Court Opinion

ID: 33517
Source: CourtListenerOpinion
Date Created: 2010-04-25 19:05:57+00
Date Added: 2024-06-11T16:49:57.002844
License: Public Domain

United States Court of Appeals
                                                                Fifth Circuit
                                                             F I L E D
               IN THE UNITED STATES COURT OF APPEALS        December 9, 2003

                       FOR THE FIFTH CIRCUIT             Charles R. Fulbruge III
                       _____________________                     Clerk

                            No. 03-10710
                          Summary Calendar
                       _____________________

In The Matter Of: PIRANHA INC,

                                                               Debtor,

------------------------

RICHARD S BERGER,

                                                           Appellant,
versus

ROBERT NEWHOUSE, Chapter 7 Trustee of the Bankruptcy Estate of In
Re: Piranha, Inc, as successor to Piranha, Inc,

                                                           Appellees.

                      ---------------------
          Appeal from the United States District Court
               for the Northern District of Texas
                        (3:01-CV-2223-D)
                      ---------------------

Before JOLLY, WIENER, and CLEMENT, Circuit Judges.

PER CURIAM:*

     Appellant Richard S. Berger appeals the district court’s June

20, 2003 Order affirming an earlier Bankruptcy Court decision on

jurisdiction over a case involving a debtor in bankruptcy, Piranha,

     *
       Pursuant to 5TH CIR. R. 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
Inc. (“Piranha”).1    Berger contends that the Bankruptcy Court has

no jurisdiction to consider Piranha’s bankruptcy filing because the

filing was not a valid action of Piranha’s board of directors under

the company’s bylaws and Delaware state law.2       The Bankruptcy Court

concluded that the filing was valid, vesting that court with

jurisdiction over the case.     We affirm.

                      I.    Facts and Proceedings

     In May 2001, the chairman of Piranha’s board of directors,

Edward Sample, called a special board meeting for May 25 to

consider    restructuring   Piranha’s   management.     In   addition   to

Sample, Piranha’s directors were Michael Steele, Larry Greybill,

and Berger.    Claiming lack of sufficient notice, Berger protested

the May 25 meeting and refused to attend.     The other directors held

the meeting despite Berger’s objection, as they had a quorum

without him, and voted to adopt a number of resolutions.       If valid,

those resolutions accepted the resignations of Greybill and Steele

and appointed Mike Churchill a director.       Greybill submitted his

written resignation following the May 25 meeting, as required by

Piranha’s bylaws and Delaware law.3        Steele, however, did not.

     1
       The original Bankruptcy Court decision was handed down in
2001, but protracted (and ultimately unsuccessful) settlement
negotiations delayed the appeal to district court.
     2
         See Price v. Gurney, 324 U.S. 100 (1945).
     3
       See 8 Del. Code Ann. § 141(b) (2003) (“Any director may
resign at any time upon notice given in writing or by electric
transmission to the corporation.”).

                                    2
Appellees contend that Steele did not do so because the directors

knew about Berger’s challenge to the meeting’s validity and wanted

to maintain control of Piranha in the event Berger’s notice claims

proved to be valid.4

      Piranha’s counsel later informed the directors, however, that

insufficient notice probably rendered the May 25 meeting a nullity.

To effect the changes that had not been validly made at that

invalidly called meeting, Sample furnished notice to the other

directors (Steele and Berger, according to Appellees) for a June 15

meeting.    Berger also protested the June 15 meeting and again did

not attend.    At the June 15 meeting, Sample and Steele voted to

elect Churchill a director, and on June 16 Steele tendered his

written resignation.5     At a June 20 meeting Piranha’s board of

directors   (then   consisting    of   Sample,   Berger,   and   Churchill,

according to Appellees) voted to file for bankruptcy relief under

Chapter 11.

                            II.    Analysis

A.   Standard of Review

      4
       There are underlying allegations in this case that Berger
absconded with Piranha funds without prior Board approval. We do
not pass on the substance of these allegations, but note that their
existence supports Appellees’ arguments, made before the Bankruptcy
Court, that all of the Board meetings and changes in Board
membership at issue here were attempts to ensure that Appellees
retained control of the Board so that any remedial measures
regarding the missing funds could be implemented.
      5
      Steele waited until June 16 to get Piranha’s legal counsel’s
opinion as to the validity of the June 15 meeting before submitting
his resignation.

                                       3
      Findings      of   fact    underlying      Bankruptcy   Court   orders   are

reviewed for clear error.             Conclusions of law are reviewed de

novo.6

B.   Berger’s Contentions

      Berger argues that, even though Steele did not tender a formal

written resignation prior to June 15, his resignation was effective

on May 29, 2001, the date on which Piranha’s legal counsel filed a

Form 8-K with the Securities and Exchange Commission (“SEC”)

indicating, inter alia, that Steele had resigned.                 Berger argues

that,     because    that       document       contained   Steele’s   electronic

signature, under the Uniform Electronic Transaction Act (“UETA”)7

Steele cannot disavow the document; as such, it served as a written

resignation effective May 29.              Berger contends that by virtue of

the invalidity of Churchill’s election, he and Sample were the sole

remaining directors as of 6/15.                According to Berger, this means

that the June 20 vote to proceed with the Chapter 11 filing was

invalid, as Berger did not vote for that action and Churchill was

not a director, because he had not been validly elected at either

the May 29 or June 15 meeting.              This case therefore turns on the

effective date of Steele’s resignation.

