OPINION
MVE Holdings, Inc. (Holdings), appeals from judgment and denial of its new-trial
FACTS
From 1993 until January 23, 1997, R. Edwin Powell was CEO and president of CAIRE, Inc., a Delaware company based in Burnsville, Minnesota. CAIRE manufactures home health-care products, including portable oxygen tanks. Powell had worked for CAIRE, a subsidiary of Holdings, for the preceding 13 years as an at-will employee. In addition, Powell and the Powell Family Limited Partnership were minority shareholders in Holdings, owning 63,747 shares or 11.9% of the company. Trial testimony established that Powell paid $114,000 to $344,000 for the stock during his employment.
In 1996, a group of investors decided to acquire Holdings and CAIRE. They formed MVE Investors, LLC (Investors), a Delaware limited-liability company with its principal place of business in New York. Investors; organized solely to acquire a majority interest in Holdings, purchased the shares of three retiring Holdings shareholders in June 1996 as part of a recapitalization of the company. Investors paid the retiring shareholders $125.456 per share, investing $47 million in Holdings to become its primary owner.
Powell declined Investors’ offer to sell his stock and retire with the shareholders who had accepted Investors’ offer. Powell continued as CAIRE’s CEO and president. To compensate Powell for losing his chance to sell his shares in the recapitalization, Holdings loaned Powell $1.5 million secured by 24,793 of Powell’s shares of Holdings’ common stock. Holdings called the loan in January 1998; at the time, an independent company valued the shares at $5.37 per share.
In response to CAIRE’s financial setbacks, David O’Halloran, Holdings’ CEO and president, met with Powell on January 23, 1997, to fire Powell. O’Halloran gave Powell the option to resign in lieu of termination, and Powell chose to resign, writing a resignation letter on January 28, 1997.
The critical factual issues in this litigation revolve around O’Halloran and Powell’s January 23, 1997, meeting. The two men sharply disagree on the severance package O’Halloran offered Powell on behalf of Holdings at the meeting, the terms of which were to be included in a “separation agreement.” Both men agree that O’Halloran offered Powell six months’ salary and an additional six months’ salary if Powell was not re-employed within the six months immediately following his departure. They also agree that O’Halloran offered Powell $30,000 in out-placement services, a continuation of Powell’s health insurance and other benefits for a year, and a cash bonus if Powell was successful in lobbying Congress for particular legislation.
But the two men disagree on the terms for the disposition of Powell’s stock. Powell testified that O’Halloran agreed, on behalf of Holdings, to buy Powell’s stock at the same price that the retiring shareholders had been paid at the recapitalization that occurred in August 1996. According to Powell, O’Halloran told Powell that
O’Halloran maintains that he did not promise Powell that Holdings would buy Powell’s stock. But O’Halloran concedes that at the meeting, he gave Powell a detailed chart showing the number of shares Powell owned on January 23, 1997, and how much money Powell would receive if those shares were sold or redeemed at a price of $125,456, the same price the retiring shareholders had received. O’Halloran also testified that he wrote a letter terminating Powell’s employment if he chose not to resign. In the letter, O’Halloran expressed Holdings’ intent to buy Powell’s stock in the same manner as it had bought the retiring shareholders’ stock.
After his termination, Powell continued to attend trade-association meetings and to lobby Congress on Holdings’ behalf until April 1997. Holdings and Powell continued to discuss Powell’s separation agreement until April 1997, when O’Halloran informed Powell in writing that Holdings would no longer reimburse Powell for any expenses he incurred on behalf of Holdings. Also, Powell testified that O’Hallo-ran called* Powell in April to tell him that O’Halloran had lost board support for the stock redemption and that the deal was off.
Holdings fired O’Halloran from his position as CEO and president of Holdings in August. As part of the separation agreement that followed O’Halloran’s discharge, he agreed to represent that he did not “make any statements or provide any writings that [he] in good faith believefd] could reasonably be construed to constitute any agreement, oral or written, concerning the payment of severance or similar payments to, or the redemption or other disposition of capital stock of, R. Edwin Powell.”
Powell brought this action against Holdings in October 1997, claiming, among other things, that Holdings had contracted to buy back his shares and then breached that contract. Chart Industries merged with Holdings in February 1999, paying $78 million for Holdings’ stock. The merger agreement specified that shareholders who released claims against Holdings would receive $45 per share, but shareholders refusing to release claims against Holdings would receive only $25 per share. Powell refused to drop his lawsuit, and Holdings redeemed his shares at $25 per share, paying him a total of about $860,000 and retaining about $680,000 for defense costs associated with Powell’s lawsuit. Powell also received shares of stock in a Holdings subsidiary as a result of the merger.
