a
litigant may challenge the effect of his electronic signature by
discussing its “context and surrounding circumstances” in front of
the reviewing court. In the instant case, Steele did just that,
contending that the Form 8-K was filed in error and that he did not
10
6 Del. Code Ann. § 107(a) (2003)(emphasis added).
11
17 C.F.R. § 232.302(a) (2003).
12
6 Del. Code Ann. § 109(a) (2003).
13
6 Del. Code Ann. § 109(b) (2003).
6
execute, adopt, or authorize the electronic signature it contained.
We cannot say that the Bankruptcy Court committed clear error by
agreeing with him.
2. Steele’s Actions Prior to June 16
The Bankruptcy Court also found that Steele’s actions between
May 25 and June 16 were more consistent with his having remained a
director of Piranha than with his having resigned effective either
May 25 or May 29. This, in turn, forecloses a conclusion of oral
resignation.14 Again, we cannot say that this finding constitutes
clear error. It is the province of the fact-finder to weigh the
evidence and make credibility determinations. The trial court’s
factual determinations must stand unless we are “left with the
definite and firm conviction that a mistake has been committed,”15
which, in this case, we are not.
III. Conclusion
For the foregoing reasons, the decision of the district
court affirming the Bankruptcy Court’s jurisdiction over the
underlying bankruptcy action is
AFFIRMED.
14
See note 9, supra, and accompanying text.
15
Century Marine, Inc. v. U.S., 153 F.3d 225, 229 (5th Cir.
1998).
7