In the Matter of a Mail Dispute Between:

ARTHUR W. DOTY

and

LARRY STURGILL & ANDREA STURGILL

P.S. Docket No. MD-4

Randolph D. Mason Administrative Law Judge

INITIAL DECISION

The Regional Counsel for the Western Region, United States Postal Service, forwarded this matter for decision pursuant to Domestic Mail Manual 153.72 and 39 C.F.R. Part 965 (52 Fed. Reg. 29012, August 5, 1987). Disputants Arthur Doty and Andrea Sturgill both claim to be the president of Shimco Industries, Inc., and, therefore, entitled to receive the mail of that company and certain allegedly related companies addressed to P. O. Box 73004, Houston, TX 77273-3004; P. O. Box 370666, El Paso, TX 79937-0666; and P. O. Box 371170, El Paso, TX 79937-1170. The other companies are Seal Check Technology Co., Horizon Shim Systems, and Blacksmith Tool Co. Larry and Andrea Sturgill have requested that all mail addressed to the above post office boxes be forwarded to the Shimco Industries, Inc. corporate box, P. O. Box 6255, Auburn, CA 95604-6255. Both disputants have filed written submissions, and the Sturgills have filed a reply to Doty's submission.

FINDINGS OF FACT

1. On June 1, 1986, Arthur Doty and Frank Sturgill each owned 50% of the shares of stock in Shimco Industries, Inc. ("Shimco"). On that date, Arthur Doty was elected president, vice-president and director of Shimco. Frank Sturgill was elected secretary, treasurer, and chairman of the board of directors.

2. Shimco conducts its business in Houston and El Paso, Texas, and Auburn, California. Shimco's mail has been addressed to P. O. Box 73004, Houston, TX 77273. It also appears that some Shimco mail is addressed to P. O. Box 371170 and P. O. Box 370666, El Paso, TX 79937.

3. By an agreement effective January 1, 1986, Doty contracted to sell a portion of Blacksmith Tool Company to Shimco, including the right to use the "Blacksmith" name and most of the assets. Excluded from the sale were "all assets having to do with the manufacture, production, marketing, and sale of the 'bleeder cleaner'." Doty also retained the right to use the "Blacksmith" name for purposes of the bleeder cleaner business. Mail directed to Blacksmith Tool Company presently is addressed to P. O. Box 370666, El Paso, TX 79937-0666, and P. O. Box 73004, Houston, TX 77273-3004. In the present mail dispute, Doty claims that the sale of Blacksmith was never consummated and that he is the sole owner. The contract of sale states that "any dispute under this agreement shall be decided in California, [under California law], under the rules of the American Arbitration Association."

4. On January 1, 1987, Shimco created a "division" called Horizon Shim Systems to market Shimco products. Mail to this entity is addressed to P. O. Box 371170, El Paso, TX 79937-1170.

5. Another entity, Seal Check Technology Company, appears to have been founded by Arthur Doty. Although certain expenses were paid by Shimco (the record contains receipts amounting to about $1000), no documents have been introduced showing any colorable claim to ownership of Seal Check Technology Company by Shimco. Accordingly, any order issued herein shall not interfere with the delivery of mail addressed to Seal Check Technology Company. Mail for this entity is currently addressed to P. O. Box 371170 and P. O. Box 370666, El Paso, TX 79937.

6. On June 1, 1987, "proposed" minutes were drafted for purported directors' and shareholders' meetings of that date. The minutes noted that Arthur Doty was re-elected president, vice-president and director of Shimco. The minutes were signed by Larry Sturgill but not by Doty.

7. According to a Complaint filed by Shimco in California Superior Court on December 1, 1987, against Arthur W. Doty and his wife, Brenda, Arthur W. Doty served in the capacity of president of Shimco until about July 24, 1987 at which point he "resigned." This is disputed by Doty, who still claims to be the president of Shimco. The complaint alleges that Doty breached a 1985 noncompetition agreement with Shimco by unfairly competing with the company, "stealing" Shimco assets and customers, and diverting receivables to his own use. The noncompetition agreement provides that a breach by Doty will result in automatic resignation of any position as director or officer of the corporation. The agreement provides that "any dispute under this agreement will be determined under California law . . . [and] must be arbitrated in California under the rules of the American Arbitration Association."

8. Larry Sturgill claims that Arthur Doty automatically resigned all of his positions by virtue of an alleged breach of the noncompetition agreement. In accordance with this position, Sturgill held a board of directors meeting without Doty on July 24, 1987, at which he declared that Doty had automatically resigned and forfeited his interest and ownership in Shimco. He also unilaterally fired Doty in view of the alleged breach. He elected his wife, Andrea Sturgill, as director and president of the company. Doty claims that this action was a nullity and that he remains a 50% shareholder and president of Shimco.

CONCLUSIONS OF LAW

Section 153.51 of the Domestic Mail Manual provides that where disagreement arises among corporate officers and others connected with a company, mail addressed to the corporation is delivered in accordance with the order of the president of the corporation. In the instant case, Larry Sturgill, chairman of the board and a 50% shareholder, attempted to oust Arthur Doty, president and 50% shareholder. Sturgill's position is predicated, in part, upon his assertion that Doty breached the noncompetition agreement with Shimco Industries, Inc.

The Postal Service has a duty to deliver the mail in accordance with the rules set forth in the Domestic Mail Manual and other published rules. The determination of property rights under state law is more appropriately left to the local courts. The regulations provide that postmasters will deliver mail in accordance with a court order. DMM 153.73. In the instant case, the parties have already submitted the question of the alleged breach of the noncompetition agreement to the state court in California. This action should determine whether Doty is still the president of Shimco. Moreover, the agreement provides that any dispute shall be resolved by arbitration; thus the parties may also use the latter procedure.

Likewise, whether a portion of Blacksmith Tool Company is owned by Shimco must also be resolved in court or by arbitration. Again, the agreement of sale provided that disputes would be submitted to arbitration and determined under California law. However, since there was clearly never any intention of selling the "bleeder cleaner" part of the Blacksmith Tool Company business, any mail addressed to Blacksmith Tool Company which, on its face clearly pertains to the bleeder cleaner business, should continue to be delivered to Arthur W. Doty.

Accordingly, all mail addressed to Shimco Industries, Inc., Horizon Shim Systems, and Blacksmith Tool Company (unless the address indicates that it is specifically related to the bleeder cleaner business) at the above-mentioned post office boxes in Houston and El Paso, Texas, is currently undeliverable under Postal Service regulations. The Postal Service has no authority to determine who is the president of Shimco under these circumstances, or whether Blacksmith Tool Company is owned, in part, by Shimco. However, in order to allow the parties an opportunity to resolve this dispute with the least disruption of mail service, all mail addressed to the above entities will be detained for 30 days from the date of the order of the Judicial Officer while the parties appoint a disinterested third party to act as a receiver to accept mail delivery. If at the end of 30 days a receiver has not been appointed, then the postmasters in question may consider the mail undeliverable and return it to the sender. When action is taken by an arbitrator or a local court, the parties may notify the postmasters so that mail may be delivered in accordance with the regulations.