Market Street Securities Inc v. Midwest Air Group Inc et al

Filing 50

ORDER signed by Judge J P Stadtmueller on 9/15/09 denying 38 plaintiff's Motion for Attorney's Fees and Litigation Costs and Expenses. See Order. (cc: all counsel) (nm)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF WISCONSIN
____________________________________________ M A R K E T STREET SECURITIES, INC., P l a i n t if f , v. MIDW E S T AIR GROUP, INC., TIMOTHY E. HOEKSEMA, FREDERICK P. STRATTON, JR., S A M U E L K. SKINNER, JOHN F. BERGSTROM, DAVID H. TREITEL, RICHARD H. SONNENTAG, ULICE PAYNE, JR., JAMES R. BORIS, and ELIZABETH T. SOLBERG, D e fe n d a n ts . ____________________________________________

Case No. 07-CV-345

ORDER
O n April 12, 2007, plaintiff filed a complaint against Midwest Air Group, Inc. ("M id w e s t"), and its board of directors, seeking various forms of injunctive relief as w e ll as damages if appropriate. (Docket #1). Subsequent events led to the mooting o f plaintiff's claims, thus the action was dismissed without prejudice on November 2 7 , 2007. (Docket #38). On October 6, 2008, plaintiff filed a Motion for Attorney F e e s and Litigation Costs and Expenses pursuant to Fed R. Civ. P. 54(d)2. (Docket # 3 8 ). Jurisdiction over the original action, as well as jurisdiction over the motion for a tto rn e ys fees, is premised on 28 U.S.C. § 1332, as there is complete diversity

b e tw e e n the parties,1 and the amount in controversy is in excess of $75,000.

The

c o u rt, having fully considered the parties' briefs and applicable law, finds that p la in tiff's motion must be denied. B AC K G R O U N D O n October 20, 2006, AirTran Holdings, Inc. ("AirTran") offered to acquire all o u t s t a n d in g shares of Midwest stock in exchange for cash and AirTran stock, c o lle c tive ly valued at $11.25 per share of Midwest stock. (Pl. Br. Supp. Mot. Atty's F e e s at 2). Midwest's board did not disclose the offer to its shareholders, despite th e premium presented. (Id.). AirTran, thereafter, offered to enter into discussions w ith Midwest regarding possible ways to combine the two businesses. (Id. at 2-3). H o w e ve r, Midwest announced on January 10, 2007, that it intended to remain a s tan d -a lo n e company. (Id. at 3). I n the ensuing months, AirTran continued to court Midwest, offering in c re a s in g ly more per share with each proposal. (Id. at 3-8). Midwest continued to re b u ff AirTran's offers. (Id.). Thus, plaintiff, as a Midwest shareholder, brought suit in this court, on behalf of itself and others similarly situated, seeking "injunctive relief to require [Midwest's] [b]oard to fulfill its fiduciary duties to the stockholders by c o m p e llin g it, among other things, to adequately consider the pending proposal from

Midwest has faulted plaintiff for not properly alleging diversity jurisdiction, as plaintiff has alleged that its principal place of business is in Pennsylvania, but has not m a d e any allegation as to where it is in c o r p o r a te d . Midwest is, of course, correct. Plaintiff is a citizen not only of the state in which its principal p la c e of business resides, but also is a citizen of the state in which it is incorporated. See 28 U.S.C. § 1 3 3 2 (c ) ( 1 ) . However, in order to resolve plaintiff's m o tio n on its m e r its , without further briefing, the court has c o n s u lte d the Pennsylvania Departm e n t of State online database and confirm e d that plaintiff is a corporation a n d is incorporated under the laws of Pennsylvania.

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A irT ra n , engage in good-faith negotiations with AirTran regarding possible terms for a combination, and take all necessary steps to maximize short-term and long-term s h a re h o ld e r value." (Compl. at 1-2). As plaintiff's case moved forward in the court, o u ts id e pressure from Midwest's shareholders appeared to be mounting for Midwest to consider AirTran's offer. (Pl. Br. Supp. Mot. Atty's Fees at 10-13). On June 14, 2 0 0 7 , Midwest announced that at its annual meeting its stockholders had voted to re m o ve three incumbent directors, and replace them with directors nominated by A irT ra n . (Id. at 13). O n June 26, 2007, Midwest announced that it would allow AirTran to conduct a presentation to Midwest's employees regarding AirTran's offer; however, Midwest m a in ta in e d that AirTran's offer was inadequate and did not reflect Midwest's longte rm value. (Id. at 14). At the end of July, Midwest announced that it was forming a committee to review strategic alternatives, including AirTran's offer. (Id. at 15-16). O n August 16, 2007, Midwest announced that it had signed a merger agreement to b e acquired by an affiliate of private equity firm TPG Capital, L.P. ("TPG"). (Id. at 1 6 ) . Under the terms of the proposed agreement, each share of Midwest stock w o u ld be converted into the right to receive $17.00 cash per share, which was a h ig h e r price than that of any of AirTran's offers. (Id.). On October 20, 2007, it was a n n o u n c e d that Midwest shareholders voted to approve TPG's offer. (Id. at 17). A c c o rd in g ly, plaintiff's claims were mooted, and the court dismissed the action in the in s ta n t case on November 27, 2007. (Id.).

