Smith v. Robbins & Myers Inc et al
Filing
82
ORDER GRANTING DEFENDANTS' MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JURISDICTION (Doc. 78 ) AND DISMISSING THIS CASE FOR LACK OF ARTICLE III STANDING. Signed by Judge Timothy S. Black on 9/22/2014. (mr1)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION
J. ROBERT SMITH, individually and
:
on behalf of all others similarly situated, :
:
Plaintiff,
:
:
vs.
:
:
ROBBINS & MEYERS, INC., et al.,
:
:
Defendants.
:
Case No. 3:12-cv-281
Judge Timothy S. Black
ORDER
GRANTING DEFENDANTS’ MOTION TO DISMISS
FOR LACK OF SUBJECT MATTER JURISDICTION (Doc. 78)
AND DISMISSING THIS CASE FOR LACK OF ARTICLE III STANDING
_____________
This civil action is before the Court on Defendants’ Motion to Dismiss for Lack of
Subject Matter Jurisdiction (Doc. 78) and the parties’ responsive memoranda (Docs. 80,
81). 1 Also pending is Plaintiff’s motion for class certification. (Doc. 77).
I.
BACKGROUND FACTS
Plaintiff J. Robert Smith filed his original complaint on August 17, 2012, seeking
to proceed individually and on behalf of a class of all other R&M shareholders against
1
Defendants include Robbins & Myers, Inc. (“R&M”), Peter C. Wallace, Thomas P. Loftis,
Richard J. Giromini, Stephen F. Kirk, Andrew G. Lampereur, Dale L. Medford, Albert J.
Neupaver, National Oilwell Varco, Inc. (“NOVI”), and Raven Process Corp. (collectively,
“Defendants”).
1
Defendants for breach of fiduciary duty under Ohio law. 2 (Doc. 2). The allegations stem
from a merger agreement between R&M and NOVI announced on August 9, 2012. The
announcement provided that the corporations had “entered into an agreement under
which National OilWell Varco will acquire Robbins & Myers in an all cash transaction
that values Robbins & Myers at approximately $2.5 billion.” (Id. at ¶ 48). As a result,
R&M shareholders were to receive $60.00 per share for each of the approximately 42.4
million outstanding shares. (Id. at ¶¶ 2, 48).
Plaintiff alleged that Defendants, as Directors of R&M, breached their fiduciary
duties to R&M shareholders in approving the agreement. Plaintiff claimed that the
agreement was the result of a fundamentally flawed process and would result in NOVI
acquiring R&M at a discount, thereby preventing R&M shareholders from receiving
adequate value for their shares. (Doc. 2 at ¶¶ 3, 6, 26). Plaintiff further alleged that
Defendants failed to solicit other bids, and that the terms of the agreement effectively
precluded a third party from subsequently making a higher bid commensurate with the
company’s true value. (Id. at ¶¶ 3, 49, 54). The proposed transaction was subject to
approval by two-thirds vote of R&M shareholders, and Plaintiff alleged that Defendants
were withholding information necessary for him and the other shareholders to make an
informed decision on whether to approve the proposed transaction. (Id. at ¶¶ 26, 48, 57,
2
Plaintiff also pled a claim for aiding and abetting claim against NOVI, but withdrew the claim
after Defendants filed their joint motion to dismiss his third amended complaint. (Doc. 64 at 3
n.1). Plaintiff appears to have retroactively withdrawn the claim because his memorandum
contra refers exclusively to the breach of fiduciary duty claim in his original complaint. (Doc. 80
at 8-9).
2
62, 68). Finally, Plaintiff alleged that Defendants engaged in self-dealing by accepting
personal financial benefits in exchange for approving the merger agreement. (Id. at ¶ 26).
