Opinion ID: 1830892
Heading Depth: 1
Heading Rank: 1

Heading: the formation of dtk

Text: The special master included the following findings in his report concerning the formation of DTK: Burgess Mining is a substantial coal strip mine operator that has been in business for a number of years. Its principal stockholder and chief executive officer is A.E. Burgess. In the summer of 1974, Burgess decided to form a partnership composed of some of Burgess Mining's key personnel to operate a strip mine. The purpose was to provide additional compensation to employees of Burgess Mining selected by A.E. Burgess. A.E. Burgess contacted Harry Lees and discussed with him the proposed operation. Lees was retired at that time and was not an employee of Burgess Mining. He had been in the strip coal mining business in Alabama for a number of years. He had been an owner-operator of a small operation and had worked for larger companies. He and A.E. Burgess were friends and had known each other for a long time. They were partners in the coal mining business in 1947 and 1948. Lees operated a small strip mine in partnership with Johnny Crim until he retired in 1973. Burgess offered Lees a partnership interest in the proposed partnership, if he would be the superintendent of mine operations. In September of 1974, there was an organizational meeting at Burgess Mining offices attended by several of the proposed partners, including Lees. A.E. Burgess was not present at this meeting. He had previously outlined his plans to Prescott, the administrative vice president of Burgess Mining. Prescott reviewed these plans with those present. A written agreement of the partnership, subsequently prepared by Prescott and dated September 2, 1974, was executed by W.J. Davis, T.H. Terrell, M.L. Killian, E.W. Lackey, J.M. Phillips, A.E. Burgess, C.R. Burgess, A.E. Burgess, Jr., W.E. Prescott III, H.D. Lees and C.E. Henderson. Two amendments dated March 1, 1976 were signed by all of the partners adding as partners: H.L. Wilson, L.A. Woodall, Ben F. Robinson and A.J. Ryan. All of the partners, except Lees, executed an amendment dated January 19, 1977, adding R.D. Whatley as a partner. Lees was not informed of this amendment and did not agree to it. The name given the partnership was `Davis, Terrell, Killian and Associates' (DTK). None of the partners invested any initial capital in DTK. DTK borrowed $115,000.00 with which to begin business. At least $10,000.00 was borrowed from A.E. Burgess and $94,000.00 from Burgess Mining. All of it was repaid with interest during 1975. The partnership agreement provided that decisions would be made by a majority of the partners. However, except for the organizational meeting and one other meeting in September of 1977, no formal meetings were held prior to dissolution. No minutes were kept of any meeting. Except for the partnership agreement itself and the amendments recited above, no decision of the partnership was ever made or ratified by a majority of the partners as provided in the agreement. From time to time, various members of the partnership met informally at Burgess Mining office and discussed partnership affairs, and occasionally partnership affairs were discussed at social gatherings with some of the partners. At an informal meeting, when Lees was not present, some of the partners selected Prescott as the managing partner of DTK. However, A.E. Burgess effectively controlled the business affairs of DTK and made its major business decisions. DTK operated a strip mine at three different locations near West Blocton, Alabama, from January 1975 until October of 1977. The mines were in the Thompson seam until August 1976, the Atkins seam until December 1976, and the Allis-Jones seam thereafter. DTK operated under the state permit issued to Burgess Mining until it was issued its own permit on December 1, 1975. Lees was in charge of the mining operations and received a salary from DTK from the time it began mining until he retired in December of 1976. All of the other partners were employees of Burgess Mining, and none of them received any salaries from DTK.