ORDER ON PLAINTIFF'S EMERGENCY MOTION FOR APPOINTMENT OF A RECEIVER
Roland A. Cole,
Plaintiff Donald Grey Lowry moves on an emergency basis for the appointment of a receiver to manage the business of Lowry & Associates, P.A. on an interim basis. Plaintiff supports his motion with an affidavit and exhibits attached thereto. Defendants James C. Beardsley and JCB Corporation, P.A. oppose Plaintiffs motion and support their opposition with affidavits from Mr. Beardsley and JCB Corp's bookkeeper, Joan Kelly.
For the reasons discussed below, the Court denies Plaintiffs emergency motion for appointment of receiver.
I. Factual Background
Plaintiff is the founder and former sole shareholder of the law firm Lowry & Associates, P.A. (the "Firm"). (Lowry Aff. ¶ 3.) In the late 2000s, defendant James C. Beardsley became an employee of the Firm. (Id. at ¶ 4.) On September 3, 2013, Plaintiff sold his ownership interest in the Firm to Mr. Beardsley pursuant to a written agreement (hereinafter, the "Agreement"). (Id. at ¶ 5 and Exhibit A thereto, the Agreement.) Plaintiff asserts that the intent of the Agreement was to fairly compensate Plaintiff for his ownership interest in the Firm and his continuing services to the Firm. (Lowry Aff. ¶ 6 (quoting Exhibit A, p. 1).) Under the terms of the Agreement, Plaintiff transferred 100% of his stock in the Firm to Mr. Beardsley. (Agreement, 1 ¶ 1.) In exchange, Plaintiff received the following pertinent consideration: (1) the monthly sum of $5, 000 on the last day of each month for the period September, 2013 through December, 2015; (2) 8% of the total fees in excess of $850, 000.00 received by the Firm in each of the years ending December 13, 2013, December 31, 2014 and December 31, 2015, payable no later than the end of the following January; (3) the retention of the Firm's business related perks and benefits which Plaintiff has heretofore enjoyed including use of an automobile for business related and personal use within the State of Maine (to be replaced as necessary) and the use of an office, office supplies and equipment, and access to staff assistance for firm business related purposes to the same extent as in the past. (Id. at pp. 2-3, ¶¶ 4-5.).
Plaintiff asserts that Mr. Beardsley breached the Agreement by: 1) failing to pay the full $5, 000 per month agreed to; 2) freezing Plaintiff out of the practice; 3) changing the locks of the office building to cut-off Plaintiff s access; 4) preventing Plaintiff from accessing the Firm's books, records, and staff; 5) denying Plaintiff internet access and preventing him from reading firm e-mail; 6) shutting off Plaintiff s office cell phone; and 7) cancelling his Firm credit card. (Lowry Aff. ¶¶ 8-9.) Plaintiff also asserts that in the weeks before he filed the motion, the Firm suffered damage due to flooding. (Id. at ¶ 10.) Finally, Plaintiff contends that there is an ongoing dispute between himself and Mr. Beardsley. (Id. at ¶ 11.) Part of that dispute is based on Plaintiffs belief that Mr. Beardsley is irreparably harming the Firm, withholding money from him, and damaging the Firm's reputation. (Id.)
Defendants contend that they have paid Plaintiff $5, 000 for each month, beginning with September 2013, through the present. (Beardsley Aff. ¶ 7.) The first four payments were allegedly made without withholdings, whereas the subsequent payments were made subject to withholding. (Beardsley Aff. ¶ 8; Affidavit of Joan Kelly, bookkeeper for Defendant JCB Corp. ¶ 6-8.) Mr. Beardsley asserts that the decision to characterize the payments to Plaintiff as wages subject to withholding was first suggested by Plaintiffs accountant in January 2014 and was consistent with the parties' pre-acquisition understanding that payments to Plaintiff would be expenses of the Firm. (Beardsley Aff. ¶¶ 9-11.) In a January 29, 2014 email, Plaintiff wrote that he did not want to start a war over this matter, considered it relatively inconsequential, and therefore gave in to Mr. Beardsley's interpretation. (Exhibit 1 to Beardsley Aff.) Consistent with this representation, Plaintiff filled out a W-4 form to the Firm. (Exhibit 3 to Beardsley Aff.)