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A P P L I C A B L E LAW O n October 6, 2008, nearly a year after plaintiff's complaint was dismissed, p la in tiff filed its motion seeking $163,954.00 in attorney's fees, and $9,325.81 in c o s ts , arguing that its legal efforts contributed to Midwest's decision to entertain b u yo u t offers, which led to Midwest shareholders receiving more for their shares th a n the shares were otherwise worth at the time. Thus, plaintiff argues that

b e c a u s e all Midwest shareholders shared in the benefits from plaintiff's actions, they s h o u ld also share in the expense under the "common fund" doctrine. T h e common fund doctrine is an exception to the American rule of attorney's fe e s . Recent Case, Attorneys' Fees ­ Substantial Benefit Doctrine ­ Delaware S u p re m e Court Grants Fees to Plaintiff Suing as an Individual Shareholder ­ T a n d yc ra fts , Inc. v. Initio Partners, 562 A.2d 1162 (Del. 1989), 103 HARV. L. REV. 1 1 8 7 , 1187 (1990). The American rule requires each side in a lawsuit to pay the full c o s t of its own legal representation. Id. The common fund doctrine, however, holds th a t "a litigant or a lawyer who recovers a common fund for the benefit of persons o th e r than himself or his client is entitled to a reasonable attorney's fee from the fund a s a whole." Boeing Co. v. Van Gemert, 444 U.S. 472, 478 (1980). By allowing re c o v e ry of attorney's fees from the common fund, the doctrine ensures that all th o s e who share in the benefit (i.e., the prospective fund recipients) also share in the c o s ts that plaintiff incurred in recovering the fund. It is the court's jurisdiction over th e fund involved in the litigation, as well as the court's historic equity jurisdiction,

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th a t empower it to assess fees against the fund, so as to prevent the unjust e n ric h m e n t which would otherwise occur. See Sprague v. Ticonic Nat'l Bank, 307 U .S . 161, 164-165 (1939); see also Van Gemert, 444 U.S. at 478. A n extension of the common fund exception is the "common benefit" doctrine.2 T h e common benefit doctrine recognizes that attorneys fees should be shared by th o s e who receive a common benefit arising from a suit, even if that benefit is not a m o n e ta ry fund from which the fees can be extracted before the funds are disbursed to the recipients. The typical situation is a shareholder derivative suit in which "the s u c c e s s fu l shareholder plaintiff confers a substantial benefit on all of the s h a re h o ld e rs of the defendant corporation." Johnson v. U.S. Dep't of HUD, 939 F.2d 5 8 6 , 590 (8th Cir. 1991). Thus, "any fees assessed against the corporation can be s p re a d proportionately among all of the shareholders, who are the real beneficiaries o f the litigation, because the corporation is the alter ego of the shareholders." Id. W h ile acceptance of the common fund doctrine is rather ubiquitous, the extent to which it has been applied varies by jurisdiction. See Robert L. Rossi, Annotation, A llo w a n c e of Fees out of Fund, 1 Attorney's Fees § 7:1 (3d ed. 2009). The standard p la in tiff would have this court apply is that espoused by the courts of Delaware, w h ic h hold that attorneys fees can be granted in a mooted case if: 1) the action was m e rito r io u s when filed; 2) action producing benefit to the corporation was taken

Som e courts refer to this as the "substantial benefit" doctrine. However, it seem s m o r e appropo to r e f e r to it as the "com m o n benefit" doctrine, as it is the com m o n a lity of the benefit conferred which justifies th e award of attorneys fees, rather than it being the substantiality of the benefit that justifies such award.

