Opinion of the recent Litigation Preston HARMON V. MRID

Breach of Fiduciary Duty – is the Commissioner’s actions a breach of fiduciary duty?

Conclude, “YES”.

If the commissioners act/acted in their own interests, rather than in the best interests of MRID and its property owners.

If one concludes that the Commissioners act/action/actions are made without extreme deference to the best interests and financial position of the property owner’s amenities, then one also concludes the commissioners breached their fiduciary duty.

MRID holds the amenities in trust for the benefit of the property owners of horseshoe bend.

Appointment and Authority

• January 4, 2023

  • Charlie McDaniels appointed as the special administrator (Hereinafter “SA”), a role which suspended the commissioners' authority to act on behalf of MRID.

• February and March 2023

  • Despite their suspension of authority, the Suspended Commissioners, (hereinafter “Suspended”) signed material contracts.

  • Employment Contracts for positions of general labor whereby an Employment Agreement/Contract is unnecessary and are, in fact, excessive (hereinafter, “Employment Agreement/s” or “EA”) were signed.

  • Parties to the Employee Agreement/s, the “Employee/s”, either knew or had reason to know of the commissioner’s suspended authority.

    • No reasonable belief that EA terms can be relied upon

• SA – Unaware; Suspended failed to seek authority from SA. Additionally, Suspended failed to provide notice to SA of the material contract/s. These failures of communication present as; intentional effort to disguise misdeeds

• The unauthorized contract is a clear overreach and violation of Suspended’s limited power.

Unauthorized Contract

The commissioners' decision to sign an excessive and unnecessary EA despite their suspended authority is a blatant disregard for the legal boundaries set by the Authorities when making the special administrator appointment.

After reviewing the available documentation, my personal opinion can be summarieds as follows:

The commissioners breached their fiduciary duty with the circulation of the EA. The EA/s does not comply with local laws on the compensation of municipal employees.

Conflict of Interest and Fiduciary Duty

The EAs in question provide benefits to the Employee party. These benefits are not in line with the market generally nor do they meet the job grading and compensation rules outlined by the state of Arkansas.

The egregious terms of the EAs suggest a significant conflict of interest and a breach of fiduciary duty. The unnecessary and excessive EAs favor the employee at the expense of MRID and its property owners.

Poor Performance and Insubordination

The EAs reward incompetence and defiance, which is wholly unacceptable and further underscores the impropriety of Suspended’s actions.

Case Order in 33cv-23-32

The case order in 33cv-23-32 (Commissioners v. Mayor and City) explicitly highlights the commissioners' obligation to ensure the financial success and ongoing concern of the amenities owned by the property owners, for which MRID holds title in trust. Suspended’s actions are a stark violation of this duty, jeopardizing the financial and operational stability of MRID.

One-Sided and Illegal Employment Agreement

The EA signed with Preston Harmon is egregiously one-sided, providing disproportionate benefits to him at the expense of MRID and its property owners.

Specific issues include:

• Excessive compensation

  • General Compensation, given duties assigned to headcount, compensation is excessive.

  • Fringe Rate out of line with market. Similar positions are not compensated with employment agreement benefits such as: Severance, PTO, Vacation – nor is it typical that employers backdate documents to provide for an enhanced fringe package (e.g., suggesting a start date of 1/1/2020 to secure additional vacation weeks and/or additional PTO/Sickpay.)

• Lack of performance metrics

• Unilateral termination clauses favoring Preston Harmon

• Conflict of interest

These terms are so unfavorable that no municipality could legally comply with them.

Legal Violations

Arkansas Code § 14-42-110 governs the ethical and legal standards for municipal employee compensation. Their behavior indicates a gross misuse of authority and a disregard for the law.

Demand for Withdrawal

Mr. P Harmon knowingly entered into an agreement he knew was improperly signed. For this reason, he cannot now hold the MRID accountable for any terms in that agreement.

Given the clear violations, the overreach of authority and the knowledge Mr. P Harmon either knew or had reason to know regarding Suspended’s lack of authority, it is absurd that Mr. P Harmon could expect the MRID to unjustly enriched by following the egregious EA.

MRID understands it obligation under this document and refuses to permit Suspended continued harm to the property owner’s amenities.

Apparent Authority & Prior Knowledge & Improper Authorization: It seems Preston sues the MRID under an employment agreement that he knew was signed by people who didn't have the authority to sign it. If true, this would likely weaken his case.

Courts generally expect individuals to act in good faith.

If Preston knew the agreement wasn't properly authorized but proceeded anyway, the MRID will argue that the agreement is invalid due to, among other things: improper authorization.

Preston's knowledge of the improper authorization could be seen as acting in bad faith, further undermining his legal standing.

If Preston knowingly entered into an agreement he knew was improperly signed, it is unlikely he can hold the MRID accountable for any of the terms in that agreement.