Freuler v. Parker et al

Filing 69

ORDER granting #47 Motion to Dismiss; granting #48 Motion to Dismiss; granting #50 Motion to Dismiss; granting #51 Motion to Dismiss. This action is dismissed for failure to demonstrate Pltf's failure to make a demand on the board is excused. Case terminated on March 14, 2012.(Signed by Judge Melinda Harmon) Parties notified.(htippen, ) TEXT Modified on 3/14/2012 (htippen, ).

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
DOUGLAS FREULER, derivatively on§
behalf of Parker Drilling
§
Company,
§
§
Plaintiff,
§
§
VS.
§
§
ROBERT L. PARKER, JR., ROBERT
§
L. PARKER, JOHN W. GIBSON, ROGER§
B. PLANK, R. RUDOLPH REINFRANK, §
ROBERT E. MCKEE, III, GEORGE J. §
DONNELLY, ROBERT W. GOLDMAN,
§
GARY R. KING, DAVID C. MANNON, §
JAMES W. WHALEN, W. KIRK
§
BRASSFIELD, LYNN G. CULLOM, and §
DIES 1 through 20, inclusive,
§
§
Defendants,
§
-and§
PARKER DRILLING COMPANY,
§
a Delaware corporation,
§
§
Defendants.
§

CIVIL ACTION H-10-3148

OPINION AND ORDER OF DISMISSAL
The above referenced shareholder action, against certain
officers

and

directors

of

Parker

Drilling

Company

(“Parker

Drilling” or the “Company”), a major provider of on-land and
offshore drilling services worldwide, and Parker Drilling itself,
alleges that individual Defendants knew or recklessly disregarded
the offer or payment of bribes by Parker Drilling employees,
representatives, agents and/or contractors to Kazakh and Nigerian
government officials to obtain or retain business for Parker
Drilling

in

violation

of

the

Foreign
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Corrupt

Practices

Act

(“FCPA”), 15 U.S.C. Sec. 78dd-1 et seq.,and that they, in violation
of the reporting requirements of the Securities Exchange of 1934,
15 U.S.C. § 78m(b)(2)(A-B), caused or allowed the Parker Drilling
to file false and misleading statements with the U.S. Securities
and Exchange Commission (“SEC”), which failed to reflect the amount
and purpose of payments made in violation of the FCPA.

Pending

before the Court are the following motions:
(1) Nominal Defendant Parker Drilling’s motion to dismiss
Plaintiff’s

Second

Amended

Verified

Shareholder

Complaint1 (instrument #47), for failing to plead that
demand is excused, joined by Defendants David C. Mannon,
James W. Whalen, W. Kirk Brassfield, and Lynn G. Cullom
(#49);
(2) Defendants Robert W. Goldman, George J. Donnelly, and
Gary R. King’s motion joining #47 (#48);
(3) Defendants John W. Gibson, Jr., Robert E. McKee, III,
Roger B. Plank, and R. Rudolph Reinfrank’s motion to
dismiss (#50); and
(4) Robert L. Parker, Sr. and Robert L. Parker, Jr.’s
motion to dismiss Plaintiff’s Second Amended Verified
Shareholder Complaint (#51).
The Court hereby incorporates its Opinion and Order of June
30, 2011 (#36), granting these same Defendants’ initial motions to

1

Instrument #37.
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dismiss the first amended complaint for Plaintiff Douglas Freuler’s
failure to plead the kind of particularized facts required to
excuse his failure to make a demand on the Board of Directors
before

bringing

suit,

but

also

granting

leave

to

Plaintiff,

derivatively on behalf of Parker Drilling, to file an amended
complaint to meet the heightened pleading requirements set out in
that Opinion and Order. Plaintiff has amended his complaint, which
attempts to assert derivatively the same claims for breach of
fiduciary duty, abuse of control, gross mismanagement, corporate
waste and unjust enrichment as well as a “direct” claim for
declaratory and injunctive relief.2
In essence all Defendants’ motions assert that Plaintiff’s
amended complaint has the same failings as his two earlier efforts
the individual Defendants join in or adopt Nominal Defendant’s
motion.
Nominal Defendant now contends,
Once again, Plaintiff offers a variety of irrelevant
facts and unsupported conclusions and again he strings
together improper inferences, all based on the one fact
he has:
the on-going FCPA investigation of Parker
Drilling. From this one fact, Plaintiff links together
the following presumptions:
because there is an

2

As the Court indicated in its earlier order, claims for
abuse of control, gross mismanagement, and waste of corporate
assets all arise from the alleged breach of fiduciary duties and
have been viewed as merely repackaging the same issue under
different causes of action rather than as separate torts. Clark v.
Lacy, 376 F.3d 682, 686-87 (7th Cir. 2004)(applying Delaware law);
In re Zoran Corp. Deriv. Litig., 511 F. Supp. 2d 986, 1019 (N.D.
Cal. 2007).
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investigation, there must have been violations of the
law; because the law must have been violated, there must
have been deficiencies in the internal controls; because
there must have been internal control deficiencies, a
majority of the defendants must have known of the
deficiencies and deliberately chosen to do nothing about
them.
#47 at 2.