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b e fo re a judicial resolution; and 3) the resulting corporate benefit was causally re la te d to the lawsuit. Allied Artists Pictures Corp. v. Baron, 413 A.2d 876, 878 (Del. 1 9 8 0 ). Further, "[Delaware] courts `recognize a presumption that there is a causal re la tio n s h ip between the benefit and a timely filed suit.'" Alaska Elec. Pension Fund v . Brown, 941 A.2d 1011, 1015 (Del. 2007) (quoting In re Infinity Broadcasting Corp. S h a r e h o ld e rs Litigation, 802 A.2d 285, 290 (Del. 2002)). "To overcome this

p re s u m p tio n , defendants have the burden of `demonstrating that the lawsuit did not in any way cause their action.'" Alaska Elec. Pension Fund, 941 A.2d at 1015 (q u o tin g Allied Artists, 413 A.2d at 880). Plaintiff asserts that this court should adopt th e Delaware standard based on the argument that "[n]o court in the nation has a m o re developed body of shareholder and corporate law than Delaware." (Pl. Reply B r. Supp. Mot. Atty's Fees at 12). Midwest, however, states that "[t]here is no question that plaintiff's application fo r fees is governed by W is c o n s in law." Though Midwest cites no basis for this a x io m , the court, through its own research, has determined that W is c o n s in law s h o u ld apply. The fact that the common fund doctrine stems from the court's in h e re n t equitable powers might suggest that the issue is not governed by state law. S e e Perfect Fit Indus., Inc. v. Acme Quilting Co., 646 F.2d 800, 806 (2d Cir.1981) ("S ta te law does not govern the scope of the equity powers of the federal court; and th is is so even when state law supplies the rule of decision."); see also Clark E q u ip m e n t Co. v. Armstrong Equipment Co., 431 F.2d 54 (5th Cir. 1970) ("Neither

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th e Federal Rules of Civil Procedure nor the Erie doctrine deprive Federal courts in d ive rs ity cases of the power to enforce State-created substantive rights by w e ll-r e c o g n iz e d equitable remedies even though such remedy might not be available in the courts of the State."). Neither party has addressed this issue.3 However, the c o u r t has satisfied itself, based on applicable case law, that "[i]n diversity cases, s tate law governs the granting of attorney's fees." Jackman v. W M A C Inv. Corp., 8 0 9 F.2d 377, 383 (7th Cir. 1987) (citing Alyeska Pipeline Service v. W ild e r n e s s S o c ie ty , 421 U.S. 240, 259 n. 31 (1975)); see also Neyhard v. State Farm Mutual A u to Ins. Co., 1986 W L 9601, 2 (E.D. Pa. 1986) ("Plaintiff's reliance on this courts' e q u ita b le powers to award attorney's fees under a common fund theory is misplaced in this diversity case. In a diversity case, a federal court must look to state law on a tto rn e y's fees); Lewis v. Anderson, 692 F.2d 1267, 1270 (9th Cir. 1982) ("If the p la in tiff's relief derives from a state law cause of action, any entitlement to attorney's fee s must also derive from state law.") W is c o n s in law regarding the common fund doctrine is not nearly as favorable to plaintiff's position as is Delaware law. W is c o n s in law neither adopts the causation p re s u m p tio n against defendants found in Delaware law, nor does it appear to even a d o p t the common benefit doctrine. Rather, it appears confined to cases truly

3 It m a y well be that the question is purely academ ic , as W is c o n s in state law governing the com m o n f u n d doctrine sim p ly adopts well established U.S. Suprem e Court precedent governing the issue. Since there is no Seventh Circuit or U.S. Suprem e Court case law adopting the Delaware standard, it would seem that th e issue of applicable law would perhaps only m a t te r if the court thought it equitable to em p lo y the Delaware s ta n d a rd , yet felt constrained not to by W is c o n s in law. Such is not the case, as the court does not consider im p o s itio n of the Delaware standard to be equitable.

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in vo lvin g a common fund. The standard under Wisconsin law is that in order for a c o u rt to adopt the common fund approach: 1) "those benefitting from the litigation s h o u ld be small in number and easily identifiable"; 2) "the benefits should be tra c e a b le with some accuracy"; and 3) "the attorney fees should be capable of being `s h ifte d with some exactitude to those benefitting.'" Wis. Ret. Teachers Ass'n, Inc. v . Employee Trust Funds Bd., 558 N.W .2 d 83, 98 (W is . 1997) (quoting Alyeska, 421 U .S . at 265, n. 39). AN AL Y S IS P la in tiff argues that the common fund that it helped create consists of the d iffe re n c e between the price of Midwest stock at the time plaintiff filed suit, $14.62 p e r share, and the price ultimately paid to shareholders, $17.00 per share. (Pl. Br. S u p p . Mot. Atty's Fees at 18). This per share price differential, when multiplied by th e number of shares outstanding at the time, represents a fund, according to p la in tiff, consisting of an additional $58 million conferred on Midwest shareholders. (Id . ) . Because the entirety of that $58 million has already been paid out to the in d ivid u a ls who were shareholders at the time of the buyout, and because those in d ivid u a ls are not a party to this suit (thus the court has no jurisdiction over this a lle g e d fund) plaintiff maintains that attorney's fees should be assessed against the c o r p o r a te entity of Midwest, as an alter ego of the shareholders. M id w e s t attacks plaintiff's assertions on numerous grounds. Midwest states tha t according to Fed. R. Civ. P. 54, plaintiff's motion is untimely. (Def's Resp. Br.