Following a nine-day bench trial, the district court found that Holdings had contracted to buy Powell’s stock and breached the contract. The district court awarded Powell $3,455,887.20, the amount that Powell would have received had he sold his non-pledged stock for $125,456 per share, less $860,050 Powell received for his shares after the Chart merger, and also ordered Powell to transfer to Holdings the Holdings subsidiary shares he had acquired in the Chart merger. Both parties brought posttrial motions for amended findings and a new trial. The court amended its findings, but denied the new-trial motions. Holdings appeals, claiming that O’Halloran did not have authority to agree on its behalf to buy Powell’s stock; that the district court’s finding that O’Hal-loran and Powell entered into a contract is contrary to the evidence'; and that any agreement was not the parties’ final expression, is void for lack of consideration, and is against public policy.
ISSUES
I. Did the district court err in finding that O’Halloran had apparent author
II. Did the district court err in finding that the evidence established a stock-redemption agreement between O’Halloran and Powell?
III. Is the agreement between O’Hallo-ran and Powell invalid because it is not a final written agreement, lacks consideration, or is in violation of public policy?
IV. Is Holdings entitled to a new trial because the district court’s findings are manifestly contrary to the weight of the evidence?
ANALYSIS
In a case tried without a jury, the scope of review is limited to determining whether the district court’s findings are clearly erroneous and whether the court erred as a matter of law.
Schweich v. Ziegler,
I
Holdings argues that O’Halloran did not have apparent authority to enter into a stock-redemption agreement with Powell. Powell does not dispute that O’Halloran did not have express authority to enter into such an agreement.
A principal is bound not only by an agent’s actual authority but also by authority that the principal has apparently delegated to the agent.
Duluth Herald & News Tribune v. Plymouth Optical Co.,
Whether an agent is clothed with apparent authority is a question of fact.
Hagedorn v. Aid Ass’n for Lutherans,
The district court found that O’Halloran had apparent authority to enter into a stock-redemption agreement
Whether a contract is in “the ordinary course of business” is, in most instances, part of the fact-specific inquiry of whether apparent authority exists.
Lee v. Jenkins Bros.,
A number of facts support a determination that the contract between O’Halloran and Powell was not extraordinary. Just six months earlier, in August 1996, Holdings had redeemed other shareholders’ stock for the same price O’Halloran offered Powell. At the time of the 1996 recapitalization, with board approval, O’Halloran signed the shareholders’ agreement on behalf of Holdings, agreeing to buy the shares of the departing shareholders for $125,456 a share, the same amount O’Halloran offered to Powell. Powell could have reasonably believed that if O’Halloran had the authority to agree on behalf of Holdings to buy stock in August 1996, he had similar authority in January 1997.
See Temple, Brissman & Co. v. Greater St. Paul Corp.,
Holdings also alleges that the district court based its apparent-authority finding solely on O’Halloran’s position as Holdings’ president, GEO, and member of its board of directors and that proof of O’Halloran’s authority cannot be found in his title without some other manifestation of authority traceable to Holdings. To make its point, Holdings cites cases standing for the proposition that an agent’s position alone is not sufficient evidence of apparent authority to bind the corporation to obligations incurred by that agent.
See, e.g., Thompson v. North Star Muskrat Farm, Inc.,
Although a job title alone will not conclusively establish apparent authority for a contract, Powell’s belief that O’Halloran was authorized to redeem Powell’s stock is traceable, in part, to O’Halloran’s position as Holdings’ top-ranking executive.
See Frank Sullivan Co. v. Midwest Sheet Metal Works,
Because corporations are engaged in many different transactions and because the pace of corporate business is too swift to insist on express approval by a corporation’s board of directors for every transaction labeled “unusual,” third parties commonly rely on the authority bestowed on corporate officials.
Lee,
Further illustrating the importance of an agent’s corporate position as a manifestation of the principal’s consent to the agent’s actions, the tentative draft of the third restatement of agency partially defines apparent authority based on an agent’s position:
When an agent holds a position within an organization, or has been placed in charge of a transaction or situation, a third party acts reasonably in believing that the agent has authority to do acts consistent with the position the agent occupies absent knowledge of circumstances that would lead a reasonable third party to inquire into the existence, extent or nature of the agent’s authority.
Restatement (Third) of Agency § 2.03 (Tentative Draft No. 1, 2000).
