TASEKO MINES LIMITED v. RAGING RIVER CAPITAL LP et al

Filing 44

MEMORANDUM OPINION to the Order granting in part and denying in part Defendants' Motion to Dismiss. Signed by Judge Gladys Kessler on 4/26/16. (CL)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
)

TASEKO MINES Ltd.,

)
)

Plaintiff,

)
)

v.

Civil Action No. 16-390 (GK)

)
)

RAGING RIVER CAPITAL, et al., )
)

Defendants.

)

~~~---~~~~~~~~~~~->
MEMORDANDUM OPINION

Plaintiff Taseko Mines Limited

( "Taseko" or "the Company")

brings this action against Raging River Capital LP, Raging River
Capital GP LLC, Granite Creek Partners, LLC, Westwood Capital LLC,
Paul M.

Blythe Mining Associates Inc.,

LLC,

Paul

Mark

Radzik

("Lee")

Blythe

("Blythe"),

( "Radzik") ,

(collectively

Section 13 (d)

Jonathan G. Lee Partners

Nathan Milikowsky

Henry

Park

"Defendants"),

("Park")

("Milikowsky"),

and

alleging

Jonathan

Lee

violations

of

of the Securities Exchange Act of 1934

("Exchange

This matter is before the Court on Defendants'

Motion to

Act").

Dismiss ("Motion") [Dkt. No. 28]. Upon consideration of the Motion,
Opposition

[Dkt.

record herein,

No.

34],

Reply

[Dkt.

No.

36],

and the entire

and for the reasons set forth below,

shall be granted in part and denied in part.

1

the Motion

I .

Background
A.

Factual Overviewl

Taseko is a Canadian-based mining company whose shares are
traded on both the NYSE MKT and the Toronto Stock Exchange. Amended
Complaint 'II 2 ("Am. Compl. ")

[ Dkt. No. 13] . Defendant Raging River

Capital LP, a Delaware limited partnership, was formed in December
2015 in order to acquire Taseko common shares. Id. 'II 16. Defendant
Raging River Capital GP LLC,
River Capital LP.

Id.

'II 1 7.

is the General Partner for Raging
Defendants Granite Creek Partners,

LLC, Westwood Capital LLC, Paul M. Blythe Mining Associates Inc.,
and Nathan Milikowsky are Managing Members of Raging River Capital
GP LLC. Id. 'II'II 18-20, 23. Defendant Jonathan G. Lee Partners LLC
is a Member of Raging River Capital GP LLC. Id. 'II 21. Defendants
Paul Blythe, Mark Radzik,

and Henry Park have been nominated by

Defendants for seats on Taseko's Board. Id. 'II'II 22, 24-25.

Radzik

is also the Managing ·Partner of Granite Creek Partners, LLC, and
Park is the Chief Investment Officer and Principal of Westwood
Capital LLC. Id. 'II'II 24-25. Defendant Jonathan Lee is the President

1

For purposes of ruling on a motion to dismiss, the factual
allegations of the complaint must be presumed to be true and
liberally construed in favor of the plaintiff. Aktieselskabet AF
21. November 2001 v. Fame Jeans Inc., 525 F.3d 8, 15 (D.C. Cir.
2008); Shear v. Nat'l Rifle Ass'n of Am., 606 F.2d 1251, 1253 (D.C.
Cir. 1979). Therefore, the facts set forth herein are taken from
Plaintiff's Complaint [Dkt. No. 1-2].
2

of Jonathan G. Lee Partners LLC and a Limited Partner of Raging
River Capital LP. Id.

~

26.

In January 2016, Defendants acquired more than 5% of Taseko
common shares

("Taseko shares")

and disclosed their acquisitions

of shares by filing a Schedule 13D on January 13,
13D"), as required by the Exchange Act. Id.

~

2016

("First

5. In December 2015

and January and February 2016, Defendants acquired Taseko senior
notes due in 2019

("Notes").

Am.

Compl.

~

38.