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O p p . Mot. Atty's Fees at 5). Rule 54 states: "[u]nless a statute or a court order p ro vid e s otherwise, [a] motion [for attorneys' fees] must . . . be filed no later than 14 d a y s after the entry of judgment . . . ." Fed. R. Civ. P. 54(d)(2)(B)(I). Plaintiff, h o w e ve r, points out that the term "judgment" includes "a decree and any order from w h ic h an appeal lies." Fed. R. Civ. P. 54(a). As this case was dismissed without p re ju d ic e , no "judgement" was ever entered, thus the 14-day deadline was never trig g e re d . Castro County, Tex. v. Crespin, 101 F.3d 121, 128 (D.C. Cir. 1996) (h o ld in g that a dismissal without prejudice does not trigger the Rule 54(d)(2)(B)'s 1 4 -d a y filing requirement); Pavlovich v. Nat'l City Bank, 461 F.3d 832, 836 (6th Cir. 2 0 0 6 ) (same). Undoubtedly, it is problematic that, based on the foregoing, it would a p p e a r that there is no deadline by which plaintiff was required to file its motion for a tto rn e y's fees. Certainly this cannot be the case. However, Midwest has not d e m o n s tra te d what deadline should apply. Furthermore, given the court's ultimate ru lin g , the point is moot. M id w est's next contention is that the common fund doctrine does not authorize re c o ve ry in the instant situation. (Def.'s Resp. Br. Opp. Mot. Atty's Fees at 7). There a re several bases for this contention. First, Midwest suggests that there is no fund o ve r which the court has control. Such a fund is a defining feature of the common fu n d doctrine in its purest form. Indeed, each of the W is c o n s in common fund cases o f which this court is aware is characterized by an actual fund over which the court h a s control. See Wis. Ret. Teachers Ass'n, 558 N.W .2 d at 97-98 (describing the

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fu n d created by the litigation); Milwaukee Police Ass'n, 588 N.W .2 d 636, 640-41 (W is . App. 1998) (describing retirement fund that was preserved by litigation). H o w e v e r, the instant case is not a true common fund case; it is more similar to a c o m m o n benefit case. See Weinberger v. Great Northern Nekoosa Corp., 925 F.2d 5 1 8 , 522 (1st Cir. 1991) (describing an action that produces "an increased price per s h a re (which enriches the class even though the emolument is not paid into a kitty b u t goes directly to the shareholders)" as "not a common fund but a common b e n e f it . " ) . There is no basis for this court to assume that the W is c o n s in Supreme C o u rt is willing to extend the common fund exception to include the common benefit e xc e p tio n as well. Additionally, there is no basis for this court to assume that the W is c o n s in Supreme Court would be willing to adopt the liberal Delaware standard, a lo n g with its causation presumption, for which plaintiff advocates. See generally B e lo it Liquidating Trust v. Grade, 2004 W I 39, ¶ 24, 677 N.W .2 d 298, ¶ 24 (holding th a t application of Delaware law to a company incorporated in Delaware but h e a d q u a rte re d in W is c o n s in would constitute officious intermeddling.4 It is doubtful that plaintiff, even if able to show causation, would be able to re c o ve r under the common fund doctrine because, as previously stated, there is no

Unlike the corporation in Beloit Liquidating Trust, Midwest is both incorporated and headquartered in W is c o n s in , further underscoring the inappropriateness of applying Delaware law.

