Rubenstein v. Liberty Media Corp. et al
OPINION re: 39 MOTION for Attorney Fees filed by Liberty Media Corp. The motion of Liberty for sanctions in the form of attorney's fees is denied. The motion of the Plaintiff for time to appeal is granted. It is so ordered. (Signed by Judge Robert W. Sweet on 9/22/2017) (anc)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
- -------------------------------- - ---------x
AARON RUBENSTEIN ,
16 Civ . 7283
LIVE NATION ENTERTAINMENT ,
Nominal Defendant ,
- and LIBERTY MEDIA CORP. ,
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A P P E A RA N C E S :
Attorneys for Plaintiff
MIRIAM TAUBER LAW PLLC
885 Park Avenue 2A
New York , NY 10075
By : Miriam Tauber , Esq .
LAW OFFICES OF DAVID LOPEZ
P.O. Box 323
171 Edge of Woods Road
Southampton , NY 11968
By : David Lopez , Esq .
Attorneys for Defendant
Liberty Media Corp .
BAKER BOTTS LLP
30 Rockefeller Plaza
New York , NY 10112
By : Douglas W. Henkin , Esq .
Ri chard B. Harper , Esq .
2001 Ross Avenue , Suite 600
Dallas , Texas 75201 - 2980
By : Thomas E . O' Brien
98 San Jacinto Blvd ., Suite 1500
Austin , Texas 78701
By : Mysha Lubke , Esq .
Attorneys for Nominal Defendant
Live Nation Entertainment
LATHAM & WATKINS , LLP
140 Scott Drive
Menlo Park , CA 94025
By : Hilary H. Mattis
Robert A. Koenig , Esq .
885 Third Avenue
New York , NY 10022
By : Jason C. Hegt , Esq .
By letter of July 5 , 2017 treated as a motion , the
defendant Liberty Media Corporation ("Liberty" or the
"Defendant " ) has moved pursuant to Federal Rule of Civil
Procedure ll(b) and the Private Securities Litigation Reform Act
(the " PSLRA" ) , 15 U. S . C.
78u - 4(c) , for findings regarding and
complia nce with Rule ll(b) and the imposition of sanctions in
the form of attorneys '
fees to be imposed on the plaintiff Aa r on
Rubenstein (" Rubenstein" or the " Plaintiff " ) . The Plaintiff has
also moved by l etter dated July 19 , 2017 t o extend his time to
appeal until thirty days following the Court ' s Order resolving
this motion .
Based on the conclusions set forth below , Liberty ' s
motion for findings and sanctions is denied , and Plaintiff ' s
motion to extend the time to appeal is granted .
I. Prior Proceedings
On September 19, 20 16, the Plaintiff filed his
complaint alleging a short swing profit by Liberty in violation
of Section 16(b) of the Securities Exc hange Act of 1934 . The
motion of Liberty to dismiss the comp l aint was granted by the
op ini on of June 20 , 2017
(the " June 20 Opinion") . See Rubenstein
v . Live Nation Entm ' t , No . 16 CIV . 7283
(RWS) , 20 1 7 WL 2670749 ,
(S . D. N. Y. June 20 , 2017) .
The instant motions were heard and marked fully
submitted on August 2 , 2017 .
The Applicable Standard
Under the PSLRA , "upon final adjudication of the
action , the court shall inc l ude in the record specific findings
regarding comp liance by each party and each attorney .
each requirement of Rule ll(b) of the Federal Rules of Civil
Procedure as to any complaint , responsive pleading , or
dispositive motion. " 15 U.S . C.
78u - 4(c) (1) . This section also
" mandates a court to impose sanctions if it finds a violation of
Rule 11," id ., and creates presumptions in favor of attorney ' s
fees and costs "depending on the severity of the v i olat i on ."
Rabin v . Nasdaq Omx Phlx LLC , No . CV 15-551, 20 1 6 WL 3914031 , at
*1 (E . D. Pa . July 20 , 2016) . Although the PSLRA requires the
Court to assess the conduct of each party and counsel regarding
compliance with Rule 11, it "does not in any way purport to
alter the substantive standards for finding a violation of Rule
11 ." Simon DeBartolo Grp ., L . P . v . Richard E. Jacobs Grp ., Inc. ,
186 F . 3d 157 , 167 (2d Cir . 1999) ; see also Zagami v . Cellceutix
Corp ., No . 15 Civ . 7194
(S . D. N. Y. Mar . 29 , 2017)
(KPF) , 2017 WL 1180923 , at *10 - 11
(noting the distinction between the
"mandat ory sanctions review" required by the PSLRA and
" mandatory sanctions ," which are imposed under the mandatory
PSLRA analysis only if Ru l e 11 is vio l ated) .
Rule 11 imposes on attorneys "an affirmative duty to
conduct a reasonable inquir y into the facts and the law before
filing ," Bus . Guides , Inc . v . Chromatic Commc ' ns Enters ., Inc .,
498 U. S . 533 , 551 (1991) , and "i s targeted at situations ' where
it is patently clear that a c laim has absolutely no chance of
success under the existing precedents , and where no reasonable
argument can be advanced to extend , modify or reverse the law as
it stands .
. "' Stern v . Leucadia Nat . Corp ., 844 F . 2d 997 ,
1005 (2d Cir . 1988)
(quoti ng Eastway Constr . Corp . v . City of
762 F . 2d 243 , 254
(2d Cir. 1985)) ; see also Eastway
Constr . Corp ., 762 F . 2d at 254
("In framing this standard , we do
not intend to stifle the enthusiasm or chill the creativity that
is the very lifebl ood of the law. " ) .