During that same

time period, Raging River Capital 2 LLC also acquired Taseko senior
notes due in 2019 ("Additional Notes"). Opp'n at 26.
Shortly after acquiring their shares,
their

rights

Columbia)

under

("BCBCA")

2

the

Business

Defendants exercised

Corporations

Act

(British

to demand that Taseko convene a shareholder

meeting to vote on the removal of three current Taseko directors
and the addition of four new directors nominated by Defendants.
Id.

The shareholder meeting is currently scheduled for May 10,

2016.
On February 26, 2016, Taseko filed a Complaint [Dkt. No. 1]
in this matter,

alleging that the

First 13D failed to include

information required by§ 13(d) of the Exchange Act and is false
and misleading. In response, Defendants filed an amended Schedule

2

Corporations in Canada can choose to incorporate federally
under the Canada Business Corporations Act ("CBCA"), RSC 1985,
c C-44 (Can.), or provincially under a province's similar law,
such as the BCBCA, SBC 2002, c 57 (Can) .
3

13D on March 9,

2016

("First Amended 13D"),

which included the

original Complaint as an exhibit. See First Amended 13D, Exhibit
2 to Mot.

[Dkt. No.

[Dkt.

13].

No.

28-2]; Amended Complaint

On March

21,

2016,

Plaintiff

("Am. Compl.")
filed

<JI

6

an Amended

Complaint, claiming that the First Amended 13D only cured some of
the issues it had raised and that Defendants' disclosures remain
materially deficient. Am.

Compl.

<JI

6. On March 28,

2016,

Raging

River filed a second amended Schedule 13D ("Second Amended 13D")·.
Opp'n at 4.
In the midst of these actions, Taseko filed a Motion to Lift
Stay and Expedite Discovery on March 14, 2016
anticipation

of

Defendants'

Motion

to

[Dkt. No.
In

Dismiss.

12],

in

private

securities actions, the Private Securities Litigation Reform Act
of 1995

("PSLRA") imposes an automatic stay of all discovery and

other proceedings pending a motion to dismiss, subject to certain
exceptions. 15 U.S.C.

§

78u-4 (b) (3) (B). Taseko expressed its need

for limited discovery on certain issues to support its planned
preliminary injunction motion, and indicated that it would suffer
prejudice if the stay were not lifted and discovery expedited.
Motion to Lift Stay at 2-3. This Court granted the Motion to Lift
Stay for

purposes

of

limited discovery on April

4,

2016.

See

Memorandum Order [Dkt. No. 33].
After

Defendants

filed the

Second Amended 13D,

acknowledged that the filing mooted some of the
4

Plaintiffs

issues

it had

raised.

Specifically,

disclosures

with

Taseko

respect

is

to

no

longer

Defendants'

seeking
alleged

corrective
affirmative

misrepresentations nor is it seeking disclosure of "undisclosed
groups"

in

light

of

Defendants'

representation

that

no

such

additional groups exist. Opp'n at 13. Taseko is still seeking the
following information that it believes Defendants are required to
disclose:
1.

The amount of funds provided by each limited partner
of Raging River Capital LP for the purchase of Taseko
shares and Notes;

2.

The purpose for which Defendants acquired the Taseko
Notes;

3.

All contracts, arrangements, understandings and/or
relationships between Defendants and other persons with
respect to any Taseko securities.

Id. On April 15, 2016, the same day Defendants filed their Reply
in support of the present Motion to Dismiss,

Defendants filed a

Third Amended Schedule 13D ("Third Amended 13D"). See Third Amended
13D, Exhibit A to Reply [Dkt. No. 36-2]. Defendants argue that the
Third Amended 13D addresses all of Taseko's remaining issues. Reply
at 1-2.
B.

