Nelson v. Westport Shipyard, Inc.

163 P.3d 807
CourtCourt of Appeals of Washington
DecidedAugust 7, 2007
Docket35308-3-II
StatusPublished
Cited by6 cases

This text of 163 P.3d 807 (Nelson v. Westport Shipyard, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals of Washington primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Nelson v. Westport Shipyard, Inc., 163 P.3d 807 (Wash. Ct. App. 2007).

Opinion

163 P.3d 807 (2007)

Larry NELSON, and the marital community composed of Larry and Barbara Nelson, Respondent,
v.
WESTPORT SHIPYARD, INC., a Washington corporation, j. orin edson, individually and his marital community composed of orin and Charlene edson; daryl wakefieLd, individually and his marital community composed of daryl and kim wakefield, Appellants.

No. 35308-3-II.

Court of Appeals of Washington, Division 2.

August 7, 2007.

*808 Victoria Lynn Vreeland, Gordon Thomas Honeywell Malanca Peterson, Seattle, WA, James Walter Beck, Gordon Thomas Honeywell, Tacoma, WA, for Respondent.

Gail Eileen Mautner, D. Michael Reilly, Lane Powell PC, Seattle, WA, Michael Barr King, Talmadge Law Group PLLC, Tukwila, WA, for Appellants.

HUNT, J.

¶ 1 Westport Shipyards, Inc., a closely held corporation, appeals a pretrial superior court ruling denying its motion to compel arbitration of the shareholder claims included in employee-shareholder-director Larry Nelson's multi-claim lawsuit against Westport. As Westport notes, Nelson's six causes of action include a combination of shareholder-based and employee-based claims, including *809 fiduciary breach and minority shareholder oppression. More specifically, in his sixth cause of action for duress, coercion, and misrepresentation, Nelson seeks to nullify the 2004 Shareholders Agreement, which contains an arbitration clause. Citing Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 126 S.Ct. 1204, 163 L.Ed.2d 1038 (2006), Westport argues that, under their 2004 Shareholders Agreement with Nelson, "claims regarding enforcement or breach of the Shareholders Agreement, whether asserted by Mr. Nelson or Defendants, must be referred to arbitration for resolution."[1] Clerk's Papers (CP) at 392.

¶ 2 We hold that Buckeye does not apply to compel arbitration as broadly as Westport asserts, particularly with respect to Nelson's challenge to the validity of the 2004 Shareholders Agreement as a whole. But we do agree with Westport that the shareholders' "unresolvable difference" triggered the buy-sell provisions of the 2004 Shareholders Agreement; therefore, we hold that the price Westport must pay Nelson to buy back his shares is subject to arbitration under the Agreement. Accordingly, we affirm in part, reverse in part, and remand for arbitration of the repurchase price for Nelson's Westport shares under the 2004 Shareholders Agreement.

FACTS

I. Background

¶ 3 Westport Shipyards is a closely held Washington corporation that manufactures and sells motor-yachts. In 1983, Larry Nelson began working for Westport as a laminator. Over the years, he worked his way up to become Vice President, Director, and Chairman of the Board.

A. Shareholder Agreements

¶ 4 In 1998, Westport's shareholders, including J. Orin Edson and President Daryl Wakefield, offered Nelson the opportunity to become a shareholder. As part of the resulting 1998 Purchase Agreement, Nelson agreed to sell any shares he purchased back to Westport if his employment with the company ever ceased.

¶ 5 Over the next three years, Nelson continued to purchase additional shares of Westport. In both December 2000 and December 2001, Nelson and Westport executed two more Purchase Agreements. In total, Nelson paid $327,833 to acquire 460 shares, approximately two percent, of Westport stock.

¶ 6 In 2004, Westport and Nelson executed a Shareholders Agreement, in which (1) Nelson agreed to sell his shares back to Westport "upon the unresolvable difference between shareholders," Section 2.3.3, CP at 45, or "upon the termination . . . of [his] employment," Section 2.3.4, CP at 45; and (2) Westport agreed to repurchase Nelson's shares at the greater of either one and one-half times their book value or Nelson's original purchase price. This 2004 Shareholders Agreement stated, "[It] shall be governed by, and interpreted and construed under, the laws of the State of Washington." Section 6.4, CP at 52.

¶ 7 This 2004 Shareholders Agreement also contained an arbitration clause, Section 6.5, which provided:

In the event of any disputes among any of the parties arising out of this Agreement, then such disputes shall be submitted to arbitration pursuant to the Commercial Arbitration Rules of the American Arbitration Association. In the event the parties to such dispute are unable to agree upon an arbitrator, then said Association shall submit a list of proposed arbitrators and the parties to such dispute shall alternately strike a name from such list until the final arbitrator remains, who shall be final and binding upon the parties. The cost of such arbitrator shall be born equally by the parties.

Section 6.5, CP at 52 (emphasis added). It is this 2004 Shareholders Agreement and its arbitration clause that precipitated the instant litigation.

*810 B. Nelson's Termination

¶ 8 On April 29, 2005, Nelson experienced an undisclosed medical emergency. Nelson was then Westport's Chairman of the Board of Directors, Vice President of Administration, Secretary, and Registered Agent. Nelson continued to work at Westport full-time.

¶ 9 On May 7, 2005, Westport's majority shareholder, J. Orin Edson, raised the subject of early retirement with Nelson, referring to Nelson's medical problems. On May 18, Westport's President, Daryl Wakefield, told Nelson he was to take a paid leave of absence. Nelson told Westport he had no desire or plan to retire and there were no medical restrictions on his work activities. At a Special Meeting of the Board of Directors and Shareholders on June 8, Westport decided to terminate Nelson's employment. Wakefield notified Nelson in writing on June 17.

¶ 10 Following Nelson's termination, Westport informed him that his termination had triggered its right under the 2004 Shareholders Agreement to repurchase his shares at one and one-half times their book value[2] and that it was exercising this right. Nelson rejected Westport's tendered payment of $1,086,570, and he refused to sell his shares back to Westport.

¶ 11 Two months later, the other Westport shareholders voted to require Nelson to sell back his shares, triggered by the "unresolvable difference" provision of the 2004 Shareholders Agreement. Nelson continued to refuse to tender his shares to Westport for its repurchase.

¶ 12 In a letter from Wakefield, Westport then notified Nelson of its intent to commence arbitration "to enforce the terms of the Agreement and to require the sale of [his] 460 shares. . . ." CP at 116.

II. Lawsuit

¶ 13 Nelson sued Westport in Grays Harbor County Superior Court. He alleged six causes of action, emanating from his general claim that Westport had illegally terminated his employment: (1) disability discrimination, seeking damages; (2) breach of implied contract of employment, seeking damages; (3) wrongful withholding of wages, seeking back pay; (4) breach of fiduciary duties and minority shareholder oppression; (5) tortious interference with a business expectancy; and (6) duress, coercion and misrepresentation, seeking to invalidate the 2004 Shareholders Agreement.

¶ 14 In August 2005, Westport moved to compel arbitration of Nelson's claims arising under the 2004 Shareholders Agreement. The trial court denied Westport's motion to compel arbitration "[a]t this stage." In an October 31 letter opinion, the court stated:

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Bluebook (online)
163 P.3d 807, Counsel Stack Legal Research, https://law.counselstack.com/opinion/nelson-v-westport-shipyard-inc-washctapp-2007.