The original complaint expressly requested “equitable relief only, specifically to
require R&M’s Board to uphold their [sic] fiduciary duties to the Company’s public
stockholders.” (Doc. 2 at ¶ 8). The original complaint further indicated that Plaintiff
“seeks to enjoin the Proposed Transaction” and “seeks to obtain a non-pecuniary benefit
for the Class in the form of injunctive relief against defendants.” (Id. at ¶¶ at 56, 86).
The prayer for relief “demand[ed] injunctive relief” and sought an injunction to enjoin
the shareholder vote and closing of the transaction, a declaration that Defendants had
breached their fiduciary duties in approving the merger agreement and directing
Defendants to exercise their fiduciary duties to obtain a higher bid, the imposition of a
constructive trust, and “other and further equitable relief.” (Id. at ¶¶ A-H).
Plaintiff sought to proceed on behalf of a class consisting of all R&M shareholders
for the ongoing harm to their interests in the corporation. (Doc. 2 at ¶ 28). The original
complaint provided that Plaintiff “is, and at all times relevant hereto was, a shareholder of
R&M.” (Id. at ¶ 12). Plaintiff filed a first amended complaint on September 25, 2012,
which pled additional claims for violations of federal securities law based on a
Preliminary Proxy Statement filed by R&M on August 31, 2012. (Doc. 13). As required
by the Private Securities Litigation Reform Act (“PSLRA”), Plaintiff provided a sworn
certification that he purchased 100 shares of R&M stock on May 10, 2012 and another
3
100 shares on July 31, 2012, and subsequently sold 100 shares on August 14, 2012. 3
(Doc. 13-1 at ¶ 4). According to this statement, made under penalty of perjury, Plaintiff
owned 100 shares of R&M stock. (Id.) Plaintiff filed a verified second amended
complaint in November 2012, and a verified third amended complaint in March 2013,
each reasserting his continued ownership of R&M shares and now purporting to proceed
derivatively on behalf of R&M. (Docs. 40, 53).
The third amended complaint included new factual allegations related to the filing
of R&M’s Definitive Proxy Statement on November 30, 2012, the shareholder vote
approving the merger on December 27, 2012, and NOVI’s completion of the acquisition
on February 20, 2013. (Doc. 53). Plaintiff demanded damages for the first time.
The Court denied Defendants’ Rule 12(b)(6) motion to dismiss directed to
Plaintiff’s third amended complaint on August 27, 2013. (Doc. 66). With respect to the
class and derivative claims for breach of fiduciary duty set forth in Counts V and VI, the
Court observed that the allegations involved conduct occurring on or before the merger
agreement on August 9, 2012 and that Plaintiff properly asserted a direct claim under
Ohio law. (Id. at 14-15, 22-23). On February 3, 2014, Plaintiff filed a motion to certify a
class consisting of all holders of R&M common stock from August 9, 2012 to February
20, 2013. (Doc. 77-1 at 1).
3
Pursuant to the PSLRA,“[e]ach plaintiff seeking to serve as a representative party on behalf of
a class shall provide a sworn certification, which shall be personally signed by such plaintiff and
filed with the complaint, that – (i) states that the plaintiff has reviewed the complaint and
authorized its filing . . . [and] (iv) sets forth all of the transactions of the plaintiff in the security
that is the subject of the complaint during the class period specified in the complaint.” 15 U.S.C.
§ 78u-4(a)(2).
4
On March 12, 2014, nineteen months after filing suit, Plaintiff’s counsel revealed
that Plaintiff had sold all of his R&M shares on August 14, 2012, and, therefore, he did
not own any shares throughout the entirety of this litigation. Defendants argue that
Plaintiff lacked Article III standing when he filed his original complaint and move for
dismissal pursuant to Rules 12(b)(1) and 12(h)(3).
II.
STANDARD OF REVIEW
Defendants raise a factual attack on the jurisdiction alleged in the original
complaint, and the Court may consider evidence such as affidavits and documents to
determine the factual basis for jurisdiction. Gentek Bldg. Prods., Inc. v. SherwinWilliams Co., 491 F.3d 320, 330 (6th Cir. 2007). Plaintiff bears the burden of
establishing standing. Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992).