Securities Exchange Act of 1934

Section 13(d) of the Exchange Act mandates that "any person"
who becomes "directly or indirectly the beneficial owner of more
than

5

per

corporation

centum"
must

of

file

a
a

class

of

statement

5

securities
setting

of

an

forth

issuing
certain

information with the SEC and send the statement to the

issuer

within 10 days after such acquisition. 15 U.S.C. § 78m(d). "Person"
is not limited just to individuals; the. Exchange Act states that
"when two or more persons act as a .

group for the purpose of

acquiring, holding, or disposing of securities of an issuer, such
syndicate or group shall be deemed a 'personj for the purposes of
this subsection." 15 U.S.C.

§ 78m(d) (3). The SEC has prescribed

'

Schedule 130 as the official form for compliance with§ 13(d) of
the Exchange Act. 17 C.F.R. § 240.13d-101.
Under the Exchange Act,

the Schedule 130 shall contain the

following information:
(A)
the background,
and identity,
residence,
and
citizenship of, and the nature of such beneficial
ownership by, such person and all other persons by whom
or on whose behalf the purchases have been or are to be
effected;
(B) the source and amount of the funds or other
consideration used or to be used in making the purchases,
and if any part of the purchase price is represented or
is to be represented by funds or other consideration
borrowed or otherwise obtained for the purpose of
acquiring,
holding,
or
trading
such
security,
a
description of the transaction and the names of the
parties thereto, except that where a source of funds is
a loan made in the ordinary course of business by a bank,
as defined in section 78c (a) ( 6) of this title, if the
person filing such statement so requests, the name of
the bank shall not be made available to the public;
(C) if the purpose of the purchases or prospective
purchases is to acquire control of the business of the
issuer of the securities, any plans or proposals which
such persons may have to liquidate such issuer, to sell
its assets to or merge it with any other persons, or to

6

make any other major change in its business or corporate
structure;
(D) the number of shares of such security which are
beneficially owned, and the number of shares concerning
which there is a right to acquire,
directly or
indirectly, by (i) such person, and (ii) by each
associate of such person,
giving the background,
identity,
residence,
and citizenship of each such
associate; and
(E) information as to any contracts, arrangements, or
understandings with any person with respect to any
securities of the issuer, including but not limited to
transfer of any of the securities, joint ventures, loan
or option arrangements, puts or calls, guaranties of
loans, guaranties against loss or guaranties of profits,
division of losses or profits, or the giving or
withholding of proxies, naming the persons with whom
such contracts, arrangements, or understandings have
been entered into, and giving the details thereof.
15 U.S.C. 78m(d) (1).
II.

Legal Standard
A.

Standard of Review Under Fed. R. Civ. P. 12(b) (6)

To survive a motion to dismiss under Rule 12(b) (6) for failure
to state a claim upon which relief can be granted,

a plaintiff

need only plead "enough facts to state a claim to relief that is
plausible on its face" and to "nudge[ ] [his or her] claims across
the line from conceivable to plausible." Bell Atlantic Corp.

v.

Twombly, 550 U.S. 544, 570 (2007). "[O]nce a claim has been stated
adequately,

it

may

be

supported

by

showing

any

set

of

facts

consistent with the allegations in the complaint." Id. at 563.
Under the Twombly standard,

a "court deciding a motion to

dismiss must not make any judgment about the probability of the
7

plaintiffs' success .

[,] must assume all the allegations in

the complaint are true

(even if doubtful in fact)

[,

and]

must give the plaintiff the benefit of all reasonable inferences
derived from the facts alleged." Aktieselskabet AF 21.

November

2001 v. Fame Jeans Inc., 525 F.3d 8, 17 (D.C. Cir. 2008)

(internal

quotation

marks

and

citations

omitted).

The

court

shall

not,

however, accept as true "legal conclusions or inferences that are
unsupported by the facts alleged."
Inv.

in

U.S.,

omitted).

F.3d

Furthermore,

assertion[s]'
suffice.

758

devoid of

Ashcroft

v.

a

315

(D.C.

complaint

Cir.

2014)

(citation

"tenders

which

'naked

'further factual enhancement'" will not

Iqbal,

Twombly, 550 U.S. at 557)
B.

