Freeman v. Complex Computing Co./Concurrence-dissent Godbold

GODBOLD, Senior Circuit Judge, concurring in part, dissenting in part.

I concur in part and dissent in part.

I agree that we have jurisdiction over the appeal and the cross-appeal.

I concur in affirming the district court's holding that Glazier was in total control of C3. I see no need, however, to remand the case to the district court for it to determine whether "Glazier used his control over C3 to commit a fraud or other wrong that resulted in an unjust loss or injury to Freeman." The record before us discloses fraud or other wrong by Glazier, through C3, resulting in an unjust loss or injury to Freeman. Consequently C3's corporate veil is to be pierced, and, without more, arbitration should proceed against Glazier as well as C Click for Enhanced Coverage Linking Searches3.

In some "corporate veil" cases one must search the record for evidence shedding light on whether an individual's control of the corporation has been used to commit a fraud or wrong resulting in unjust loss or injury. Not in this case. Here it all hangs out.

C3 is Glazier's creature, subject to his "complete control" ("he [Glazier] was C3"). C3 agreed with Freeman for him to sell and license C3's software products for five years and to receive commissions for ten years on revenue received from Freeman's clients. Plus, if C3 merged or consolidated, Freeman was to receive an additional payment of 10% percent of the total consideration conveyed. The agreement contained a termination clause. C3 could terminate on sixty days notice, but Freeman was entitled to receive all compensation for services previously rendered as well as the commissions that accrued over a ten year period (presumably to include 10% percent of the consideration for a buy out or merger).

An arbitration clause was included: "Any controversy or claim arising out of or related to this Agreement or any breach thereof … shall be settled by arbitration."

Approximately a year after the C3-Freeman agreement was made C3 entered into an agreement with Thomson Trading Services, Inc., an account developed by Freeman, to make Thomson its exclusive worldwide marketer. Thomson purchased C3's assets and C3 became essentially a shell. Thomson hired Glazier as vice president and director of research at a handsome salary and commissions and paid him a $ 450,000 "signing bonus" plus $ 210,000 for C3 assets. Thomson took over existing C3 agreements, but not C3's agreement with Freeman. That agreement remained C3's responsibility. But C3 has paid Freeman nothing.

It remained for C3 to get rid of Freeman. It did so by a purported termination of the C3-Freeman agreement. C3 recited that it was exercising its option to terminate as "an action to combat the overly generous termination clause we committed to, and to force a renegotiation of your sales contract." In short, Freeman was not to receive the benefits guaranteed him by the termination clause; the termination was to force him to give up the "overly generous" termination benefits he was entitled to receive. The asserted termination was not to implement the provision for termination but in derogation of it.

By this Tinker-to Evans-to Chance play:

-- C3's business has gone to Thomson.

-- Thomson has handsomely rewarded Glazier.

-- Thomson, in acquiring C3, has not assumed responsibility for the Freeman agreement.

-- Glazier is enjoying the generous fruits of the C3- Thomson deal while C3 has been reduced to a shell.

-- Freeman has been stripped of his benefits, paid nothing, and hung out to dry, on the asserted ground that benefits (past and future) agreed to be paid to him by C3 were too generous.

This is fraud by Glazier - a fully revealed rip off. But if one shrinks from the word "fraud" it is at least a "wrongful injury." We [p1055]  should not hesitate to say so at the appellate level, for the record is clear.