III.
STANDING
Defendants argue that Plaintiff lacked standing when he filed his original
complaint and therefore this action must be dismissed in its entirety. “Article III standing
is a jurisdictional requirement that cannot be waived, and such may be brought up at any
time in the proceeding.” Zurich Ins. Co. v. Logitrans, Inc., 297 F.3d 528, 531 (6th Cir.
2002) (citing Fed. R. Civ. P. 12(h)(3)). “While the proof required to establish standing
increases as the suit proceeds, the standing inquiry remains focused on whether the party
invoking jurisdiction had the requisite stake in the outcome when the suit was filed.”
Davis v. FEC, 554 U.S. 724, 734 (2008) (emphasis supplied).
5
“The requirements of standing are: (1) ‘an injury in fact’; (2) ‘a causal connection’
between the alleged injury and the defendants’ conduct—that ‘the injury . . . [is] fairly
traceable to the challenged action . . . and not the result of the independent action of some
third party not before the court’; and (3) redressability—that the injury will ‘likely . . . be
redressed by a favorable decision.’” Klein v. U.S. Dep’t of Energy, 753 F.3d 576, 579
(6th Cir. 2014) (quoting Lujan, 504 U.S. at 560-61). “[A] plaintiff must demonstrate
standing for each claim he seeks to press,” DaimlerChrysler Corp. v. Cuno, 547 U.S.
332, 352 (2006), and “a plaintiff must demonstrate standing separately for each form of
relief sought.” Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S.
167, 185 (2000). “To demonstrate standing, a plaintiff must have alleged such a personal
stake in the outcome of the controversy as to warrant his invocation of federal-court
jurisdiction.” Salazar v. Buono, 559 U.S. 700, 711 (2010). The Article III standing
requirement “assures that there is a real need to exercise the power of judicial review in
order to protect the interests of the complaining party.” Summers v. Earth Island Inst.,
555 U.S. 488, 493 (2009).
“The Article III standing requirements apply equally to class actions.” Sutton v.
St. Jude Med. S.C., Inc., 419 F.3d 568, 570 (6th Cir. 2005). There must be a “named
plaintiff who has such a case or controversy at the time the complaint is filed and at the
time the class action is certified.” Sosna v. Iowa, 419 U.S. 393, 402 (1975). “[I]f none of
the named plaintiffs purporting to represent a class establishes the requisite of a case or
controversy with the defendants, none may seek relief on behalf of himself or any other
member of the class.” O’Shea v. Littleton, 414 U.S. 488, 494 (1974). “Where the named
6
plaintiff’s claim is one over which federal jurisdiction never attached, there can be no
class action.” Crosby v. Bowater Inc. Ret. Plan for Salaried Emps. of Great N. Paper,
Inc., 382 F.3d 587, 597 (6th Cir. 2004).
Here, the question is whether Plaintiff, the sole named plaintiff in this precertification class action, satisfied the requisites for Article III standing when he filed his
original complaint on August 17, 2012. This entire action must be dismissed if he lacked
Article III standing because jurisdiction never attached and cannot be cured by
amendment or otherwise. Here, Plaintiff has no standing to make such a motion, and the
Court likewise lacks jurisdiction to entertain it. Zurich, 297 F.3d at 532. Plaintiff
concedes that he did not own R&M shares after August 14, 2012. 4 At issue is whether he
satisfied injury in fact and redressability.
IV.
ANALYSIS
Plaintiff bears the burden of demonstrating standing for each claim asserted and
for each form of relief sought in his original complaint. DaimlerChrysler Corp., 547
U.S. at 352. Plaintiff submits that the breach of fiduciary duty claim in his original
complaint was based on two actual injuries and sought redress in three forms of relief.
Plaintiff identifies two injuries that allegedly occurred before he sold his shares.