296,

Ralls Corp. v. Comm. on Foreign

556 U.S.

662,

678

(2009)

(quoting

(alteration in Iqbal).

PLSRA

"As a check against abusive litigation in private securities
fraud actions,

the Private Securities Litigation Reform Act of

1995 (PSLRA) includes exacting pleading requirements," beyond the
requirements of Rule 12 (b) (6).

Tellabs,

Inc.

v.

Makor Issues

&

Rights, Ltd., 551 U.S. 308, 308 (2007). The PSLRA requires that a
plaintiff asserting a violation of the
based

on

a

false

or

misleading

federal

statement

must

securities

laws

"specify

each

statement alleged to have been misleading, the reason or reasons
why the statement is misleading,

and if an allegation regarding

the statement or omission is made on information and belief,
8

state with particularity all facts on which that belief is formed."
15 U.S.C.

§

Put

78u-4 (b) (1).

differently,

the

Court

"must

ascertain

whether

the

complaint states sufficient facts to permit a reasonable person to
find that the plaintiff satisfied this element of his claim-that
the defendant made a
Ret.

false or misleading statement." Teachers'

Sys. of Los Angeles v. Hunter,

2007).

In evaluating the facts,

477 F.3d 162,

173

(4th Cir.

the Court should consider:

number and level of detail of the

facts;

"the

the plausibility and

coherence of the facts; whether sources of the facts are disclosed
and

the

apparent

reliability

of

those

sources;

and

any

other

criteria that inform how well the facts support the plaintiff's
allegation

that

defendant's

statements

omissions

or

were

misleading." Id. at 174.
III. Analysis
A.

As

The Amended Complaint Is Subject to the PSLRA's Pleading
Requirements
an

Complaint

initial
is

not

matter,

subject

to

Taseko
the

contends

PSLRA

that

pleading

its

Amended

requirements,

arguing that the pleading requirements apply only to "securities
fraud actions." Opp' n at 2.

The basis for Taseko' s

that the section heading for 15 U.S.C.
pleading requirements)

reads,

§

78u-4(b)

argument is

(the heightened

"Requirements for securities fraud

actions," and Taseko contends that this is _not a fraud action. Id.

9

The plain language of the statute suggests otherwise.

Our

Court of Appeals has consistently held that "[t]he plain meaning
of a statute cannot be limited by its title." Nat'l Ctr. for Mfg.
Scis. v. Dep't of Def., 199 F.3d 507, 511 (D.C. Cir. 2000)

(citing

Pennsylvania Dep't of Corrections v. Yeskey, 524 U.S. 206 (1998)).
Taseko's claim is based on 15 U.S.C. 78m(d)

(Section 13(d) of

the Exchange Act), which is found in the same chapter as .Section
78u-4(b). Section 78u-4(b)
requirements

apply

to

specifically states that its pleading

"any

private

action

arising

under

this

chapter in which the plaintiff alleges that the defendant (A) made
an untrue statement of a material fact; or (B) omitted to state a
material fact necessary in order to make the statements made, in
the

light

of

the

circumstances

in

misleading." 15 U.S.C. § 78u-4 (b) (1)

which

they

were

made,

not

(emphasis added). With such

clear statutory language, it is difficult to see how the PLSRA's
heightened pleading requirements could not apply.
In addition to the pleading requirements,

Section 78u-4(b)

also contains the PSLRA's automatic stay of discovery provisions,
which Taseko did not dispute were applicable in this instance. See
Motion to Lift Stay at 8.

In other words,

even though both the

pleading requirements and the stay provisions are in the section
titled "Requirements for securities fraud actions," Taseko argues
that only the stay provisions are applicable to the case at hand.

10

15 U.S. C.

§

7 Bu-4 (b) .

Such inconsistency within the statute is

highly unlikely.