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c o m m o n fund over which this court has authority to order attorney's fees deducted.5 A t best, it could be said (if causation were shown) that plaintiff's efforts created a c o m m o n benefit; however, as previously stated, there is no indication that W is c o n s in h a s adopted the common benefit exception. Yet, even if the court employs the c o m m o n benefit doctrine ­ or, if the court be mistaken in categorizing the instant c a s e as being a common benefit type case rather than a common fund type case 6 ­ plaintiff still would not be able to recover attorney's fees for two important reasons: 1 ) assessing attorney's fees against Midwest would not constitute fee spreading a m o n g beneficiaries, but would rather constitute impermissible fee shifting; and 2) p la in tiff cannot show causation absent the inapplicable Delaware causation p r e s u m p tio n . 1) Inapplicability of Common Fund Doctrine and Common Benefit Doctrine T h e common fund and common benefit doctrines are not mechanisms to shift th e fee to an opposing party, but rather are mechanisms to spread the fee among
Plaintiff argues that the dissem in a tio n of the fund does not preclude an award of attorneys fees being a s s e s s e d against Midwest pursuant to the com m o n fund doctrine. (Pl. Reply Br. Supp. Mot. Atty's Fees at 7 ) . As support for this prem is e , Plaintiff cites McIntosh v. McAfee Inc., 06-07694 (JW ) (N.D. Cal. October 17, 2 0 0 8 ) . However, McIntosh is wholly inapposite, as recovery in that case is based on a California "private a tto r n e y general" statute (C.C.P. § 1021.5), not on the com m o n fund doctrine I f plaintiff desired to recover funds under the com m o n fund doctrine, plaintiff should have sought a p r e lim in a r y injunction to set aside a portion of the distribution. Savoie v. Merchant's Bank, 84 F.3d 52, 58 (2d C ir . 1996). Failure to do so m a y itself be justification for a denial of plaintiff's m o tio n . W y s e r - P r a tte v. Van D o r n Co., 49 F.3d 213, 218 (6th Cir. 1995) (declining to award attorney's fees to plaintiff pursuant to com m o n f u n d doctrine, in part because plaintiff had not fully pursued m o tio n for prelim in a r y injunction to set aside p o r tio n of defendant's intended distribution). In d e e d , there is a fair am o u n t of disagreem e n t as to whether a case such as this, where the benefit is m o n e ta r y, yet there is no actual fund under the court's jurisdiction, is a com m o n fund or a com m o n benefit c a s e . Compare Great Northern Nekoosa Corp., 925 F.2d at 522 (describing an increased price per share s c e n a r io as a com m o n benefit case) with In re Dunkin' Donuts Shareholders Litigation, 1990 W L 189120 (Del. C h . 1990) (describing the sam e scenario as a com m o n fund case).
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th e beneficiaries of the litigation.

See 10 JAMES W M . MOORE, MOORE'S

F E D E R A L PRACTICE § 54.171[2][a] ("The most important feature of the common fu n d exception is that the fee movant's recovery must be drawn exclusively from the fu n d created; neither the litigation opponent nor the fund beneficiaries themselves a re personally liable for any of the fees."). In Wis. Ret. Teachers Ass'n, the

W is c o n s in Supreme Court made it clear that imposition of the common fund doctrine s h o u ld leave "a losing litigant . . . no better or worse off as a result of the doctrine's a p p lic a tio n ." 558 N.W.2d at 99. The importance that the burden of the fee award fa ll on the beneficiaries, and not defendants, stems from the purpose of the doctrine ­ to avoid the unjust enrichment of those benefitting from plaintiff's efforts ­ and is h ig h lig h te d by the third factor to be considered in determining whether the doctrine s h o u ld apply, namely: whether the fees are capable of being "shifted with some e xa c titud e to those benefitting." Alyeska, 421 U.S. at 265 n. 39 (quoted in Wis. Ret. T e a c h e rs Ass'n, 558 N.W.2d at 98). It is true that under the common benefit doctrine attorney's fees are at times a s s e s s e d against the losing party, such as a corporation or a union; however, this is only done as a method of distributing the costs among the beneficiaries. Thus, if a plaintiff brings suit against a corporation in order to prevent the corporation from e n g a g in g in wasteful or illegitimate behavior, and the plaintiff is successful, then u ltim a te ly each individual shareholder is an equal beneficiary of the action. Because th e shareholders are the alter ego of the corporation, the court can effectively spread

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th e costs among the beneficiaries ­ the shareholders ­ by levying attorney's fees a g a in s t the corporation. The aforementioned scenario often occurs within the

c o n te xt of a shareholder derivative suit, see Mills v. Electric Auto-Lite Co., 396 U.S. 3 7 5 (1970); however, this is not such a case. The fact that the instant case is not a derivative suit is not in and of itself fatal to plaintiff's motion though. Rather, it is th e lack of identity of interest between Midwest and the beneficiaries that precludes re c o ve ry. In Hall v. Cole, 412 U.S. 1 (1973), the Supreme Court granted attorney's fees to a plaintiff that sued his former union, claiming that his expulsion from the union for vio la tio n of a union rule violated his right of free speech. The Court found that by vin d ic a tin g his own free speech rights, plaintiff had conferred a common benefit on th e union and all of its members, and was thus entitled to have his attorney's fees p a id out of the union coffers. Id. at 8-9. The crucial element to note is that the union w a s not required to pay because it lost, but rather because all of the union members w e re the beneficiaries, and thus an award against the union was merely a m e c h a n is m for spreading the fees amongst all the union members. W ith o u t this id e n tity of interest between the defendant and beneficiaries, it would be improper to c h a rg e a defendant with plaintiff's attorney's fees, for doing so would fail to shift the c o s ts with the requisite "exactitude to those benefitting." Alyeska, 421 U.S. at 265 n . 39.

