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Clark v. Southern Community Financial Corporation

United States District Court, M.D. North Carolina

October 28, 2014

F. SCOTT BAUER and JEFFREY T. CLARK, Plaintiffs,
v.
SOUTHERN COMMUNITY FINANCIAL CORPORATION, SOUTHERN COMMUNITY FINANCIAL, LLC, SOUTHERN COMMUNITY BANK AND TRUST, WINSTON 23 CORPORATION, CAPITAL BANK CORPORATION, CAPITAL BANK FINANCIAL CORPORATION, and CAPITAL BANK, N.A., Defendants.

MEMORANDUM OPINION AND ORDER

N. CARLTON TILLEY, Jr., Senior District Judge.

This matter comes before the Court on Defendants' Motion to Enlarge Page Limit [Doc. #28], Defendants' Motion to Dismiss Pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure [Doc. #29], and Defendants' Motion for Leave to File Corrected Reply Brief in Support of Motion to Dismiss [Doc. #37]. For the reasons that follow, Defendants' Motion to Enlarge Page Limit is GRANTED, Defendants' Motion for Leave to File Corrected Reply Brief in Support of Motion to Dismiss is GRANTED, Defendants' Motion to Dismiss is DENIED as MOOT, and the case is DISMISSED under Rule 12(h)(3) of the Federal Rules of Civil Procedure for lack of subject matter jurisdiction.

I.[1]

In 1995, Plaintiff F. Scott Bauer ("Bauer") founded Southern Community[2] in Winston-Salem, North Carolina and served as its Chief Executive Officer and President. Doc. #1 (Compl. ¶ 15). Plaintiff Jeffrey T. Clark ("Clark") joined Southern Community during its first year as Senior Vice President and Chief Commercial Banking Officer. Id . ¶ 16. As part of their employment with Southern Community, Bauer and Clark each had various employment agreements and benefit plans. Id . ¶ 18. At issue in this case are Bauer's and Clark's April 2006 Employment Agreements and March 2007 Salary Continuation Agreements. Id . ¶¶ 19-22; Compl. Exs. 1-4.[3]

A.

Although Bauer and Clark entered into Employment Agreements, they could be terminated without cause with written notice sixty days in advance of the termination.[4] Compl. Ex. 1 (Bauer's Employment Agreement) ¶ 3.1(b); Compl. Ex. 3 (Clark's Employment Agreement) ¶ 3.1(b). In that event, the compensation and benefits after termination provisions of Sections 4.4 and 4.5 apply, in addition to other post-termination payments or benefits provided for in the Employment Agreements. Compl. Ex. 1 ¶ 3.1(b); Compl. Ex. 3 ¶ 3.1(b).

Bauer's and Clark's Employment Agreements also each provide benefits if a Change in Control were to occur during the term of the Employment Agreement. The Employment Agreements define Change in Control to mean a change in ownership, a change in effective control, or a change in ownership of a substantial portion of assets of Southern Community Financial Corporation. Compl. Ex. 1 Amended ¶ 5.2; Compl. Ex. 3 Amended ¶ 5.2.

According to their terms, the Employment Agreements were binding on the Employer's successors. Compl. Ex. 1 ¶ 8.1(a); Compl. Ex. 3 ¶ 8.1(a).

B.

In their Employment Agreements, Bauer and Clark anticipated the execution of Salary Continuation Agreements, which occurred the following year. Bauer's and Clark's Salary Continuation Agreements provide benefits similar to those described above. See Compl. Ex. 2 (Bauer's Salary Continuation Agreement); Compl. Ex. 4 (Clark's Salary Continuation Agreement). If a Change in Control were to occur after January 1, 2007, but before the Executive's Normal Retirement Age and before his Separation from Service, the Bank[5] would be required to pay the Executive the Change in Control benefit, instead of any other benefit provided for in the Salary Continuation Agreement. Compl. Ex. 2 ¶ 2.4; Compl. Ex. 4 ¶ 2.4. Change in Control is defined in the Salary Continuation Agreements as a change in ownership, a change in effective control, or a change in ownership of a substantial portion of assets of Southern Community Financial Corporation. Compl. Ex. 2 ¶ 1.4; Compl. Ex. 4 ¶ 1.4. Just as the Employment Agreements were binding on successors, so too, were the Salary Continuation Agreements. Compl. Ex. 2 ¶¶ 7.2, 7.5; Compl. Ex. 4 ¶¶ 7.2, 7.5.

