Kaufman v. Alexander, 082815 FED3, 14-3293
|Opinion Judge:||GREENAWAY, JR.; Circuit Judge.|
|Party Name:||JEFFREY KAUFMAN, Appellant v. BARBARA T. ALEXANDER; STEPHEN M. BENNETT; DONALD G. CRUICKSHANK; RAYMOND V. DITTAMORE; THOMAS W. HORTON; IRWIN M. JACOBS; PAUL E. JACOBS; ROBERT E. KAHN; SHERRY LANSING; DUANE NELLES; FRANCISCO ROS; BRENT SCOWCROFT; MARC I. STERN; WILLIAM E. KEITEL; STEVEN R. ALTMAN; STEVEN M. MOLLENKOPF; DONALD J. ROSENBERG; QUALCOMM|
|Judge Panel:||Before: GREENAWAY, JR., KRAUSE, GREENBERG, Circuit Judges.|
|Case Date:||August 28, 2015|
|Court:||United States Courts of Appeals, Court of Appeals for the Third Circuit|
Submitted Under Third Circuit L.A.R. 34.1(a) March 26, 2015
ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE (1-11-cv-00217) District Judge: Honorable Richard G. Andrews
Appellant Jeffrey Kaufman, a QualComm, Inc. shareholder, asserts that QualComm's Board Members made material misstatements in two proxy statements and breached their fiduciary duties and various corporate contracts. Five of the Claims on appeal are derivative. On those claims, the District Court appropriately granted summary judgment to the QualComm Board Members ("Individual Directors") because demand was not made and was not excused. As to the two direct Claims, there are no genuine disputes of material fact regarding whether the Individual Directors had the authority to submit for shareholder approval amendments to the relevant compensation plan. We will affirm.
I. FACTUAL AND PROCEDURAL HISTORY
QualComm, Inc. is a Delaware Corporation. On December 5, 2005, QualComm's Board passed a formal resolution approving the 2006 Long-Term Incentive Plan ("LTIP").1 Shareholders approved the plan at the 2006 Annual Meeting. In both 2010 and 2011, the Compensation Committee2 approved amendments to the LTIP, which sought increases to the share reserve. Per Section 16 of the LTIP, "[t]he Board or the Committee may amend, suspend or terminate the Plan at any time. However, without the approval of the Company's stockholders, there shall be  no increase in the maximum aggregate number of shares of Stock that may be issued under the Plan . . . ." J.A. 483. The amendments were submitted for shareholder approval in the 2010 and 2011 Proxy Statements respectively and the shareholders approved both amendments.
On March 11, 2011, plaintiff Kenneth Hoch filed the original complaint against the Individual Directors and QualComm, Inc. (collectively "Appellees"), 3 which alleged that certain statements in the 2011 Proxy violated specified Treasury regulations precluding QualComm, Inc. from receiving tax deductions under 26 U.S.C. § 162(m). After the District Court granted in part a motion to dismiss, in the first of many iterations of the allegations, Hoch filed an amended complaint, which included four direct claims and six derivative claims. On July 2, 2013, the District Court granted in part a second motion to dismiss, which left unresolved Claims II, III, VIII, IX, X, XI, XII, and XIII. On July 12, 2013, Hoch and Appellant Kaufman filed the second amended verified complaint, which left the claims unchanged but substituted the plaintiff from Hoch to Kaufman. Kaufman v. Alexander, 62 F.Supp. 3d 395, 397 n.2 (D. Del. 2014). The Individual Directors moved for summary judgment. Appellant cross-moved for partial summary judgment. On June 11, 2014, the District Court granted the Individual Directors' motion for summary judgment. On that same day, but in a separate Memorandum Order, the District Court granted QualComm, Inc.'s motion for summary judgment. Kaufman timely appealed the District Court's grant of summary judgment as to all Appellees.
II. LEGAL STANDARDS
The District Court had jurisdiction pursuant to 28 U.S.C. § 1332. We have jurisdiction pursuant to 28 U.S.C. § 1291. "We review a district court's grant of summary judgment de novo, applying the same standard the district court applied." In re G-I Holdings, Inc., 755 F.3d 195, 201 (3d Cir. 2014) (internal quotation marks and citation omitted). "'We also review the legal interpretation of contractual language de novo.'" Id. (quoting Viera v. Life Ins. Co. of N. Am., 642 F.3d 407, 413 (3d Cir. 2011)). We may affirm on any ground supported by the record. Hildebrand v. Allegheny Cnty., 757 F.3d 99, 104 (3d Cir. 2014).
The only claims remaining in the instant appeal are Claims II, III, VIII, IX, XI, XII, and XIII. Delaware law applies to Claims VIII and XI; Delaware law also provides the substantive requirements for the issue of demand futility, which implicates Claims II, III, 4 IX, XII, and XIII.5
A. Demand Futility6
Federal Rule of Civil Procedure 23.1(b)(3) requires a shareholder filing a derivative suit to make a particularized pleading of "(A) any effort by the plaintiff to obtain the desired action from the directors or comparable authority and, if necessary, from the shareholders or members; and (B) the reasons for not obtaining the action or not making the effort." This demand requirement "afford[s] the directors an opportunity to exercise their reasonable business judgment and waive a legal right vested in the corporation in the belief that its best interests will be promoted by not insisting on such right." Kamen v. Kemper...
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