Corporate Governance: Telecom CEO Reinstated After Improper Firing

In a bifurcated arbitration proceeding, Trepanier Tajima LLP, leaving no stone unturned, proved that a telecom executive was wrongfully fired from his CEO and Director positions. Tajima LLP proved that the member of the LLC failed to follow corporate formalities and sought to “automatically” fire the executive and that the executive’s position was protected by an operating agreement requirement that managers of the LLC can only be terminated by unanimous board consent, which was never obtained. On cross examination, Trepanier Tajima LLP elicited an admission from the attorney drafter of the operating agreement that the LLC’s directors are considered its statutory managers, which cloaked the executive’s position with unanimous board consent protections. The LLC’s member’s president admitted on cross examination that he did not properly call the meeting which sought to fire the executive. This case highlights the importance of faithfully following corporate formalities when managing a corporation or LLC. Where a corporate decision is made, a dissenter can argue that non-compliance with corporate formalities may invalidate the action. This was a “bet-the-company” case that had far reaching implications for the executive’s legal position and potential damages recovery.