C.

In early 2012, Capital Bank[6] approached Southern Community to discuss purchasing Southern Community. Compl. ¶ 37. On March 16, 2012, Southern Community and Capital Bank entered into an Agreement and Plan of Merger ("Plan of Merger"). Compl. ¶ 45 & Exs. 6, 7. Section 7.2(g) of the Plan of Merger required that Southern Community, Capital Bank, and individuals listed in the Parent Disclosure Schedule enter into amended employment arrangements and/or waivers pursuant to the Parent Disclosure Schedule. Compl. ¶ 47 & Ex. 6 at ¶ 7.2(g). According to Plaintiffs, the amended employment arrangements would have greatly reduced the value of the Employment Agreements, including reducing or eliminating the Change in Control benefits. Compl. ¶ 47. Nothing in the Plan of Merger required Capital Bank to expressly assume and agree to perform the Employment Agreements in the same manner and to the same extent that Southern Community would be required to perform them. Id . ¶ 48.

At the meeting during which the Board of Directors was considering whether to adopt the Plan of Merger, Bauer and Clark stated that, while they approved of the merger, they would not sign amendments to their Employment Agreements. Id . ¶ 51. After the Plan of Merger was signed, Southern Community demanded that Bauer and Clark sign proposed amendments to their Employment Agreements and Salary Continuation Agreements, but they refused. Id . ¶¶ 52, 73. According to Plaintiffs, the amendments would have changed Bauer's and Clark's job titles, replaced the Change in Control benefits with a smaller lump sum payment, removed provisions making the agreements binding on successors, removed provisions requiring Southern Community to pay Bauer's and Clark's legal fees associated with enforcing the agreements, and created a more stringent covenant not to compete. Id . ¶ 55.

Because Bauer and Clark refused to sign the proposed amendments, on July 24, 2012, Southern Community issued notices of termination without cause and terminated Bauer's and Clark's employment effective September 22, 2012. Id . ¶ 76 & Ex. 13. On October 1, 2012, Southern Community and Capital Bank consummated Capital Bank's acquisition of Southern Community. Compl. ¶ 79.

II.

On April 26, 2013, Plaintiffs Bauer and Clark filed a Complaint against Defendants Southern Community Financial Corporation, Southern Community Financial, LLC, Southern Community Bank and Trust, Winston 23 Corporation, Capital Bank Corporation, Capital Bank Financial Corporation, and Capital Bank, N.A., alleging breach of Bauer's and Clark's Employment Agreements (First Claim for Relief); in the alternative, claims for Employment Agreement benefits and to enforce rights under the terms of the plans pursuant to 29 U.S.C. §§ 1132(a)(1)(B) and 1140 (Second and Third Claims for Relief, respectively); claims for Salary Continuation Agreement benefits and to enforce rights under the terms of the plans pursuant to 29 U.S.C. §§ 1132(a)(1)(B) and 1140 (Fourth and Fifth Claims for Relief, respectively); in the alternative, breach of Bauer's and Clark's Salary Continuation Agreements (Sixth Claim for Relief); tortious interference with contract (Eighth Claim for Relief); in the alternative, discrimination under 29 U.S.C. § 1140 (Ninth Claim for Relief); and seeking a declaratory judgment as to an attorneys' fees provision (Seventh Claim for Relief). Doc. #1. In support of their Complaint, Plaintiffs attached:

1. Bauer's Employment Agreement,

2. Bauer's Salary Continuation ...


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