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T h e question of whether there is identity of interest between Midwest and the b e n e fic ia rie s in this case is a thorny question. If one simply defines the class of b e n e fic ia rie s as "all Midwest shareholders," then there clearly would be identity of in te re s t. However, such a definition would simply fail to be factually correct. In the in s ta n t case, all Midwest shareholders were cashed out at a set price. Thus, the b e n e fit of the higher price accrued to all persons owning shares of Midwest stock im m e d ia te ly prior to the consummation of the transaction on January 31, 2008. The p re s e n t shareholder, TPG, paid the higher price, thus generating the $58 million c o m m o n benefit that the previous shareholders (i.e. the beneficiaries) received. Of c o u rs e , in most scenarios it makes no sense to distinguish between the share and th e shareholder, or to distinguish between whether or not the shareholder at the time th e attorney fee is assessed was a shareholder at the time the benefit was c o n fe rre d . This is because in most situations the benefit accrues to the organization its e lf. Thus, in Mills v. Electric Auto-Lite Co., the Court assessed attorney's fees a g a in s t the company, in favor of the plaintiff who had sued alleging that the proxy s ta te m e n t was misleading in violation of the Securities Exchange Act of 1934. 396 U .S . 375. The Court's rationale was that by ensuring fair and informed corporate s u ffra g e , the plaintiff's action had benefitted the company as a whole, thus each s h a re h o ld e r is proportionately benefitted, Id. at 628, even if a given shareholder did n o t acquire his shares until afterwards ­ for if the company itself has benefitted, then th a t benefit travels with each share through future transactions. In the instant case,

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th e re is no allegation that the company as a whole has benefitted (again, plaintiff's s u it, unlike Mills, was not a derivative suit), the only alleged benefit is the $58 million in c re a s e in share price, which clearly did not travel with the share, but rather was p o c k e te d by the previous shareholders. D is tin g u is h in g between ownership of shares at given moments in time is c e r ta in ly a practice that historically has no place within most corporate law contexts. H o w e v e r, it is relevant in the instant context, because the corporation is merely the e n tity through which the individual beneficiary's contribution is effected. See

A ly e s k a , 421 U.S at 276 (Marshall, J., dissenting). This point is illustrated in Vice C h a n c e llo r Lamb's opinion in In re First Interstate Bancorp Consol. Shareholder L itig a tio n , a case, like the instant case, in which shareholder plaintiffs sought a tto rn e y's fees by arguing that their suit led to a merger that resulted in a higher per s h a re stock price for all shareholders. 756 A.2d 353, 356 (Del. Ch. 1999). In re a c h in g the conclusion that it was appropriate to award plaintiff's fees out of the c o rp o ra te coffers, Lamb was careful to point out that there would not be fee shifting, b e c a u s e the acquisition of the company was for stock in the acquiring company, not c a s h . Id. at 360. Thus, the current stockholders in the acquiring company (i.e., the s to c k h o ld e r s having to pay the attorney's fees) were, in some substantial degree, fo rm e r stockholders in the acquired company (i.e., the beneficiaries receiving a h ig h e r value for their shares). Id. The instant case, however, presents the exact o p p o s ite scenario as the transaction was for cash, not stock, thus, there is no

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o ve rla p between the current Midwest stockholders (i.e., the stockholders having to p a y the attorney's fees) and the former Midwest stockholders (i.e., the beneficiaries re c e ivin g a higher value for their shares). U ltim a te ly, neither party has invited the court's attention to relevant case law r e g a rd in g this important issue as to whether there is identity of interest between b e n e fic ia ry former shareholders, and an ongoing corporate entity owned by all new s h a re h o ld e rs . However, the court's own research has disclosed three cases that are p a r tic u la r ly relevant. The first such case is O'Neill v. Church's Fried Chicken, Inc., 9 1 0 F.2d 263 (5th Cir. 1990). The facts of O'Neill, for present purposes, are almost id e n tic a l to those in the instant case. O'Neill filed suit in order to compel Church's b o a rd to consider a tender offer it had previously refused. Id. at 264-65. Her claim w a s ultimately mooted based upon the board's eventual decision to sell the company to the highest bidder. Id. O'Neill, thereafter, sought attorney's fees from Church's, a rg u in g that her efforts had, by increasing the value of Church's stock, conferred a s u b s ta n tia l benefit upon Church's and its shareholders. Id. at 266. The district court g ra n te d attorney's fees to be paid by Church's. Id. Church's appealed to the Fifth C irc u it, arguing "that the district court was clearly erroneous in finding that [the] in c re a s e d tender price conferred a substantial benefit on the corporation as opposed to the individual shareholders who accepted the offer."7 Id. (emphasis in original).

Clearly, a m a jo r distinction between the instant case and O'Neill is the issue of causation. However, th is issue is irrelevant to the court's present analysis of whether recovery under either the com m o n fund or t h e com m o n benefit doctrines is even available in the instant scenario.

