Stender et al v. Archstone-Smith Operating Trust
ORDER denying 440 Motion for Reconsideration, by Judge William J. Martinez on 10/30/2015.(cthom, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge William J. Martínez
Civil Action No. 07-cv-02503-WJM-MJW
STEVEN A. STENDER, and
INFINITY CLARK STREET OPERATING, L.L.C.,
on behalf of themselves and all others similarly situated,
ARCHSTONE-SMITH OPERATING TRUST et al.,
ORDER DENYING MOTION TO RECONSIDER
Before the Court is Defendants’ Motion to Reconsider (ECF No. 440) this Court’s
September 28, 2015 order granting in part and denying in part Plaintiffs’ motion for
class certification (“Certification Order”) (ECF No. 434). For the reasons stated below,
the Motion to Reconsider is denied.
I. LEGAL STANDARD
“A motion for reconsideration is appropriate where the court has
misapprehended the facts, a party’s position, or the controlling law.” Servants of
Paraclete v. Does, 204 F.3d 1005, 1012 (10th Cir. 2000). But such m otions “are
regarded with disfavor. . . [and are] ‘not appropriate to revisit issues already addressed
or advance arguments that could have been raised in prior briefing.’” Kerber v. Qwest
Group Life Ins. Plan, 727 F. Supp. 2d 1076, 1076 (D. Colo. 2010) (q uoting Servants of
Paraclete, 204 F.3d at 1012).
Familiarity with the factual allegations, procedural history, and the Certification
Order is presumed.
Defendants argue that this Court overlooked an important argument allegedly
demonstrating that class certification even as to liability is inappropriate. Specifically,
Defendants re-urge their argument that: (a) a breach of fiduciary duty claim based on
majority oppression of minority shareholders requires Plaintiffs to prove that the majority
substantially defeated the minority’s “reasonable expectations” (see ECF No. 312 at 13
(quoting Edenbaum v. Schwarcz-Osztreicherne, 885 A.2d 365, 377–78 (Md. Ct. Spec.
App. 2005))); and therefore (b) the liability phase will require discovery into every A-1
Unitholder’s subjective expectations. (ECF No. 440 at 6–7.) 1 Similarly, Defendants
assert that Plaintiffs’ breach of contract claim turns on each A-1 Unitholder establishing
that he/she/it suffered “adverse consequences” based on the Unitholder’s individual,
subjective expectations, preferences, and so forth. (Id. at 7–8.)
To begin, the Court did not overlook these arguments. They were subsumed in
the observation that some Class members may have no interest in bringing a lawsuit
like this one, but that does not mean that no one can bring a class action based on the
theories Plaintiffs allege. (ECF No. 434 at 14.)
Moreover, as to breach of fiduciary duty, Defendants are walking into a mess
largely of their own making. Last year, Defendants moved to dismiss Plaintiffs’ Second
Amended Complaint, including the fiduciary duty cause of action based on majority
All ECF page citations refer to the page number in the ECF header, which does not
always match the document’s internal pagination.
oppression. (ECF No. 288 at 19–24.) Plaintiffs responded by offering the Edenbaum
decision, supra, with its “reasonable expectations” requirement. (ECF No. 299 at 15.)
The only mention of Edenbaum in Defendants’ reply is a footnote distinguishing it as
“distinct from the type [of corporate transaction] at hand” because it “arose in the
context of a closely-held entity.” (ECF No. 305 at 7 & n.5.) Indeed it did, and m ost of
the discussion in Edenbaum (as well as in the cases on which Edenbaum relies)
focuses on the policies motivating states to provide minority shareholders in closelyheld entities with forms of relief not normally available in larger entities. See 885 A.2d
at 377–80. But nowhere in Defendants’ motion or reply did they argue that an
oppression claim under Maryland law cannot extend to larger entities. (See ECF No.
288 at 19–24; ECF No. 305 at 6–9.)