For these

reasons,

the

Court

finds

that

Taseko' s

Amended

Complaint is subject to the heightened pleading requirements of
the PSLRA. 3
B.

Plaintiff Has Sufficiently Stated a Claim

Defendants argue that Taseko has not pled facts sufficient to
satisfy the heightened pleading requirements of the

PSLRA.

Mot.

additional

at

11.

They

argue

that

mere

speculation

that

See

information might exist which should have been disclosed is not
sufficient to meet the PSLRA pleading standards. Id. at 12. With
regard to Taseko's allegations of false or misleading

statements~

Defendants contend that Taseko must demonstrate with specificity
why and how they are false or misleading. Id.
1.

In

its

Specific Sources of Funds

Amended

Complaint,

Taseko

alleges

that

Defendants

failed to disclose "the specific source of funds provided by each

3

Defendants allege that the Amended Complaint must also "state
with particularity facts giving rise to a strong inference that
the defendant acted with the required state of mind." Mot. at 12
(quoting 15 U.S.C. § 78u-4 (b) (2) (A)). This is incorrect. The
scienter requirement applies only to actions "in which the
plaintiff may recover money damages," 15 U.S. C. § 7 Bu-4 (b) ( 2) (A) ;
see also SEC v. e-Smart Technologies, Inc., 82 F. Supp. 3d 97, 104
( D. D. C. 2015) ( "scienter is unnecessary to establish a violation
of Section 13(d) (l)"). The Amended Complaint does not seek money
damages. See Am. Compl. at 20-21. Accordingly, there is no scienter
requirement.
11

limited partner of Raging River Capital LP" to purchase Taseko
shares and notes. Am. Compl.

35. The First Amended 13D states,

~

in response to question number

4,

"Source of Funds," that the

acquisitions were funded out of Raging River Capital LP's working
capital (abbreviated as "WC" per the Schedule 13D instructions) .
First Amended 13D at 2.
Al though Defendants
required,

Mot.

at

14,

contributions of each

contend that no further

they nonetheless
[of]

disclosure is

disclosed

"the

capital

the limited partners to Raging River

[Capital LP]" "for the purposes of purchasing the Common Shares
and the Notes" in the Third Amended 13D. Third Amended 13D at 2.
Attached to the Third Amended 13D is a chart listing the capital
contributions of each of the partners of Raging River LP. Third
Amended 13D at 5 (Exhibit 99.11). Defendants argue that Taseko's
request for this information is now moot. Reply at 8-9.
Given

Defendants'

disclosure,

the

Court

need

not

decide

whether such disclosure was required by Section 13D. Taseko asked
for "[t]he amount of funds provided by each limited partner of
Raging River Capital LP for the purchase of Taseko shares and
Notes,"

Opp'n

at

13,

which

Defendants

have

now

provided.

Accordingly, Taseko's claim is moot and will be dismissed.

12

2.

Purpose of the Acquisition

Taseko's next claim is that Defendants have not sufficiently
stated the purpose for which they acquired the Taseko Notes,

as

required by Item 4 of Schedule 13D.
In its Opp'n,

Taseko quotes a portion of Defendants'

First

Amended 13D, discussing the purchases of the Notes:
In December 2015 and January and February 2016, the
Reporting Persons acquired the Issuer's 7.75% senior
notes due 2019 with an aggregate cost of $6,040,323
(excluding accrued interest)
(the "Notes") .
In
addition to the Notes acquired by the Reporting
Persons, Raging River Capital 2 LLC ("RC 2 LLC"), a
Delaware limited liability company established solely
as an investment vehicle for Notes of the Issuer,
acquired in December 2015 and February 2016, the
Issuer's 7.75% senior notes due 2019 with an
aggregate cost of $2,873,737
(excluding accrued
interest) (th~ "Additional Notes") .
Opp'n at 26

(quoting First Amended 13D at 13). Taseko points to

this quote as evidence of Defendants' failure to state a purpose
for the purchase of the Notes. Defendants point out that the quote
omits a later portion of the same paragraph in which Defendants
state that Raging River Capital 2 LLC acquired the Additional Notes
"for investment purposes because it believed that they represented
an attractive investment opportunity." First Amended 13D at 13.