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C h u rch 's "point[ed] out . . . that [] the current owner of the company[] did not receive a n y benefit from O'Neill's [] action, but "was directly injured by being forced to pay a higher price to acquire the stock." Id. (emphasis in original). The court of appeals w a s unpersuaded, and required Church's to pay plaintiff's attorney's fees. Id. at 267. T h e facts in O'Neill are almost identical with those found in the instant case a n d , owing to a crucial distinction, reaches the opposite conclusion this court re a c h e s . O'Neill's suit was a derivative action. The instant case was not a derivative a c tio n . Thus, the following rationale, on which the O'Neill court relied in reaching its d e c is io n , is not applicable in the instant case: T h e increased price per share in the tender offer was a benefit enjoyed e q u a ll y by all shareholders, solely in their capacities as such, in p ro p o rtio n to their share of ownership in the corporation. In the context o f a tender offer, this benefit of the derivative action may therefore be d e e m e d to have accrued to the corporation; and the corporation a c c o rd in g ly is properly made subject to a claim for attorney's fees by th e shareholder whose derivative action on its behalf brings about the b e n e f it . Id . Conversely, in the instant case, because plaintiff's suit was not a derivative a c tio n , it was not brought on behalf of Midwest. The fact that the action in O'Neill w a s derivative was the basis on which the O'Neill court distinguished it from a similar S e c o n d Circuit case, Christensen v. Kiewit-Murdock Inv. Corp., 815 F.2d 206 (2d C ir. 1987). Christensen also involved shareholders alleging that their actions led to a higher per share price by facilitating a tender offer that would not have otherwise o c c u rre d . Id. at 210-11. The Second Circuit Court of Appeals rejected these claims s ta tin g that there was no fund out of which to pay the attorney's fees, and that -17-

a s s e s s m e n t of the fee against the acquiring corporation would mean the fee would n o t "be taxed against persons who have derived benefit from appellants' law suit." Id . at 211 (emphasis added); see also Junker v. Crory, 650 F.2d 1349 (5th Cir. 1981) (a c c o rd ). The O'Neill court, in reaching its ruling that fees could be assessed a g a in s t the corporate entity, pointed out that Christensen and Junker were not d e riva tive suits, thus distinguishable. T h e importance to the holding in O'Neill of the derivative nature of the action is underscored by reference to a later Sixth Circuit case, Wyser-Pratte v. Van Dorn C o ., 49 F.3d 213 (6th Cir. 1995). W y s e r-P r a tte argued that his efforts to compel Van D o rn 's board to accept an acquisition offer had created a higher per share value for e a c h of Van Dorn's shareholders at the time of the acquisition. Id. at 215-17. W yse r-P r a tte cited O'Neill for the proposition that "disbursement of the common fund to the shareholders does not preclude a fee award under the common fund d o c trin e ." Wyser-Pratte, 49 F.3d at 218. The court disagreed. It pointed out that O 'N e ill was a derivative suit, and Texas law (the applicable law in O'Neill) held that "s h a re h o ld e rs who pursue a successful derivative suit [are allowed] to recover their a tto rn e y's fees from the corporation if they show that they have conferred a s u b s tan tia l benefit to the corporation through their efforts." Wyser-Pratte, 49 F.3d a t 218. It was the foregoing law, not the common fund doctrine, the Wyser-Pratte c o u rt explained, which justified the award of attorneys fees against the corporation in O'Neill. Wyser-Pratte, 49 F.3d at 218. The court thus refused to assess

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a tto rn e y's fees against Van Dorn. As the instant case was not a derivative case, the ra tio n a le expressed in Wyser-Pratte is more applicable than the rationale expressed in O'Neill, and further supports the court's determination that neither the common fu n d nor common benefit doctrine support taxing attorney's fees against Midwest. A s s u re d ly, the above analysis is vulnerable to criticism. The court is well a w a r e that an acquiring company assumes the liabilities of the company it acquires. W e re one not to draw a distinction between the individual shareholders and the c o r p o r a tio n (which typically one does not do in a corporate law context), then c e rta in ly one would have to hold ­ if plaintiff could show the requisite causation ­ th a t Midwest, regardless of who the shareholders now are, should, under the c o m m o n benefit doctrine (if that doctrine is valid under W is c o n s in law), pay plaintiff's a tto rn e y's fees. However, the range of common fund and common benefit cases fo r m a spectrum. At one end of the spectrum is a pure common fund case, in which d e d u c tin g attorney's fees from the fund is clearly permissible. At the other end of the s p e c tru m is a case in which there is a common benefit, but there is a lack of identity b e tw e e n the beneficiaries and the defendant, thus making deduction of fees from the d e fe n d a n t's coffers nothing more than fee shifting, which is clearly impermissible. A t some point a court has to draw a line on that spectrum, and say that anything that fa lls to one side is permissible, and anything that falls to the other is not. W h ic h side o f that line this case falls on results directly from whether or not one distinguishes b e tw e e n the individual shareholders and the corporate entity. Based on the facts,

