On Jan. 17, the company asked to halt the arbitration while Schuster rules whether the 2008 settlement agreement and resulting final order and judgment “permit Mr. Brown to provide consulting services to Cobb EMC in exchange for payment” — an action Brown’s attorneys criticize as “forum shopping.”
Judge Schuster has scheduled oral arguments on that question for 9 a.m. April 3 in Cobb Superior Court.
Brown signed a contract to continue working full-time for Cobb EMC as a consultant as of March 1, 2011 — the day after his retirement that was required in the settlement to the 2007 lawsuit brought by a handful of EMC members.
According to that consulting contract, which was signed by both Brown and Larry Chadwick, the longtime chairman of the board of directors of Cobb EMC, Brown was to be paid $13,800 per week for three years, plus expenses, for consulting services, and $5,000 for his attorneys fees in crafting the contract. The full value of the deal is more than $2.1 million.
The deal could be terminated early in three ways: by mutual written agreement of the parties; by the company for “good cause” — including if Brown is convicted “of any felony”; and by Brown if the company breaches the contract and he notifies the company within 10 days.
The contract requires that any disputes be settled through arbitration rather than the courts, and that if the arbiter finds the company did not have good cause to end the deal, Brown would be owed a lump sum of all remaining compensation and benefits owed under the contract, plus all of his attorneys fees and costs incurred in arbitrating the dispute.
At this time last year, as the month of February was ticking away, Cobb EMC announced in a press release that Brown had retired after 31 years with the company — but also noted that the board was seeking permission from Judge Schuster to rehire Brown as CEO, and that in the interim, “Brown has agreed to a request by the board of directors to continue serving the co-op as an independent consultant.”
On June 24, 2011, after a May hearing on the matter, Schuster wrote in a 13-page order: “This Court holds that the tenure of Dwight T. Brown at Cobb EMC and its subsidiaries ended February 28, 2011. It cannot be renewed, revived or repackaged.”
Nearly a month later, lawyers for the utility and the plaintiffs — but not Brown or any of his attorneys — met in Schuster’s chambers, where the EMC notes that the judge “made it clear that the June 24 order also precluded Mr. Brown from working for Cobb EMC as a consultant.”
On July 27, EMC lawyer Dwight Davis, of the King & Spalding law firm in Atlanta, wrote to Dwight Brown’s lawyers, Craig Gillen and Barry McCabe, who work at different firms in Atlanta: “On July 26, 2011, the Board of Cobb EMC voted, unanimously, to terminate the consulting arrangement with Dwight Brown effective close of business that day. Since Mr. Brown is represented by you two gentlemen, we are providing notice of the termination to you.” (Gillen is part of the legal team defending Brown against a 34-count criminal indictment, though this may be the first instance of his involvement in the separate civil matter.)
On Aug. 19, Brown filed a notice of arbitration, insisting his consulting contract was “wrongfully terminated” and seeking $1,860,240 for unpaid compensation and other damages, including attorney’s fees. Lawyer David J. Larson, of Weinberg, Wheeler, Hudgins, Gunn and Dial, another Atlanta firm, prepared the notice.
That was followed on Sept. 16 by EMC’s amended notice of defense and counterclaim, in which “Cobb EMC denies that Brown and Cobb EMC entered into a Consulting Agreement which is dated as of the first day of March 2011. Cobb EMC’s Board of Directors never approved or authorized the material provisions of the Consulting Agreement, including the amount of compensation that Brown was to receive. Cobb EMC admits that Exhibit A to the Notice of Arbitration is a true and correct copy of the Consulting Agreement signed by Brown and Chadwick.”
Later in that same filing, Davis writes: “Cobb EMC contends that there was no mutual assent or meeting of the minds on the material provisions of the Consulting Agreement, and, consequently, Cobb EMC has no duty to perform under the agreement.”
On Jan. 17 of this year — days before arbitration hearings set for Jan. 19 and 20 — the company went to Judge Schuster to stay the arbitration.
According to the EMC’s motion, Brown argues that Schuster’s June 24 order “is not binding on him because he was not formally a party to the declaratory judgment action that precipitated it and had no opportunity to be heard. Cobb EMC strenuously disagrees with Mr. Brown’s argument. … But if Mr. Brown believes he was deprived of an opportunity to be heard … then Cobb EMC is glad to give Mr. Brown that opportunity.
“Once Judge Schuster has addressed the narrow issue that only he has the authority to resolve — whether the Settlement Agreement and Final Order and Judgment permit Mr. Brown to provide consulting services to Cobb EMC in exchange for payment — then the parties can resume this arbitration on whether Cobb EMC breached the consulting agreement by terminating it.”
That prompted a 24-page response on Feb. 16 from Larson, Brown’s lawyer, who writes that Cobb EMC “seeks intervention from this Court to untangle a mess solely attributable to its own errors with the ultimate goal of forcing the consequences of its errors on Dwight Brown and others.”
The settlement, he wrote, “never addresses Mr. Brown’s services as a consultant to Cobb EMC. Accordingly, Cobb EMC and Mr. Brown entered into the Consulting Agreement without violating the Settlement Agreement.”
Also, “between June 24 and July 18, 2011, counsel for Cobb EMC informed counsel for Mr. Brown that, in his opinion, the Court Order of June 24, 2011 had no bearing on the Consulting Agreement and that Mr. Brown could continue to work under the Consulting Agreement. Cobb EMC had been paying Mr. Brown since March 1, 2011 pursuant to the Consulting Agreement and continued to do so well after the June 24, 2011 Order,” according to Brown’s response.
Larson also criticizes EMC’s counterclaim demanding that Brown refund the consulting fees he had already been paid.
“Cobb EMC actually initiated the conversation to engage Mr. Brown as a consultant, drafted the Consulting Agreement and represented on several occasions that Mr. Brown could enter into the Consulting Agreement without fear that it would violate the Settlement Agreement,” he wrote.
What’s likely now is that “Cobb EMC recognized the inherent flaws in its defenses to Mr. Brown’s claims and Cobb EMC attempts now to forum shop the resolution of the issues reserved for the arbitration,” Larson argued.
Larson additionally notes that the plaintiffs who filed the derivative lawsuit back in 2007 have taken no action against either Cobb EMC or Mr. Brown regarding the consulting contract.
“Surely if the Derivative Plaintiffs thought that the Consulting Agreement violated the Settlement Agreement, they would have raised the issue long ago,” he said.
Pitts Carr, the lawyer for the plaintiffs who brought the 2007 suit, told the Journal that the plaintiffs “firmly believe” Brown’s relationship with the EMC ended in February 2011.
“We have always believed and continue to believe that the so-called consulting arrangement was nothing other than a sham to get around his mandatory retirement, and as a sham was ineffectual. That leads us to the conclusion that his effort to get money through arbitration is inappropriate not only because of the final order but also under Judge Schuster’s order of June 24,” Carr said. “The losers, of course, are the EMC members for having to incur further expense at the behest of Mr. Brown, who seems very hard to embarrass.”
He added: “We fully support the EMC’s position that Brown is not entitled to those payments. Although we fought tooth and toenail with them for years, we are in agreement with the EMC on this issue.”