It is significant that O’Halloran’s appearance of authority resulted from Holdings’ conduct. Holdings placed O’Halloran in the position to ask Powell to resign or to be fired and to offer Powell a severance package. Holdings also invested authority in O’Halloran to buy shares from the retiring shareholders at the time of the recapitalization, leading to Powell’s reasonable belief that O’Halloran had authority to buy Powell’s stock as well.
Holdings points out that in the face of evidence raising questions as to the agent’s authority, third parties dealing with agents
The district court did not err in concluding that O’Halloran had apparent authority to enter into a stock-redemption agreement.
II
Holdings asserts that whether or not O’Halloran had apparent authority, the evidence is insufficient to support the district court’s finding that O’Halloran agreed to buy the stock from Powell. “If in dispute, the existence and terms of a contract are questions for the fact finder.”
Morrisette v. Harrison Int’l Corp.,
Whether a contract has been formed is judged objectively by the parties’ conduct, not by the parties’ subjective intent.
Cederstrand v. Lutheran Bhd.,
The district court found that a contract had been formed between Powell and Holdings and that Holdings had breached the contract. The court’s findings specifically took into account its determinations on credibility, stating that
[t]he Court has had the opportunity to be in the unique position to observe the witnesses and weigh their credibility. The Court has considered their relationship to the parties, their interest or lack of interest in the outcome of the case, their age, experience, manner and appearance, their ability and opportunity to know, remember and relate fqcts, their frankness and sincerity, or lack thereof, and the reasonableness of tqeir testimony in light of all the other Evidence in the case. v.
The record contains ample evidence supporting the district court’s determination that O’Halloran offered, on behalf of Holdings, to redeem Powell’s stock and that Powell agreed to that redemption. The strongest evidence pointing to a contract between Holdings and Powell is the chart and letter O’Halloran prepared for the January 23 meeting. The handwritten chart depicts Powell’s shares on that date: 24,793 shares pledged as collateral for Powell’s loan and another 34,402 shares labeled “non-optioned/non-restricted.” The chart shows 16,590 of Powell’s shares redeemed for cash at the same sum that was paid the retiring shareholders, $125,456, for a total sum of $2,081,315. The chart also depicts Powell’s remaining “non-optioned/non-restricted” 17,812 shares being redeemed for preferred B stock, at a value of $2,234,622. This amount of money is identical to what Powell would have been paid had he sold his shares after Holdings’ 1996 recapitalization.
While Holdings maintains that the chart was meant as a “draft” for O’Halloran’s use only and points out that the word “draft” is written on the top of the chart, O’Halloran’s act of giving a copy of the chart to Powell and later directing Holdings’s human-resources director to type the chart and give Powell the typed 'version of the chart belies that argument.
Equally damaging to Holdings’s claim that the two men made no agreement is O’Halloran’s “termination” letter to Powell, prepared in case Powell refused to resign and O’Halloran was forced to fire him. O’Halloran wrote Powell that “[w]hile there is never a desirable time for a decision like this, I do feel that the recent investment and redemption process provide both a model and a means for this separation to occur in a very fair and enriching way.” He went on to state that “as part of the separation and release process, I have arranged for the Company to redeem your non-optioned and nonrestrict-ed stock for cash and securities in the same proportions to that received by other redeeming shareholders in August.”
Other evidence tends to prove that O’Halloran, on behalf of Holdings, agreed to redeem Powell’s stock at the January 23, 1997, meeting. O’Halloran prepared an agenda for the meeting, listing “Stock redemption” as an agenda item. Powell took notes at the meeting, and his notes corroborate O’Halloran’s agenda, listing discussed items in the same order and stating “cash pref. B for remaining stock.”
Further, at trial, Powell entered into evidence a document provided by Holdings’s bank stating, “[a]n additional $2.6 [million] will be left in MVE Holdings account which will be potentially utilized to repurchase Ed Powell’s stock. The Ed Powell transaction will be completed by August * ⅜ *. The stock would then be available for key officers and/or the Investor group to purchase.”
In February and March 1997, while negotiating Powell’s separation agreement, Holdings offered to buy a portion of Powell’s stock at the same price that Powell alleged it had agreed to buy all the stock—
Also, Powell’s attorney sent a conflict-of-interest waiver to Holdings on January 23, 1997, stating that “[Holdings] hereby waives any and all conflicts that may exist should [attorney] represent Ralph E. Powell in connection with the sale of his company stock ⅜ * ⅜.” Holdings’ counsel signed and returned the waiver, apparently not disavowing the waiver’s purpose, the sale of Powell’s stock. Further, Powell’s attorney testified that during a telephone conference with O’Halloran and Holdings’ counsel in March 1997, he asked whether Holdings intended to redeem Powell’s stock, and O’Halloran purportedly stated, “We are going to buy the stock. We just don’t want to put it in writing.”