First, Defendants injured him by depriving him of a fair sales process. According to
Plaintiff, Defendants breached their fiduciary duties to him and all other shareholders by
4
Defendants object to the exhibits attached to Plaintiff’s memorandum contra (Doc. 80, Exs. A,
B) and argue that Plaintiff has produced no admissible evidence proving that he ever owned
R&M shares. Defendants observe that the attached account statements are not authenticated by
affidavit and that Plaintiff has failed to demonstrate that he is the beneficial owner of the 100
shares in the account bearing his son’s name.
7
undertaking a self-interested and flawed sales process in which Defendants “failed to take
steps to maximize the value of R&M [by] failing to solicit other potential acquirors [sic]
or alternative transactions”; “failed to properly value R&M”; and “ignored or did not
protect against the numerous conflicts of interest resulting from the directors’ own
interrelationships or connection with the Merger.” (Doc. 2 at ¶ 63). Second, Plaintiff
alleges that he suffered economic injury upon announcement of the merger price of $60
per share, and from the terms of the merger agreement itself, because this capped share
value at the merger price. (Id. at ¶¶ 3, 53-55).
Plaintiff’s only claim is for breach of fiduciary duty. Under Ohio law, the
elements of a breach of fiduciary duty claim are: “(1) the existence of a fiduciary duty;
(2) a breach of that duty; and (3) injury proximately caused by the breach.” Garvais v.
Reliant Inventory Solutions, Inc., 2:09-cv-389, 2012 U.S. Dist. LEXIS 131558, at *15
(S.D. Ohio Sept. 14, 2012). A director owes a fiduciary duty to the corporation. Ohio
Rev. Code § 1701.59(B). The fiduciary duty is owed only indirectly to shareholders
because “directors stand, roughly, as trustees over the corporation, administering it for
the benefit of the beneficial owners, the shareholders.” 5 Radol v. Thomas, 772 F.2d 244,
258 (6th Cir. 1980). A shareholder terminates the fiduciary relationship when he sells his
shares. Thompson v. Cent. Ohio Cellular, Inc., 639 N.E.2d 462, 469 (Ohio App. 1994).
5
“[S]hareholders in a close corporation—corporations ‘with few shareholders and whose
corporate shares are not generally traded on a securities market’—owe each other a fiduciary
duty to deal in utmost good faith.” Herbert v. Porter, 845 N.E.2d 574, 578 (Ohio App. 2006)
(quoting Crosby v. Beam, 548 N.E.2d 217, 220 (Ohio 1989)). “This situation is contrasted with
an oppressed minority shareholder in a large publicly owned corporation who can more easily
sell his shares in such a corporation.” Crosby, 548 N.E.2d at 220. Plaintiff’s actions make it
clear that he fits into the latter category. Palmer v. Fox Software, Inc., 107 F.3d 415, 419 (6th
Cir. 1997).
8
To redress the alleged injuries to Plaintiff and the other shareholders. the original
complaint sought “equitable relief only” in the form of an injunction, declaratory
judgment, and the imposition of a constructive trust. (Doc. 2 at ¶¶ 8, A-H). However,
“[p]ast exposure to illegal conduct does not in itself show a present case or controversy
regarding injunctive relief . . . if unaccompanied by any continuing, present adverse
effects.” O’Shea, 414 U.S. at 495-96.
Under Ohio law, a shareholder may bring a claim for breach of fiduciary duty
against the corporation’s directors as either a derivative or direct action, depending on the
“nature of the alleged wrong rather than the designation used by plaintiffs.” Grand
Council of Ohio v. Owens, 620 N.E.2d 234, 237 (Ohio App. 1993). To determine
whether the claim is derivative or direct, “a court must preliminarily determine if the
pleadings state injury to the plaintiff upon an individual claim as distinguished from an
injury which indirectly affects the shareholders or affects them as a whole.” Adair v.
Wozniak, 492 N.E.2d 426, 428 (Ohio 1986).
