Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_06-cv-01196/USCOURTS-caed-2_06-cv-01196-7/pdf.json

Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 29:1132 E.R.I.S.A.-Employee Benefits

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IN THE UNITED STATES DISTRICT COURT 

FOR THE EASTERN DISTRICT OF CALIFORNIA 

GENERAL CHARLES E. “CHUCK” 

YEAGER, 

 Plaintiff, 

v. 

SUSAN YEAGER, YEAGER, INC., 

SCOTT ROBERTSON, ROBERTSON & 

WOODFORD, LLP, and DOES 1 

through 10, 

 Defendants. /

No. Civ. S-06-1196 DFL EFB 

Memorandum of Opinion

and Order

Plaintiff General Chuck Yeager alleges breach of an oral 

contract by defendants Susan Yeager and Yeager Incorporated in 

the eighth cause of action of his fourth amended complaint. The 

court dismissed with leave to amend plaintiff’s third amended 

complaint so he could attempt to correct deficiencies in this 

cause of action. Following plaintiff’s amendment, defendants 

filed a motion to dismiss. For the reasons below, the court 

GRANTS the motion in part. 

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I. 

On June 1, 2006, plaintiff filed a complaint alleging 

various claims regarding defendants’ failure to pay his salary 

and fund his pension plan. Plaintiff’s children each own 20% 

shares in defendant Yeager, Inc. Defendant Susan Yeager is 

Yeager, Inc.’s CFO, as well as trustee for the Charles E. Yeager 

Revocable Living Trust and the Yeager, Inc. Defined Benefit 

Pension Plan. 

Plaintiff has been forced to amend his complaint multiple 

times since filing this action. On April 9, 2007, the court 

construed plaintiff's opposition to defendants' motion to 

dismiss the eighth cause of action of the third amended 

complaint as a motion to amend the pleadings. Plaintiff's 

proposed fourth amended complaint, filed on March 9, 2007, 

became the operative complaint. 

In the eighth cause of action, plaintiff alleges that his 

efforts “constituted the sole external source of monies and/or 

valuables received by Yeager, Inc.” Fourth Am. Compl. (“FAC”) ¶ 

78. He states that the parties reached an oral agreement under 

which he would engage in certain money making activities and 

distribute the funds to the shareholders. Id. ¶ 79. In return, 

the shareholders other than the plaintiff would “actively work 

to manage the assets so generated as fiduciaries with respect 

thereto.” Id. ¶ 79. Each shareholder also agreed “by 

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shareholder agreement [to] grant Plaintiff, by grant of proxy 

and otherwise”: (1) the right “to dictate all aspects of the 

corporate affairs and to vote all shares of stock in support 

thereof . . . including a unilateral right to use and/or 

distribute to himself any or all assets of the corporation at 

any time and for any reason”; (2) the right to reimbursement for 

expenses related to work for the corporation; and (3) the right 

to a salary equal at least to the maximum legal contribution to 

the defined pension plan “and/or other such salary as he might 

dictate.” Id. ¶ 79. Plaintiff alleges that defendants orally 

agreed not to diminish the assets of the corporation or deprive 

plaintiff of his reimbursements and salary. Id. ¶ 80. Plaintiff 

alleges that defendants engaged in multiple forms of conduct 

that breached the parties’ oral agreement. Id. ¶ 82. 

On April 18, 2007, defendants filed a motion to dismiss 

only the eighth cause of action. 

II. 

Plaintiff alleges that the oral contract contains 

agreements concerning (1) corporate control, (2) reimbursement, 

and (3) compensation. Id. ¶¶ 79-80. 

Defendants argue that the corporate control agreement is a 

proxy, which must be in writing. See Cal. Corp. Code § 178 

(“‘Proxy’ means a written authorization signed or an electronic 

transmission authorized by a shareholder . . . giving another 

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person or persons power to vote with respect to the shares of 

such a shareholder.”). Plaintiff responds that the oral 

contract was not a proxy agreement but rather an agreement 

between a corporation and its employees. This argument lacks 

merit. The alleged oral agreement transfers the voting rights 

of corporate shares, FAC ¶ 79(i), and therefore requires a 

written contract under California law. The court GRANTS the 

motion as to the transfer of corporate control claim. 

Plaintiff argues that the reimbursement and compensation 

agreements do not implicate his right to unilaterally dictate 

corporate affairs and, therefore, need not be in written form. 

Defendants argue that these allegations are the same ones found 

to be insufficient in the third amended complaint, due to 

plaintiff’s failure to allege an agreement with defendant Susan 

Yeager. This argument fails. In the most recent complaint, 

plaintiff alleges that he entered into oral agreements with all 

shareholders, not just the corporation as an entity. Such 

agreements, limited to reimbursement and compensation, do not 

rise to the level of a proxy transfer or violate public policy 

restrictions on corporate control agreements. 

Defendants argue that plaintiff provided insufficient 

consideration for the alleged agreements. They characterize 

plaintiff’s promise to distribute any money earned to other 

shareholders as a promise to make a future gift because any 

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transfer of corporate assets lies entirely at plaintiff’s 

discretion pursuant to the agreement. See Beebe v. Coffin, 153 

Cal. 174, 176-78 (1908) (holding that a “delivery which does not 

confer upon the donee the present right to reduce the fund into 

possession by enforcing the obligation according to its terms 

will not suffice”). However, because plaintiff need not plead 

his breach of contract claim with particularity, the court does 

not reach the issue of consideration at this stage. Therefore, 

the court DENIES the motion as to the reimbursement and 

compensation claims. 

III. 

For these reasons, as to the eighth cause of action, the 

court: (1) DISMISSES the corporate control claim and (2) DENIES 

the motion as to the reimbursement and compensation claims. 

IT IS SO ORDERED. 

Dated: June 14, 2007 

 /s/ David F. Levi___________

 DAVID F. LEVI 

United States District Judge 

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