What Defendants overlook though,

is that this only provides an

explanation for the purpose of the Additional Notes acquired by
Raging River Capital 2 LLC

(not a party to this case),

Notes acquired by Defendants.

13

not the

In the Third Amended 13D, Defendants state "that they acquired
the Notes for investment purposes because they believed the Notes
represented an attractive investment opportunity" and that they
"also intend to pursue a concerned shareholder campaign in respect
of

the

Issuer"

Defendants'

Third

purpose

Amended

in

13D

acquiring

at
the

2.

This

Taseko

description
Notes

is

of

nearly

identical to its stated purpose for acquiring the Taseko shares,
and Taseko does not dispute the adequacy of that disclosure. See
Opp'n at 26-27. Therefore, the Court finds that the Third Amended
13D has mooted Taseko's claim for information regarding the purpose
for which Defendants acquired the Notes. As such, the Court need
not

address

requires

the

the

parties'

di$pute

disclosure of this

as

to

whether

Schedule

information and this

13D

claim is

dismissed.
3.

Alleged Failure to Disclose Agreements

Next, Taseko alleges that Defendants have not disclosed all
of

their

agreements

securities. Am Compl.

and
~~

arrangements

with

respect

to

Taseko

47-52; Opp'n at 27. In particular, Taseko

alleges that "there are almost certainly undisclosed agreements or

14

.
understandings" involving Randy Davenport 4 and/ or Jonathan Lee. 5
Opp' n at

27-28.

Taseko also alleges

the

likely existence of a

contract with Wanxiang America, the sole investor in Raging River
Capital 2 LLC,

concerning the possible sale of a copper mining

asset owned by Taseko. Id. at 10-11, 28. Taseko infers this from
Wanxiang's involvement in Raging River Capital 2 LLC, as well as
Wanxiang's past interest in purchasing the copper mine.
Item 6 of Schedule 13D requires the filer to "[d]escribe any
contracts, arrangements, understandings or relationships (legal or
otherwise)

among the

[filers]

and between such persons and any

person with respect to any securities of the issuer .
C.F.R.

§

,, 1 7

240.13d-101.

Defendants argue that Plaintiff has failed to allege facts
showing that any of the Defendants have an undisclosed agreement
with "any other stockholder beside the Reporting Persons to 'act
together for the purpose of acquiring, holding, voting or disposing
of equity securities' of Taseko, which is required for a

'group'

to exist (or that there is any requirement to disclose 'contracts,

4

Mr. Davenport is one of Raging River's nominees to Taseko's Board
of Directors and his company, RL Davenport Resources, Inc., is a
limited partner in Raging River Capital LP. First Amended 13D at
13; Opp'n at 27.
5

Defendant Lee allegedly "orchestrated the Defendants' purchases
of Taseko common shares from a Taseko insider." Opp'n at 28. Lee
is also a limited partner in Raging River Capital LP and his
company, Jonathan G. Lee Partners LLC, is a member of Raging River
Capital GP LLC. First Amended 13D at 14; Opp'n at 28.
15

arrangements,

understandings

and/or

between

relationships

Defendants and such other Taseko shareholders' when a 'group' does
not exist[)]." Mot. at 17 (quoting 17 C.F.R.
Item

is

6

broad

and,

§

240.13d-5(b) (1)

contrary

6 ).

Defendants'

to

characterization, its requirements stand independent of whether or
not a "group" exists. Item 6 clearly encompasses agreements between
filers

"and any person with

issuer." Id.

respect

to

any

securities

of

the

(emphasis added) . Not all parties to the agreements

need to be members of a "group" and nothing in Item 6 suggests
that its requirements are contingent on the existence of a "group."