The classification of a claim as derivative or direct is not dispositive of the Article
III standing inquiry as they are distinct concepts. Gradeless v. Am. Mut’l Share Ins.
Corp., 2011 U.S. Dist. LEXIS 31877, at *11 n.2 (S.D. Ind. Mar. 23, 2011). Nonetheless,
the principles underlying the distinction are helpful in determining whether Plaintiff
established the injury-in-fact and redressability prongs for Article III standing.
Injury-in-fact is “an invasion of a legally protected interest which is (a) concrete
and particularized; and (b) actual or imminent, not conjectural or hypothetical.” Lujan,
504 U.S. at 560 (citations omitted). Redressability asks whether the injury will “likely
9
. . . be redressed by a favorable decision.” Id. at 560-61. The focus of the inquiry is on
the “effectiveness of the requested remedy” because “[r]elief that does not remedy the
injury suffered cannot bootstrap a plaintiff into federal court; that is the very essence of
the redressability requirement.” Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 97,
107 (1998).
The formulation of the derivative-direct distinction by the Supreme Court of
Delaware, which succinctly states Ohio precedent, 6 closely tracks injury in fact and
redressability: “(1) who suffered the alleged harm (the corporation or the suing
stockholders, individually); and (2) who would receive the benefit of any recovery or
other remedy (the corporation or the stockholders, individually)?” Tooley v. Donaldson,
Lufkin & Jenrette, Inc., 845 A.2d 1031, 1033 (Del. 2004). As stated by the Supreme
Court of Ohio:
A shareholder’s derivative action is brought by a shareholder in the name of
the corporation to enforce a corporate claim. Such a suit is an exception to
the usual rule that a corporation’s board of directors manages or supervises
the management of a corporation. A derivative action allows a shareholder
to circumvent a board’s refusal to bring a suit on a claim. On the other
hand, if the complaining shareholder is injured in a way that is separate and
distinct from an injury to the corporation, then the complaining shareholder
has a direct action.
Crosby, 548 N.E.2d at 219.
6
Compare Tooley, 845 A.2d at 1038 (“We . . . require the court to determine the nature of the
action based on the ‘nature of the wrong alleged’ and the relief that could result.”) (emphasis
supplied), with Adair, 492 N.E.2d at 428 (“[A] suit brought by a shareholder on a personal claim
is distinguishable from a proceeding to recover damages or other relief for the corporation.”)
(emphasis supplied), and Owens, 620 N.E.2d at 237 (“In analyzing whether a complaint states a
derivative claim or a direct claim, the court is required to look to the nature of the alleged wrong
rather than the designation used by plaintiffs.”) (emphasis supplied).
10
A derivative action is brought by a shareholder for “an injury sustained by, or a
wrong done to, the corporation” and is “a proceeding to recover damages or other relief
for the corporation.” Adair, 492 N.E.2d at 428. Only a derivative claim exists if
shareholders suffer indirect “injuries as a consequence of their positions as shareholders
rather than individual claims they might have apart from their status as shareholders.” Id.
This distinction lies in the concept that any “indirect injury of the shareholders as a
whole” merely results from their ownership interest in the corporation, which is the entity
that suffered the actual injury:
Where the defendant’s wrongdoing has caused direct damage to corporate
worth, the cause of action accrues to the corporation, not to the
shareholders, even though in an economic sense real harm may well be
sustained by the shareholders as a result of reduced earnings, diminution in
the value of ownership, or accumulation of personal debt and liabilities
from the company’s financial decline. The personal loss and liability
sustained by the shareholder is both duplicative and indirect to the
corporation’s right of action.
Id. at 429.
The right to bring a derivative suit on behalf of the corporation rests only with its
shareholders because “the right of the plaintiff to maintain the action is derivative or
secondary. The [presence of the] corporation is not a mere formality, … [because the
corporation] … is an indispensable party to the action. The stockholder, as a nominal
party, has no right, title or interest in the claim itself.” Owens, 620 N.E.2d at 237.