Defendants likewise failed to offer such an argument in their pre-arbitration
motion to dismiss. (See ECF No. 29 at 17–19.) Plaintiffs’ response to that motion cited
cases similar to Edenbaum (ECF No. 40 at 30–31), one of which Defendants’ reply
distinguished—again, in a footnote—by quoting language from the case showing that it
arose in the closely-held context (ECF No. 51 at 18 n.10). But Defendants surprisingly
did not then go on to point out that Archstone was not a closely held entity. Rather,
Defendants took a very different approach, claiming that Plaintiffs’ case “[did] not
remotely suggest that it is majority oppression to approve a transaction in compliance
with a provision in the Declaration of Trust authorizing the majority unitholder to
approve a merger for specified consideration.” (Id.)
The question of whether an oppression claim can apply to a non-closely held
entity is not something to be addressed only by way of oblique distinction in a reply brief
footnote. Indeed, it would seem to be an obvious and primary argument. But in eight
years of litigation, Defendants have never put forth that argument and have certainly
forfeited it by this point. Given the absence of such an argument, and the absence of
any argument contesting the “reasonable expectations” requirement stated in
Edenbaum and proffered by Plaintiffs, this Court adopted that requirement when
resolving Defendants’ motion to dismiss the Second Amended Complaint. (ECF No.
312 at 13.)
Edenbaum can indeed be read as requiring individualized inquiry into each
minority shareholder’s expectations, but Edenbaum also suggests that a shareholder
agreement is evidence of the minority shareholder’s expectations. See Edenbaum, 885
A.2d at 379 (discussing minority shareholder’s trial testimony regarding her “expectation
that she would be employed by the corporation, share in corporate earnings, and have
a place in corporate management,” but noting that “her expectations were memorialized
in the . . . shareholders’ agreement”). More importantly, however, the New York case
from which Edenbaum largely derived the contours of “reasonable expectations,” see
id. at 378–79, looks to what the majority knew or should have known regarding the
minority’s expectations. See Matter of Kemp & Beatley, Inc., 473 N.E.2d 1173, 1179
(N.Y. 1984). A North Dakota case cited approvingly by Edenbaum, see 885 A.2d at
378, adopts the New York approach. Balvik v. Sylvester, 411 N.W.2d 383, 387 (N.D.
1987). And a North Carolina case, also cited approvingly in Edenbaum, see 885 A.2d
at 378, reaches the same conclusion through its own reasoning. See Meiselman v.
Meiselman, 307 S.E.2d 551, 563 (N.C. 1983) (“In order f or plaintiff’s expectations to be
reasonable, they must be known to or assumed by the other shareholders and
concurred in by them. . . . Only expectations embodied in understandings, express or
implied, among the participants should be recognized by the court.”).
In this case, given the size of the minority (800+ Unitholders, see ECF No. 434
at 9), the majority’s understanding of the minority’s expectations would naturally flow
mostly, perhaps entirely, from the Declaration of Trust and its connected agreements.
Thus, class certification remains appropriate with respect to liability on Plaintiffs’
fiduciary duty claim.
Turning to the breach of contract claim, Defendants argue that Plaintiffs’ claim
turns on, among other things, proving that they were “adversely affected” by
Defendants’ actions. (ECF No. 440 at 7–8; see also ECF No. 413 at 51–52.)
Defendants do not specify precisely where they derive the “adversely affected”
requirement or how it relates to the elements of a breach of contract claim. Plaintiffs
suggest that Defendants may be referring to the Declaration of Trust, Annex A, § 12.4.
(ECF No. 447 at 7–8.) That section states, in pertinent part:
Notwithstanding anything in this Article 12 to the contrary,
this Agreement shall not be amended with respect to any
Unitholder adversely affected thereby without the approval of
such Unitholder, if such amendment would [trigger certain
specified consequences]. This Section 12.4 does not
require unanimous approval of all Unitholders adversely
affected unless the amendment is to be effective against all
Unitholders adversely affected.
(ECF No. 397-32 at 73.)
To the extent this language makes “adversely affected” an element of Plaintiffs’
breach of contract claim (and the Court does not so hold), it would appear to duplicate
the damages element. Or in any event, Defendants are tellingly silent on how
“adversely affected” would fit anywhere other than the damages element. The Court
denied class certification on the question of damages. (ECF No. 434 at 25.) Class
certification on the liability elements of breach of contract therefore remains
For the reasons set forth above, Defendants’ Motion to Reconsider (ECF No.
440) is DENIED.
Dated this 30th day of October, 2015.
BY THE COURT:
William J. Martínez
United States District Judge
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