Moreover Plaintiff continues to fail to distinguish

Defendants’ individual roles with respect to all the claims and
continues

to

indulge

in

prohibited

identical facts against each.

group

pleading,

alleging

In the only new pleading attempt,

without alleging any individualized facts, Plaintiff “inartfully
(and

errantly)

recast[s]

his

previously

dismissed

claims

as

‘direct,’ seeking a ‘declaratory judgment’ that the directors
breached their fiduciary duties resulting in Parker Drilling’s yetto-be-established FCPA concerns,”3 even though “Delaware law makes
it clear that it is substance, not the pleaded characterization or

3

Nominal Defendants cite numerous cases to demonstrate that
courts regularly reject using a declaratory judgment mechanism to
circumvent procedural and substantive barriers to suit: e.g., C &
E Servs., Inc. v. D.C. Water & Sewer Auth., 310 F.3d 197, 201 (D.C.
Cir. 2002)(prohibiting use of declaratory judgment as “an end-run
around” the exclusive remedy of an administrative hearing under the
Service Contract Act); Mylan Pharms., Inc. v. Thompson, 268 F.3d
1323, 1331 (Fed. Cir. 2001)(barring use of the Declaratory Judgment
Act to achieve “delisting” when no private right of action for
“delisting” exists under the Federal Food, Drug, and Cosmetic Act);
Tex. Natural Res. Conservation Comm’n v. IT-Davy, 74 S.W. 3d 849,
855-56 (Tex. 2002)(plurality op.)(“[P]rivate parties cannot
circumvent
the
State’s
sovereign
immunity
from
suit
by
characterizing a suit for money damages . . . as a declaratoryjudgment claim.”); Hartford Cas. Ins. Co. v. Budget Rent-A-Car
Sys., Inc., 796 S.W. 2d 763, 772 (Tex. App.--Dallas 1990, writ
denied)(rejecting use of declaratory judgment to obtain otherwise
unavailable attorneys’ fees).
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form of a claim, that establishes it as a direct or derivative
claim. Dieterich v. Harrer, 857 A.2d 1017, 1027 (Del. Ch. 2004)(“A
claim is not ‘direct’ simply because it is pleaded that way.”); In
re Syncor Int’l Corp. S’holders Litig., 857 A.2d 994, 997 (Del. Ch.
2004)(It is “the duty of the court[] to look at the nature of the
wrong alleged, not merely at the form of words used in the
complaint,” to determine the correct characterization of a claim);
Tooley v. Donaldson, Lufkin & Jenrett, Inc., 845 A.2d 1031, 1033
(Del. 2004)(whether a claim is direct or derivative “turn[s] solely
on the following questions: (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)?”).

For a direct

claim a plaintiff must show “that he or she can prevail without
showing an injury to the corporation.”

Id. at 1036.

The Second

Amended Complaint, which asks the court to “declare” exactly what
Plaintiff attempts to establish derivatively, expressly states that
the injuries were suffered by Parker Drilling and that Plaintiff
seeks damages on Parker Drilling’s behalf.

Dressing up his breach

of fiduciary duty claims as direct claims when they are clearly
derivative does not relieve him of the requirement to make demand
on the board or demonstrate its futility.
Finally
Drilling’s

Nominal

restated

Defendant

newly

certificate

of

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points

out

incorporation

that

Parker

includes

a

standard exculpatory provision, Article Twelfth, that defends the
directors against claims not involving intentional misconduct,
which Section 102(b)(7) of the Delaware General Corporation

Law

permits corporations to adopt to protect their directors from
financial liability for breaches of fiduciary duty that do not
involve bad faith, disloyalty, or improper personal benefit.
Code Ann. tit. 8, § 102(b)(7)(2001).4

Del.

To overcome this exculpatory

provision,5 Plaintiff must allege conduct more culpable than mere
negligence or even gross negligence.

McPadden v. Sidhu, 964 A.2d

1262, 1273-74 (Del. Ch. 2008)(a claim of breach of a director’s
fiduciary duty of care in making business decisions requires a
showing

of

gross

negligence,

i.e.,

“conduct

that

constitutes

reckless indifference or actions that are without the bounds of
reason”).

Plaintiff’s pleading fails to state facts required

to

support a claim for breach of a duty of good faith as a nonexculpated claim.
Because the Court finds that Plaintiff’s response reiterates
his same, insufficient, conclusory or erroneous allegations, the
Court does not summarize them.

Nominal Defendant points out that

4

See Gantler v. Stephens, 965 A.2d 695, 709 n.37 (Del.
2009)(“Under 8 Del. C. § 103(b)(7), a corporation may adopt a
provision in its certificate of incorporation exculpating its
directors [but not it officers] from monetary liability for an
adjudicated breach of their duty of care.”)
5

“The court may take judicial notice of the certificate in
deciding a motion to dismiss.” McPadden, 964 A.2d at 1273 n.28.
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all of his arguments were also rejected in Midwestern Teamsters
Pension Trust Fund v, Baker Hughes, Inc., No. Civ. A. H-08-1809,
2009 WL 6799492 (S.D. Tex. May, 7, 2009), report and recommendation
adopted, 2010 WL 3359560 (S.D. Tex. May 26, 2010).
Defendant’s

reply

summarizes

its

earlier

points;

Nominal
the

other

Defendants’ replies join in that reply.
Accordingly, the Court
ORDERS that all Defendants’ motions to dismiss (#47, 48, 49,
50, and 51) are GRANTED and this action is dismissed for failure to
demonstrate that Plaintiff’s failure to make a demand on the board
is excused.
SIGNED at Houston, Texas, this

14th

day of

March , 2012.

___________________________
MELINDA HARMON
UNITED STATES DISTRICT JUDGE

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