Rather, “it is the corporation, after all, that is suing. It is the corporation’s action, only set
in motion by the stockholders [and] for the benefit of the corporation.” Id. at 238. In a
11
derivative action, the shareholders seeks to redress an injury in fact suffered by the
corporation.
A direct action is appropriate “if the complaining shareholder is injured in a way
that is separate and distinct from an injury to the corporation.” Crosby, 548 N.E.2d at
219. An injury to the shareholder is separate and distinct from injury to the corporation if
it involves “one of the shareholder’s contractual rights as a shareholder.” Carlson v.
Rabkin, 789 N.E.2d 1122, 1127-28 (Ohio App. 2003). Violation of the statutory rights of
a shareholder could also give rise to a direct claim. Id. The remedy in a direct action is
for the direct benefit of the shareholder to redress the individual injury.
These statutory and contractual rights inure only to present stockholders.
Danziger v. Luse, 815 N.E.2d 658, 660 (Ohio 2004) (stating that Ohio laws “provide
inspection rights only to shareholders. Because [plaintiffs] do not own stock in the bank,
we conclude that they do not have a statutory right to inspect the records of the bank.”).
The owner of the shares as of the record date determines who is entitled to exercise the
rights of a shareholder. Ohio Rev. Code § 1701.45.
Applying these concepts to Plaintiff’s original complaint, it is clear that Plaintiff
lacked Article III standing.
First, Plaintiff only brought a breach of fiduciary duty claim. “As a general
proposition, actions for breach of fiduciary duty are to be brought in derivative suits.”
Owens, 620 N.E.2d at 238. Breach of fiduciary duty claims are derivative in nature
because “damage that results from the fraudulent or negligent management of the
corporation is primarily damage to the corporation and to the corporate assets, and
12
because it affects the stockholders or members only indirectly and all of them alike.”
Carlson v. Rabkin, 789 N.E.2d 1122, 1127-28 (Ohio App. 2003). However, “an action to
redress injuries to a corporation cannot be maintained by a shareholder in his own name
but must be brought in the name of the corporation.” NBD Bank, N.A. v. Fulner, 109
F.3d 299, 301 (6th Cir. 1997). As a non-shareholder at the time he filed his original
complaint, Plaintiff had no right to bring a suit in the name of R&M.
Second, Plaintiff’s alleged actual injury is that Defendants deprived him of a fair
sales process and caused economic injury to the value of his shares. Essentially, “[a]t the
core of plaintiff’s action for breach of fiduciary duty is the allegation that the price per
share paid in the cash-out merger is inadequate because it is not the highest price that
could have been obtained.” Stepak v. Schey, 553 N.E.2d 1072, 1075 (Ohio 1990). Under
Ohio law, “where plaintiffs allege that actions of fiduciaries have directly affected a
corporation’s value and thereby impaired shareholders’ stock value, the appropriate
action is a derivative suit brought on behalf of shareholders as shareholders.” Murray &
Murray Co., L.P.A. Profit-Sharing Plan & Trust v. Performance Indus., Inc., 701 N.E.2d
475, 481 (Ohio Com. Pl. 1998). Thus, Plaintiff lacked Article III standing to maintain a
derivative suit on behalf of R&M because he no longer held an ownership interest. The
original complaint made clear that the directors had not scheduled the shareholder vote or
determined the record date, meaning that Plaintiff had no contractual or statutory rights as
a shareholder. 7 (Doc. 2 at ¶ 68). He therefore lacked any “personal stake in the outcome
of the controversy as to warrant his invocation of federal-court jurisdiction.” Buono, 559
7
The directors ultimately fixed November 26, 2012 as the record date. (Doc. 60, Ex. A at 17).
13
U.S. at 711. Plaintiff no longer had the right to complain of injury to R&M and could not
share in any relief granted to it. “An interest unrelated to injury in fact is insufficient to
give a plaintiff standing. The interest must consist of obtaining compensation for, or
preventing, the violation of a legally protected right.” Vermont Agency of Natural Res. v.