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a s well as the above case law and analysis, the court holds that it would be in e q u ita b le in the instant case not to so distinguish between the beneficiary previous s h a re h o ld e rs and the ongoing corporate entity. Accordingly, plaintiff, even if it could s h o w causation, could not recover under the common fund doctrine or the common b e n e fit doctrine, as allowing plaintiff to do so would constitute fee shifting. 2) Failure to Show Causation E ve n if the above analysis is categorically wrong, and the common benefit d o c trin e does allow for recovery in the instant scenario, plaintiff's motion nonetheless fa ils , for plaintiff has failed to demonstrate the requisite causation. As previously s ta te d , the Delaware causation presumption does not apply under W is c o n s in law, th u s , the onus is on plaintiff to show that its actions caused the benefit to accrue. S e e Aon Risk Servs., Inc. v. Liebenstein, 2006 W I App 4, ¶ 7, 710 N.W .2 d 175, ¶ 7 ("P e rh a p s the broadest and most accepted idea is that the person who seeks court a c tio n should justify the request, which means that the plaintiffs bear the burdens on the elements in their claims."), overruled in part on other grounds by Burbank G re a s e Servs., LLC v. Sokolowski, 2006 W I 103, ¶ 33, 717 N.W .2 d 781, ¶ 33. W h ile "[i]t is true that common fund [and common benefit] cases typically hinge on s o m e form of court-ordered relief[,]" the fact that plaintiff's "suit was dismissed for m o o tne s s is not in itself dispositive." Consolidated Edison Co. of N.Y., Inc. v. B o d m a n , 445 F.3d 438, 456-57 (D.C. Cir. 2006). However, often, though an action is rendered moot, the record will "offer no plausible explanation for the defendant's

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a c tio n s other than the lawsuit itself[,]" id., thus allowing the court to find sufficient c a u s a tio n . That is not the case in the instant suit. M id w e s t's brief details the many factors that influenced the board's decision to entertain acquisition offers. (Def. Br. Opp. Mot. Atty's Fees at 28). Particularly re le va n t is the fact that Midwest's board was being advised at all relevant times (in c lu d in g before the instant suit was filed) by experienced mergers and acquisitions c o u n s e l from well respected law firms. (Id.) Additionally, four months before plaintiff file d suit, Midwest's board engaged Goldman Sachs to assist in evaluating AirTran's in itia l offer, and Goldman Sachs continued to advise the board on all subsequent o ffe rs . (Id.). Lastly, there were a myriad of events and factors, wholly separate from th e lawsuit, that were each undoubtedly far more influential on Midwest's decisions. T h e s e include the annual shareholder's meeting at which the shareholders voted in A irT ra n 's directors, thus signaling the shareholders' interest in an acquisition, as well a s Midwest's disappointing financial performance, thus increasing the appeal of b e in g acquired. However, perhaps most damning to plaintiff's cause is plaintiff's in a b ility to point to any evidence indicating that the lawsuit had any impact on M id w e s t whatsoever. Indeed, it would appear plaintiff pinned its hope on the court a d o p tin g the Delaware causation presumption, for plaintiff's entire argument is based o n the correlation in time between plaintiff's legal maneuverings and Midwest's a c tio n s . Correlation does not equal causation and, as previously described, there w e re numerous other, far more compelling, motivating factors influencing Midwest's

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b e h a vio r. Thus, plaintiff has failed to satisfy the burden necessary to carry this m o tio n . C O N C L U S IO N P la in tiff seeks attorney's fees from Midwest under the common fund doctrine. H o w e v e r, there is no fund from which to deduct said fees, thus plaintiff cannot s u c c e e d . Construing plaintiff's motion as falling under the common benefit doctrine d o e s not change the result, for there is no identity of interest between Midwest and th e beneficiaries, thus a fee award against Midwest would constitute fee shifting. T h e same would also be true for any attempted recovery against Midwest under the c o m m o n fund doctrine. Independently, plaintiff has simply failed to show that it c a u s e d the benefit for which it seeks to recover. For each of these reasons, the c o u rt is obliged to deny plaintiff's motion. A c c o rd in g ly, IT IS ORDERED that plaintiff's Motion for Attorney's Fees and Litigation Costs a n d Expenses (Docket #38) be and the same is hereby DENIED. D a te d at Milwaukee, W is c o n s in , this 15th day of September, 2009. BY THE COURT:

J .P . Stadtmueller U .S . District Judge

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