With regard to business perks, Mr. Beardsley contends that Plaintiff was provided with the use of an automobile. (Beardsley Aff. ¶¶ 15.) He further claims that until shortly before the motion was filed, Plaintiff was provided with the use of an office, office supplies and equipment, and access to staff assistance for Firm business. (Id. at ¶ 16.) However, on August 13, 2014, Mr. Beardsley alleges that the building in which the Firm has its offices became flooded and unusable. (Id. at ¶ 17.) He contends that he asked the landlord of the building, who happens to be the Plaintiff, to remediate the damages. (Id. at ¶ 18-19.) Mr. Beardsley further contends that Plaintiff refused to remediate the damages and thereby breached the Lease between the Firm and Plaintiff. (Id. at ¶19-21.) Due to this alleged breach, Mr. Beardsley declared in writing that he was going to find new office spaces for the Firm. (Id. at ¶ 21.) Mr. Beardsley thereafter filed a separate lawsuit against Plaintiff for breach of contract. (Id. at ¶ 22.) Mr. Beardsley then asserts that through late August 2014, he allowed Plaintiff unfettered access to the building. (Id. at ¶ 26.) After August 26, 2014, he allowed Plaintiff unfettered access to the building during office hours and access after hours with notice to Mr. Beardsley. (Id. at ¶ 27.) The access limitations were purportedly because Plaintiff insisted on leaving the building unlocked and the windows open to air out the building after the flood. (Id.) Mr. Beardsley was opposed to this because they had experienced vandalism in the recent past. (Id.) Mr. Beardsley also asserts that Plaintiff used his access to the building to remove personal items therefrom. (Id.)
Regarding Plaintiffs access to the Firm's books and records, Mr. Beardsley contends that he denied Plaintiff access thereto pursuant to paragraph 2 of the Agreement, which provides, in pertinent part, that Mr. Beardsley "agrees to assume the duties of Managing Attorney of the [Firm] and shall have primary responsibility for the management of the firm including all issues involving the firm operations[.]" (Agreement, pp. 1-2, ¶ 2.) He further asserts that nothing in the Agreement guarantees Plaintiff access to the books and records of the Firm. (Beardsley Aff. ¶ 25.) Moreover, Defendants assert that Plaintiff has no need to access the Firm's books and records because he has not done any client related work for the Firm or provided any management related work since January 2015. (See id. at ¶¶ 29-30.) Finally, Mr. Beardsley asserts that he anticipates 2014 will be the most profitable year for the Firm since Mr. Beardsley joined. (Id. at ¶ 32.)
Plaintiff asserts that a receiver is necessary because the parties are deadlocked with respect to the management and operation of the Firm and Plaintiff believes Mr. Beardsley's current management is causing irreparable harm to the Firm. Plaintiff requests a receiver be appointed on an interim basis to manage the day-to-day operation of the Firm pending resolution of the present dispute. He requests that the receiver be compensated for his work by the Firm.
Defendants respond that although Plaintiff cited no authority in support of his request for a receiver, the appointment would be governed by 13-C M.R.S. § 781. Defendants contend that pursuant to that statute, the Court may appoint a custodian in a proceeding brought by a shareholder when the directors are deadlocked in the management of corporate affairs, the shareholders are unable to break the deadlock, and either the deadlock threatens or has caused irreparable injury to the Firm, or the directors are acting fraudulently and may cause irreparable injury to the firm. 13-C M.R.S. § 781(1). Defendants argue that Plaintiffs request fails because: 1) he is not a shareholder of the Firm; 2) he cannot establish that the directors of the Firm are deadlocked because Plaintiff has no authority to manage the Firm; 3) there are no allegations that Mr. Beardsley acted fraudulently; and 4) there is no evidence of irreparable injury to the Firm. Defendants also argue that Plaintiff has no legal claim to participate in the business of the Firm because the Agreement does not give Plaintiff said right. Indeed, while the Agreement anticipates a plan that allows the Firm to continue to benefit from Plaintiffs services, it squarely places the duties of managing the Firm with Mr. Beardsley.
Pursuant to 13-C M.R.S. § 781, the Court may appoint one or more persons to be custodians or, if the corporation is insolvent, to be receivers of and for a corporation when it is established that; A) the directors are deadlocked in the management of the corporate affairs, the shareholders are unable to break the deadlock, and irreparable injury to the corporation is threatened or being suffered; or B) the directors or those in control of the corporation are acting fraudulently and irreparable injury to the corporation is threatened or being suffered. 13-C M.R.S. § 781(1). Appointment of a receiver is a matter within the discretion of the trial court. Bates v. Dep't of Behavioral & Developmental Servs., 2004 ME 154, ¶ 86, 863 A.2d 890 (citing Dep't of Emtl Protection v. Emerson, 563 A.2d 762, 767 (Me. 1989)).
Here, the Court denies Plaintiffs motion to appoint a receiver because he has not established that Defendants' management of the Firm is causing irreparable damage. Indeed, the primary evidence Plaintiff has presented on this point is his own speculation that Mr. Beardsley's management is causing irreparable harm to the Firm. While not disproved, this speculation is countered by Mr. Beardsley's assertion that the Firm is having a very profitable year. In addition, while Plaintiff has put forth an argument as to why the Court should find that he is a ...