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Hamilton v. Harrington

decided: December 3, 1986.


Appeal from the United States District Court for the Eastern District of Wisconsin. No. 84-C-44--Terence T. Evans, Judge.

Author: Flaum

Before FLAUM and EASTERBROOK, Circuit Judges, and WILL, Senior District Judge.*fn*

FLAUM, Circuit Judge. Appellant, Robert L. Hamilton, Jr., appeals from the district court's order granting the defendants' motion for summary judgment. On appeal Hamilton, Jr. alleges over a dozen errors in the district court's order. For the reasons set forth herein, we affirm the judgment below.


This case involves a family dispute between Hamilton, Jr., and his father Robert L. Hamilton, Sr. In essence, Hamilton, Jr. is trying to create a cause of action that would force his father to sell him the family business.

The Dumore Corporation ("Dumore") is a family business. Hamilton, Sr.'s father was one of the co-founders. Hamilton, Sr. joined the company in 1941, and Hamilton, Jr. joined in 1963 upon his graduation from college. Hamilton, Jr. became president and chief executive officer upon Hamilton, Sr.'s retirement in 1977.

In October, 1982, the time when the events relevant to this litigation began to occur, Hamilton, Jr. owed 1,594 shares of common stock, or approximately 47.2 percent of Dumore. At that time, Hamilton, Sr. was beneficial owner of 42 percent of the common stock, and Hamilton Jr.'s three siblings owned 10.8 percent of the common stock. The preferred stock was divided differently: Hamilton, Jr.'s wife held 4.8 percent; Hamilton, Sr. together with his wife, held 57.3 percent; and Hamilton Jr.'s siblings controlled 37.9 percent.

On October 12, 1982, at a meeting of Dumore's board of directors, Hamilton, Sr. proposed the sale of the business to Dumore director (and defendant in this suit) Richard L. Harrington. Hamilton, Jr. requested that the board defer action on the proposed sale until November. In the interim, Hamilton Jr. sought the necessary financing to make a bid for control of Dumore. Meanwhile, on October 25, 1982, Harrington formed a new corporation whose purpose was to acquire the business assets of Dumore.

Hamilton, Jr. was successful in obtaining financing and was prepared to offer to purchase Dumore at the special board meeting scheduled to be held November 3, 1982. Unfortunately for Hamilton, Jr., the November 3, 1982 meeting did not go the way he had planned. At that meeting, Hamilton, Sr. announced that the company was no longer for sale, and that no offers to purchase would be considered. Moreover, after Hamilton, Jr. refused to resign, Dumore terminated him. The district court found that the board's action in terminating Hamilton, Jr. "came at the request of Hamilton, Sr. who suggested that his son's difficulties with management, personnel, extensive expenditures for consultants, cavalier treatment of him, and attempted use of corporate funds to purchase a Door County (Wisconsin) condominium supported the termination." Hamilton v. Harrington, No. 84-C-44 at 5 (E.D. Wis. April 2, 1986) (order granting defendant's motion for summary judgment).

At the November 3 meeting, Hamilton, Sr. told his son that the company was still willing to grant him termination benefits. Plaintiff, under the guidance of counsel, entered into negotiations with Dumore's legal counsel concerning the termination benefits. The negotiations concerned, in part, Hamilton, Jr.'s desire to have the company purchase his shares. On November 17, 1982, Dumore's attorney, Benn S. DiPasquale, sent a letter to Hamilton, Jr., that formed the basis for the final settlement. The final agreement provided that: the company would transfer to Hamilton, Jr. the 1980 Cadillac Seville that he had been using; Dumore would forgive about $12,000 of personal expenses that Hamilton, Jr. had charged to the company; and the company would pay to Hamilton, Jr. $92,000, minus the amount that he owed to the company, as severance pay. The settlement agreement also included a general release by Hamilton, Jr. of all claims against Dumore, its officers, agents, directors, and employees. It is the release provision that is in issue here.

After continued negotiations and alterations in the language and form of the agreement by plaintiff, the termination agreement was signed on January 14, 1983. Under the agreement, the plaintiff transferred his shares of common stock to Dumore for $844,820 ($530 per share). Hamilton, Jr.'s wife sold the preferred shares she held as trustee for the children to Dumore in exchange for $52,900.

While Hamilton, Jr.'s termination benefits were being negotiated, Hamilton, Sr. contacted Harrington to inquire whether the latter was still interested in purchasing Dumore. Harrington apparently was interested, and began to arrange then necessary financing. Seven days after Hamilton, Jr.'s stock was redeemed, on January 21, 1983. the assets and business were sold to Harrington's company, Akamai Investment, Inc. The transaction gave Hamilton, Sr. the equivalent of $425 per share and left him with the right to a tax refund in the further of an estimated $250,000. Thus, counting the possible further tax benefit, Hamilton, Sr. received about $564 per share.*fn1

The district court found that by January 1, 1984, Dumore had fully performed the settlement agreement with Hamilton, Jr. After accepting the benefits under the settlement agreement, Hamilton, Jr. ...

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