United States ex rel. Stevens, 529 U.S. 765, 772 (2000) (citations omitted). Here,
Plaintiff had no legally protected right to protect from future harm. The original
complaint unambiguously did not seek monetary compensation. (Doc. 2 at ¶ 8, 86)
(“Plaintiff seeks to obtain a non-pecuniary benefit” and “seeks equitable relief only”).
As the Sixth Circuit observed when it dismissed a derivative suit for lack of
standing brought by a plaintiff who held minimal shares in the corporation, “[i]t is as
though [plaintiff] had no equity investment to protect.” Owen v. Modern Diversified
Indus., Inc., 643 F.2d 441, 444 (6th Cir. 1981). Here, it is undisputed that Plaintiff had
no equity investment to protect. He had lacked any “ongoing interest in the dispute,”
which is required to make a case “fit for federal-court adjudication.” Camreta v. Greene,
131 S. Ct. 2020, 2028 (2011).
Third, a direct claim for breach of fiduciary duty is also insufficient to demonstrate
Article III standing. The personal injuries Plaintiff alleged in his original complaint are
that Defendants deprived him of a fair sale process and caused economic damage to the
value of his shares. When the Court looks at the “nature of the alleged wrong rather than
the designation used,” Owens, 620 N.E.2d at 237, Plaintiff merely alleges that
Defendants breached their fiduciary duties to obtain the maximum price per share.
Stepak v. Schey, 553 N.E.2d 1072, 1075 (Ohio 1990) (“At the core of plaintiff’s action
14
for breach of fiduciary duty is the allegation that the price per share paid in the cash-out
merger is inadequate because it is not the highest price that could have been obtained.”).
Here, the terms in the merger agreement precluding other bids do not allege a direct
injury to Plaintiff, rather the terms could only impact the corporate worth. Henkel v.
Aschinger, 962 N.E.2d 395, 403 (Ohio Com. Pl. 2012) (“[O]nce one looks past the stock
valuation that appears to be the predominant focus of plaintiffs’ case, questions about the
fairness of other terms in the proposed merger agreement like a no-shop provision or
breakup fee also will be felt by all shareholders or charged to the corporation as a
whole.”). Moreover, “[d]epreciation in value of shareholder’s corporate stock is
generally not the type of direct personal injury necessary to sustain a direct cause of
action.” Fulner, 109 F.3d at 301.
Moreover, Plaintiff fails to demonstrate that his requested relief will redress this
injury. Rule 8(f) mandates that “[p]leadings must be construed so as to do justice.” “If a
pleading provides a defendant notice of the plaintiff’s claims and the grounds for the
claims, omissions in a prayer for relief do not bar redress of meritorious claims.”
Pension Ben. Guar. Corp. v. E. Dayton Tool & Die Co., 14 F.3d 1122, 1127 (6th Cir.
1994) (citation omitted). However, “[c]ourts will not conjure up a damages claim where
none exists.” Youngstown Publ’g Co. v. McKelvey, 189 F. App’x 402, 407 (6th Cir.
2006).
Here, a liberal construction of the complaint reveals requests for injunctive and
declaratory relief, as well as for the imposition of a constructive trust. “[T]he Supreme
Court has held that a plaintiff’s standing to seek injunctive or declaratory relief depends
15
on the likelihood of future harm.” Hange v. City of Mansfield, 257 F. App’x 887, 891
(6th Cir. 2007). A mere “allegation of past injury is not sufficient to confer standing for
declaratory or injunctive relief.” Cohn v. Brown, 161 F. App’x 450, 455 (6th Cir. 2005).
It is undisputed that Plaintiff could only allege past injury. Accordingly, he lacked
Article III standing to pursue injunctive or declaratory relief for his purely retrospective
injury.