Defendants

argue

that

they

have

satisfied

the

reporting

requirements of the Exchange Act and mooted Plaintiff's claim by
attaching Taseko's complaints to their Schedule 13Ds. Defendants
claim they are "not required to adrni t
13D that

[they]

Cartica Mgmt.,

dispute []
LLC v.

allegations in a Schedule

in good faith."

Corpbanca,

S.A.,

Mot.

50 F.

at

Supp.

15

(quoting

3d 477,

494

(S.D.N.Y. 2014)); Reply at 12. When "the record demonstrates that
there is a dispute as to the facts, the law requires only that the
disputed facts and possible outcomes be disclosed." Cartica Mgmt.,

6

The statute reads: "When two or more persons agree to act together
for the purpose of acquiring, holding, voting or disposing of
equity securities of an issuer, the group formed thereby shall be
deemed to have acquired beneficial ownership, for purposes of
sections 13 ( d)
of all equity securities of that issuer
beneficially owned by any such persons." 17 C.F.R. § 240.13d5(b)(l).
16

50 F. Supp. 3d at 495-96 (quoting Avnet, Inc. v. Scope Indus., 499
F. Supp. 1121, 1125-26 (S.D.N.Y.1980)).
Defendants "unequivocally state that they have disclosed all
contracts, arrangements, understandings and relationships that are
required

to

be

disclosed

by

Rule

13(d)

promulgated thereunder." Reply at 11.

and

the

regulations

Defendants continue that,

because there is a dispute as to the fact of the existence of any
such agreements, they have satisfied their reporting requirements
by disclosing Plaintiff's allegations. Reply at 12-13.
Unfortunately, Defendants' "unequivocal" statement is unclear
as

to

whether

the

specifically the

dispute

requirements

relates
of Rule

to

facts

13 ( d) .

or

Given

the

law

Defendants'

incorrectly narrow interpretation of Item 6, Defendants' statement
assures the Court only that they believe they are not required to
disclose any additional agreements under their interpretation of
the

law,

not

that

no

such

agreements

exist.

Accordingly,

Defendants' attachment of the Amended Complaint to their Schedule
13D disclosures does not discharge their Section 13D obligations
on this issue.
The Court finds that Plaintiff has sufficiently pled facts
regarding

possible

undisclosed

agreements

involving

Randy

Davenport, Jonathan Lee, and Wanxiang America to survive a motion
to dismiss.
coherent,

Plaintiff's allegations are detailed, plausible, and

and when considered in light of Defendants'
17

continued

reticence to disclose information,
the

filing

parties, 7

the

Court

including contracts involving
finds

that

Plaintiff

has

sufficiently stated facts that would "permit a reasonable person
to find that the plaintiff satisfied this element of his claimthat the defendant made a false or misleading statement." Hunter,
477 F.3d at 173. Defendants' request for dismissal of this claim
will be denied.
4.

Alleged Failure to Include Jonathan Lee and
Jonathan G. Lee Partners LLC as Reporting Persons

Taseko's final remaining claim is that, based on "Mr. Lee's
role in orchestrating the Defendant's purchase of Taseko common
shares," he and his company should have been included as Schedule
13D reporting persons. Opp'n at 30; Arn. Compl.

~~

52, 62-42.

Under the Exchange Act, as noted previously, all beneficial
owners of more than 5% of a security must file a Schedule 130. 17
C.F.R. § 240.13d-1. For purposes of§ 13D, a beneficial owner is:
any person who, directly or indirectly, through any
contract, arrangement, understanding, relationship, or
otherwise has or shares:
Voting power which includes the power to
vote, or to direct the voting of, such security;
and/or,
(1)

7

For example, the First 13D did not include the partnership
agreement for Raging River Capital LP, al though the agreement
explicitly states that its principal objective is to effect changes
in Taseko's board of directors by acquiring common shares and bonds
of Taseko and carrying out a concerned shareholder campaign. See
First 13D; First Amended 13D Exhibit 99.3 at 3.1
18

(2) Investment power which includes the power to
dispose, or to direct the disposition of, such
security.