To show that O’Halloran and Powell did not agree that Holdings would buy Powell’s stock, Holdings points out that the stock-redemption agreement is not part of the proposed separation agreement O’Hal-loran gave Powell at the January meeting, Powell kept the stock-redemption agreement secret until late February or early March, and in his letter of resignation written after the January 23 meeting, Powell asked Holdings to buy his stock.
But Powell satisfactorily explains these facts, stating that the separation agreement was distinct from the stock-redemption agreement and that O’Halloran wanted the latter agreement to remain confidential. According to Powell, O’Hal-loran wanted the stock agreement and Powell’s termination to be private to avoid setting a “bad precedent.” Also, Powell states that he asked Holdings to buy back his stock in his resignation letter at O’Halloran’s request and styled the letter “taking words and concepts off of Mr. O’Halloran’s letter.”
The evidence, therefore, supports the district court’s finding that O’Halloran agreed to buy Powell’s stock.
Ill
Holdings also challenges the validity and enforceability of the contract on three grounds. First, Holdings asserts that the agreement between Powell and O’Halloran was not a final, written expression, but only evidence of continued negotiations between the parties.
A signed agreement is not required for formation of a contract.
Aratex Servs. Inc. v. Blue Horse, Inc.,
The record contains no evidence, however, that O’Halloran and Powell intended to impose a condition precedent requiring a written contract.
See Asbestos Prod., Inc. v. Healy Mechanical Contractors, Inc.,
Holdings alternatively argues that any agreement between Powell and Holdings is void because Powell did not furnish adequate consideration. When a contract is not supported by consideration, no valid contract is formed.
Franklin v. Carpenter,
Powell asserts and O’Halloran concedes that, in exchange for the stock redemption, O’Halloran asked him to continue, even after he left CAIRE, to participate as a member of several trade-association boards, to attend trade-association meetings, and to lobby Congress on behalf of Holdings. Additionally, Powell and O’Hal-loran testified that to disrupt CAIRE’s business as little as possible and because of his belief that customer goodwill might be affected if customers felt that Powell was fired, O’Halloran asked Powell to contact CAIRE’s key customers and industry contacts to reassure them that Powell’s departure was a positive, voluntary step. Powell performed these functions until April 1997, when O’Halloran wrote a letter requesting that Powell no longer make those efforts and telling Powell that Holdings would no longer pay him or offer reimbursement for any incurred expenses.
Holdings asserts that Powell’s lobbying activities were not performed as consideration for stock redemption but, instead, for a cash bonus tied to those efforts and that the other tasks Powell claims to have performed were of no value to Holdings. But even if Powell’s lobbying efforts are discounted, he performed other tasks for Holdings at Holdings’ request. Also, a court will not examine the adequacy of consideration so long as something of value has passed between the parties.
Brooksbank,
Relying on
Berreman v. West Publ’g Co.,
But Holdings’ argument is unpersuasive in this context. The “equal-opportunity rule” is designed to protect minority shareholders from being “frozen out.”
Id.
In making this argument, Holdings ignores the fact that if this court applied the rule to the facts in the case, it would not be protecting a minority shareholder. Further, buying one shareholder’s shares at a premium could reasonably be founded on a valid business judgment.
See id.
(recognizing that the Massachusetts Supreme Court later retreated from the
Donahue
holding in
Wilkes v. Springside Nursing Home, Inc.,
Because the district court did not err in finding a contract between Holdings and Powell, we need not address the district court’s finding that, in the alternative, Holdings was bound to Powell by virtue of promissory estoppel.
IV
Finally, Holdings claims that it is entitled to a new trial because the district court’s findings are manifestly contrary to the evidence. Ordinarily, a decision to grant a new trial rests within the sound discretion of the district court and will not be disturbed absent a clear abuse of that discretion.
Halla Nursery, Inc. v. Baumann-Furrie & Co.,
DECISION
The district court did not err in finding that O’Halloran had apparent authority to enter into a contract with Powell and that the parties formed a valid contract supported by consideration, not in violation of public policy, and not subject to a condition precedent requiring the agreement to be in writing.
Affirmed.