C.   Steele’s Resignation Date

      The Bankruptcy Court implicitly found that Steele did not

      6
       See, e.g., Krafsur v. Scurlock Permian Corp. (In re El Paso
Refinery, L.P.), 171 F.3d 249, 253 (5th Cir. 1999).
      7
          6 Del. Code Ann. §§ 101-117 (2003).

                                           4
resign until June 16, 2001, having refrained from submitting his

written resignation until that date.8 The court further found that

Steele did not resign orally —— a question of intent —— because his

conduct was inconsistent with his having done so.9           The district

court     agreed   with    the   Bankruptcy   Court,   deciding   that   its

construction of the UETA was correct and its factual findings not

clearly erroneous.        We agree.

1.   Steele’s Form 8-K

      Berger’s primary contention is that, because the Form 8-K

filed with the SEC contains Steele’s electronic signature, he may

not disavow it now under § 107(a) of the UETA, and it must

therefore stand as the written resignation required by Piranha’s

bylaws and Delaware law. Berger points to Section 107(a)’s dictate

that “[a] record or signature may not be denied legal effect or

      8
       As the district court notes, the Bankruptcy Court neither
explicitly stated that Steele did not resign until June 16, nor
squarely addressed the question whether the Form 8-K filed with the
SEC constituted a written resignation.      Its overall decision,
however, must by implication include a finding that Steele did not
resign until he submitted his written resignation in tangible form
on June 16. And, we will infer that the trial court made a finding
that is necessarily included in a broader holding, even if not
explicitly stated. See, e.g., Clinkenbeard v. Central Southwest
Oil Corp., 526 F.2d 649, 651-52 (5th Cir. 1976).
      9
       The Bankruptcy Court had noted that the Tenth Circuit,
interpreting a Kansas statute similar to the Delaware law here at
issue, ruled that the requirement of a writing is permissive rather
than mandatory, and an oral resignation can be effected if intent
to resign is evident. See Wylie v. Marley Co., 891 F.2d 1463, 1469
(10th Cir. 1989).

                                       5
enforceability solely because it is in electronic form.”10          Steele,

however, does not attempt to deny the legal effect of his signature

“solely because it is in electronic form,” but because he did not

“execute[], adopt[] or authorize[]” it as required by Treasury

Regulation S-T.11 In essence, Steele contends that the Form 8-K was

filed in error, three hours after being forwarded to him via email

by Piranha’s legal department for his review.

      As the district court noted, sections 109(a) and (b) of the

UETA indicate that a document bearing an electronic signature may

be contested on these very grounds.       Section 109(a) states that an

“electronic signature is attributable to a person if it was the act

of the person;”12 section 109(b) explains that “[t]he effect of an

electronic record or electronic signature attributed to a person

under subsection (a) of this section is determined from the context

and   surrounding    circumstances   at   the   time   of   its   creation,

execution, or adoption ....”13       Section 109(b) makes clear that a

litigant may challenge the effect of his electronic signature by

discussing its “context and surrounding circumstances” in front of

the reviewing court.      In the instant case, Steele did just that,

contending that the Form 8-K was filed in error and that he did not

      10
           6 Del. Code Ann. § 107(a) (2003)(emphasis added).
      11
           17 C.F.R. § 232.302(a) (2003).
      12
           6 Del. Code Ann. § 109(a) (2003).
      13
           6 Del. Code Ann. § 109(b) (2003).

                                     6
execute, adopt, or authorize the electronic signature it contained.

We cannot say that the Bankruptcy Court committed clear error by

agreeing with him.

2.   Steele’s Actions Prior to June 16

      The Bankruptcy Court also found that Steele’s actions between

May 25 and June 16 were more consistent with his having remained a

director of Piranha than with his having resigned effective either

May 25 or May 29.     This, in turn, forecloses a conclusion of oral

resignation.14    Again, we cannot say that this finding constitutes

clear error.      It is the province of the fact-finder to weigh the

evidence and make credibility determinations.      The trial court’s

factual determinations must stand unless we are “left with the

definite and firm conviction that a mistake has been committed,”15

which, in this case, we are not.

                            III. Conclusion

      For the foregoing reasons, the decision of the district

court affirming the Bankruptcy Court’s jurisdiction over the

underlying bankruptcy action is

AFFIRMED.

      14
           See note 9, supra, and accompanying text.
      15
           Century Marine, Inc. v. U.S., 153 F.3d 225, 229 (5th Cir.
1998).

                                   7