17 C.F.R.

240.13d-3. Although Defendants have stated that

§

Jonathan Lee
Partners")
Mot.

("Lee")

and Jonathan G. Lee Partners LLC

("Lee

do "not have voting power or investment power,"

at 18,

Plaintiff argues that because Lee is a limited

partner of Raging River Capital,

LP and Lee Partners is a

member of Raging R.iver Capital GP LLC, "[a] t the very least,
it

is

not

clear,

based

on

Mr.

Lee's

investments

and

involvements in those special-purpose entities, that he does
not share power over voting and/or disposition of the Taseko
common shares." Opp'n at 31-32.
Such an allegation is not sufficient to meet the pleading
requirements of the PSLRA. Plaintiff does not plead specific
facts to support its allegation that Lee and Lee Partners are
beneficial owners,

but instead alleges that it is merely a

possibility that Lee and Lee Partners are beneficial owners.
Next,

Plaintiff

argues

that,

even

influence the voting or disposition of

if Mr.

Lee

cannot

Defendants'

Taseko

shares, he is still required to join as a reporting person on
the Schedule 13D "based on his role in purchasing the Taseko
common

shares."

Opp' n

at

32.

As

discussed

previously,

a

"group" for purposes of Section 13D is formed when "two or
more

persons

agree

to

act

together
19

for

the

purpose

of

acquiring, holding, voting or disposing of equity securities
of an issuer." 1 7 C. F. R.

240 .13d-5. Members of the group

§

are considered reporting persons. 15 U.S.C.

78m(d) (3).

§

Taseko alleges that Lee initiated and participated in
the negotiations and acquisitions of the Taseko shares, and
is therefore a member of the group. Opp'n at 32. Defendants
point to case law holding that a person must have a beneficial
ownership interest in order to be considered a member of the
group. See Hemipherx Biopharma, Inc. v. Johannesburg Consol.
Invs., 553 F.3d 1351, 1363-64 (11th Cir. 2008)

(holding that

a person must actually own a beneficial interest in shares in
order to incur reporting liabilities under section 13(d));
Rosenberg v. XM Ventures,
("based

upon

the

274 F.3d 137,

statutory

and

147

(3d Cir.

regulatory

text,

2001)

relevant

legislative history, and caselaw from our sister circuits, we
conclude that . . . each member of a section 13(d) group must
hold beneficial ownership of the shares of the issuing entity
prior to becoming a section 13(d) group member").
At most,

there

is

a

disputed

factual

question as

to

whether Lee was part of the "group." Defendants once again
argue that,

because there is a genuine factual dispute and

they have "disclosed all material facts regarding Taseko's
position on this
Avnet,

issue," the

claim is moot.

Reply at

16;

499 F. Supp. at 1125 (the "purpose of the disclosure
20

,,

provisions of the securities laws is to see to it that the
[shareholder]

discloses to the investor the facts as truly

believed

the

by

discloser.

When,

as

here,

the

record

demonstrates that there is a dispute as to the facts, the law
requires

only

that

the

disputed

facts

and

the

possible

outcomes be disclosed") .
Plaintiffs have not sufficiently alleged facts to show
that Lee or Lee Partners were required to file Schedule 13Ds.
Even if they had,

to

the

genuine dispute as to the

extent
facts

there would have been a
of Lee and Lee

Partners'

status as beneficial owners or members of a group, Defendants
have made adequate disclosures in their Schedule 13D filings,
which include Taseko's allegations.
Accordingly,

Defendants'

motion

See First Amended 13D.

will

be

granted

and

this

claim will be dismissed.
IV.

Conclusion

For

all

of

the

foregoing

reasons,

Defendants'

Dismiss is granted in part and denied in part.

Motion

An Order shall

accompany this Memorandum Opinion.

April 26, 2016

Gli:i.dys Ke ler
United States District Judge

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