The final form of relief Plaintiff pled was the imposition of a constructive trust
over any improper benefits Defendants received for their role in approving the merger
agreement. “A constructive trust is an equitable remedy that protects against unjust
enrichment and is usually invoked when property has been obtained by fraud” and “must
be imposed on particular assets, not on a value.” Estate of Cowling v. Estate of Cowling,
847 N.E.2d 405, 411-12 (Ohio 2006). “A constructive trust arises irrespective of the
intention of the parties and is imposed when a person holding title to property is subject
to an equitable duty to convey it to another on the ground that she would be unjustly
enriched if she were permitted to retain it” and under Ohio law such a duty may arise if
property is acquired “through a breach of fiduciary duty.” Brate v. Hurt, 880 N.E.2d 980,
985 (Ohio App. 2007). “[A] constructive trust may also be imposed where it is against
the principles of equity that the property be retained by a certain person even though the
property was acquired without fraud.” Ferguson v. Owens, 459 N.E.2d 1293, 1295 (Ohio
1984).
Here, even if the Court were to impose a constructive trust, it would provide no
redress to Plaintiff. Plaintiff sought the imposition of a constructive trust over “any
16
benefits improperly received by defendants as a result of their wrongful conduct.” (Doc.
2 at ¶ F). However, “a constructive trust is an equitable remedy that must be imposed on
particular assets, not on a value.” Cowling, 847 N.E.2d at 412. Additionally, “a
constructive trust is not a right to recover on a debt owing; it creates a right to recover
property wrongfully held.” Dixon v. Smith, 695 N.E.2d 284, 291 (Ohio App. 1997).
Only R&M and its shareholders had the right to recover any property subject to the
constructive trust. Nienaber v. Katz, 43 N.E.2d 322, 325 (Ohio App. 1942) (“Any secret
profit obtained by an officer or director by reason of violation or disregard by him of
obligations arising by reason of fiduciary relations existing between him and the
corporation, cannot be retained, but must be accounted for to the corporation.”).
“Relief that does not remedy the injury suffered cannot bootstrap a plaintiff into
federal court; that is the very essence of the redressability requirement.” Steel Co., 523
U.S. 83 at 107. Because Plaintiff voluntarily sold his shares before seeking relief in this
Court, he lacked any “personal stake in the outcome of the controversy.” Susan B.
Anthony List v. Driehaus, 134 S. Ct. 2334, 2341 (2014). The original complaint
expressly and unambiguously provided that it “seeks equitable relief only, specifically to
require R&M’s Board to uphold their [sic] fiduciary duties to the Company’s public
stockholders” and “seeks to obtain a non-pecuniary benefit for the Class in the form of
injunctive relief against defendants.” (Doc. 2 at ¶¶ 8, 86). “[Plaintiff’s] complaint
unambiguously seeks only declaratory and injunctive relief, and this court cannot invent
requests for damages that the plaintiff did not make.” Donkers v. Simon, 173 F. App’x
451, 454 (6th Cir. 2006).
17
“[P]sychic satisfaction is not an acceptable Article III remedy because it does not
redress a cognizable Article III injury.” Steel Co., 523 U.S. at 107. “Article III standing
ultimately turns on whether a plaintiff gets something (other than moral satisfaction) if
the plaintiff wins.” Drutis v. Rand McNally & Co., 499 F.3d 608, 612 (6th Cir. 2007).
Plaintiff has failed to meet his burden of demonstrating that the original complaint would
have provided him anything more. Accordingly, Plaintiff lacked Article III standing at
the initiation of this action.
V.
CONCLUSION
For the reasons stated here, Defendants’ motion to dismiss (Doc. 78) is
GRANTED, and this action is DISMISSED for lack of Article III standing. 8 The Clerk
shall enter judgment accordingly, whereupon this case is CLOSED in this Court.
IT IS SO ORDERED.
Date:
8
9/22/14
s/ Timothy S. Black
Timothy S. Black
United States District Judge
Plaintiff’s motion for class certification (Doc. 77) is therefore terminated as moot.
18
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