Crowder Construction Co. v. Kiser

Eugene Kiser (plaintiff) was an employee of Crowder Construction Company (Crowder) (defendant). Crowder adopted stock-option plans that enabled Kiser to purchase, for $7 per share, 2,000 shares of Crowder stock in 1986 and 4,750 shares in 1988. Under the buy-sell provisions of Crowder’s shareholders’ agreement, Kiser was required to sell his shares back to Crowder upon termination of his employment. If Kiser held his shares for at least seven years, the repurchase price would be equal to the stock’s book value per share, subject to certain adjustments (adjusted book value). If Kiser held his shares for less than seven years, the repurchase price would be $7 per share, plus or minus the change in adjusted book value since his purchase of the shares. Around 1994, Kiser’s working relationship with Crowder’s president and other senior officers deteriorated, with Kiser openly disagreeing with many of their business decisions as Crowder struggled with economic challenges. This led to Kiser’s firing in January 1995, which was more than seven years after his purchase of 2,000 shares in 1986 but less than seven years after his purchase of 4,750 shares in 1988. As a result, the repurchase price for the 2,000 shares was much higher than the repurchase price for the 4,750 shares. The former was $56.42 per share—Crowder’s adjusted book value per share as of March 31, 1994—while the latter was $18.59 per share—$7 plus the increase in Crowder’s adjusted book value per share since 1988. Had Kiser remain employed by Crowder until later in 1995, he would have met the seven-year holding-period requirement on the 4,750 shares and been entitled to an additional $180,000. After Kiser refused to sell his shares back to Crowder, Crowder sued for specific enforcement of the shareholders’ agreement. Kiser argued that enforcement would be unconscionable, mainly because (1) Crowder allegedly timed his firing to occur before March 31, 1995, when Crowder had a higher book value than it did as of March 31, 1994, and before his seven-year holding period on the 4,750 shares ended, both of which were intended to enable Crowder to repurchase those shares at a much lower price; and (2) his employment was allegedly terminated without warning.