III. The Motion for Findings and Sanctions is Denied
Plaintiff ' s claim in the underlying action was based
on the contention that Liberty's forward purchase of additional
Live Nation stock - none of which was sold within six months of
its acquisition - should be deconstructed and recast as two
separate option contracts to c reate Section 16(b) liability .
Live Nation ' s counsel described Plaintiff's 16(b)
claim as " novel " in the correspondence it submi tted in its
motion to dismiss , and Liberty complained that Plaintiff
attempted to extend the law stated in Chechele v . Sperling,
F . 3d 463 (2d Cir . 2014) . See Def. ' s Br . in Supp . of Mot . for
Attorney ' s Fees Ex . C ., at 2 ; Pl .' s Br . in Opp. of Mot . for
Attorney ' s Fees , 2 .
In its June 20 Opinion this Court noted that
" [a]lthough courts have analyzed Forward Contracts under Section
16 (b) , none has held an insider liable under the statute for
settling a Forward Contract more than six mon t hs after entering
into it. " See Rubenstein , 2017 WL 2670749 , at *3. Further , the
June 20 Opinion conc luded that "[i]n any event , no precedent
supports [Plaintiff's interpretation o f]
requiring] an insider t o reimburse the consideration received
for writing an alleged option instead of the premium received ,"
and that " as Plaintiff concede[d] , the only authority on point
is to the contrary. " See id ., at *6 - 7.
Nonetheless , sanctions are not mandated under Rule 11
and the PSLRA solely in light of Plaintiff ' s claims being
unsupported by precedent . See Fishoff v . Coty Inc ., 634 F . 3d
647 , 654
(2d Cir . 2011) ("The fact that a legal theory is a l ong -
shot does not necessarily mean it is sanctionable ." ). Rather,
"[t]he operative question is whether the argument is frivolous,
i.e., the legal position has ' no chance of success, '
is 'n o reasonable argument to extend , modify or reverse the law
as it stands.' " Id .; see also Simmonds v . Credit Suisse Secs .
(USA) LLC, No . Cl2 - 1937JLR (W.D . Wash. 2013) , Order Denying Mot .
for Attorney ' s Fees (Dkt . #51)
(holding that "Plaintiff's 16(b)
c laim was, to be sure , an invitation to extend the law beyond
its present confines [but nevertheless] , these arguments made
logical sense and presented the court with a legitimate , non frivolous issue to decide.") .
Plaintiff ' s 16(b) claim was based on an alleged
distinction between Liberty ' s "collarless " forward and the
" collared " Pre - Paid Variable Forward Contracts construed by the
Court in Sperling (and its predecessor District Court cases) .
Plaintiff contended that this " collarless " distinction deferred
the effective 16(b) date of Liberty ' s forward from the original
September 4 , 2 014 contract execution date , until the initial
price - fix i ng event on September 28 , 2015 . In its June 20 Opinion
addressing the substantive merits of Plaintiff ' s claim this
Court rejected Plaintiff ' s " collarless " distinction and delayed
16(b) effective forward date under the modified Sperling
analysis Plaintiff proposed . See Rubenstein , 2017 WL 2670749, at
Moreover , the other issues raised by Plaintiff ' s
claim , that both put and call options were embedded within
Liberty ' s contract , were a l leged to have arisen from the
Sperling suggestion as to the default treatmen t of " in the
money " and " out of the money " options , as well as application of
SEC rule 16b-6(d) to forward settlements . See Sperling , 758 F . 3d
(looking to which party " won the bet " ) ; Rubenstein ,
2017 WL 2670749 , at *17-18 . As this Court noted in its June 20
Opinion , the only case directly dealing with this was pending
Second Circuit review. See Olagues v. Icahn , 866 F.3d 70
Cir. 2017) ; Rubenstein, 2017 WL 2670749 , at *19. While the
absence of case law directly supporting Plain tiff ' s claim did
not make for a winning argument , such lack of precedent alone is
not a sufficient basis for imposing Rule 11 sanctions . See
634 F . 3d at 654 ; see also Eastway Const. Corp ., 762
F . 2d at 254 .
The lin e between positions characterized as frivolous
or "l ong - shot" may be difficult to draw , but in this inst ance it
is concluded that the Plaintiff ' s position , though a "longshot ," fell short of frivolity . See Fishoff , 634 F.3d at 654 .
The motion f or mandatory sanctions is denied.
The Motion for an Extension of Time to Appeal is Granted
The Plaintiff has moved by letter to extend the period
of time for Plaintiff to file the Notice of Appeal of the
Court ' s dismissal Order until thirty days from the entry of the
Court ' s disposition of Liberty's motion for attorney 's fees.
The time to appea l the Court ' s dismissal expired July
19 , 2017 , the date on which Plaintiff ' s opposition to the
Liberty sanction motion was due and the date of Plaintiff's
application for an extension of time to appeal . According to the
Plaintiff, in view of the pending sanction motion no decision
had been made with respect to the filing of an appeal .
Pursuant to the Federal Rules o f Civil and Appellate
Procedur e , this Court has discretion to extend the deadline for
filing an appeal "[t o ] run
for al l parties from the entry of
the order disposing of the last such remaining motion
[in cluding a motion] for attorney ' s fees ." See Fed . R . App . P.
4; Fed. R. Civ . P . 54 , 58.
The Plaintiff ' s time to appeal the June 20 Op ini on is
extended twenty days from the date he reof .
V . Conclusion
The motion of Liberty for sanctions in the form of
attorney ' s fees is denied . The motion of the Plaintiff for time
to appeal is granted .
It is so ordered .
New York, NY
U.S.D . J .
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