Beatty v. JRMB II, Inc.

• Decision Date: 06 June 2013
• Docket Number: Case No. CIV-12-1021-M
• Parties: BARBARA BOYD BEATTY, et al., Plaintiffs, v. JRMB II, INC., et al., Defendants.
• Court: U.S. District Court — Western District of Oklahoma

BARBARA BOYD BEATTY, et al., Plaintiffs, v. JRMB II, INC., et al., Defendants.

Case No. CIV-12-1021-M

UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF OKLAHOMA

ORDERED: June 6, 2013

ORDER

Before the Court is defendants' Motion to Dismiss, filed October 19, 2012. On November 27, 2012, plaintiffs filed their response, and on December 11, 2012, defendants filed their reply. Based upon the parties' submissions, the Court makes its determination.

I. Introduction

Plaintiffs are three former minority shareholders in J.R. Montgomery Bancorporation ("JRMB"), FSNB, and CNB (collectively, "the Companies"). Plaintiffs allege that, on December 28, 2010, they were cashed out of their ownership by certain transactions of defendants Zelda M. Davis, John R. Davis, Roma Lee Porter, George L. Porter, and Tresea M. Moses (collectively, "the Individuals") during a merger and reorganization. The Office of Comptroller of the Currency ("OCC") approved defendants' merger and reorganization.¹

The Individuals collectively controlled the Companies, comprising a majority ownership and a majority of the directors and executive officers. According to plaintiffs, each of the Individuals have a familial relationship to the others. Plaintiffs allege that they conspired and orchestrated a scheme to squeeze out minority shareholders of the Companies for the purpose of consolidating familial ownership and control of the Companies. Plaintiffs further allege that the Individuals, acting without any Board of Director approval and without observing corporate formalities, selected the shareholders who would be allowed to continue and the shareholders who would be eliminated.

According to plaintiffs, defendants mailed three information statements to minority shareholders, with each statement containing misleading statements and omissions of material facts. Plaintiffs allege that if the material facts were properly disclosed, plaintiffs would have exercised their appraisal rights and had their stock valued in an appraisal proceeding.

On September 13, 2012, plaintiffs filed their Complaint, alleging, inter alia, violations of Section 10(b) of the Exchange Act and Rule 10b-5. Defendants move to dismiss this matter on the following grounds: (1) preemption; (2) plaintiffs have failed to state a claim under Section 10(b) or Rule 10b-5; and (3) plaintiffs have failed to state their allegations with the requisite particularity.

II. Standard

A. Federal Rule of Civil Procedure 12(b)(6)

Regarding the standard for determining whether to dismiss a claim pursuant to Rule 12(b)(6), the United States Supreme Court has held:

To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face. A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Theplausibility standard is not akin to a "probability requirement," but it asks for more than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts that are merely consistent with a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief.

Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (internal quotations and citations omitted). Further, "where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged - but it has not shown - that the pleader is entitled to relief." Id. (internal quotations and citations omitted). Additionally, "[a] pleading that offers labels and conclusions or a formulaic recitation of the elements of a cause of action will not do. Nor does a complaint suffice if it tenders naked assertion[s] devoid of further factual enhancement." Id. at 1949 (internal quotations and citations omitted).

B. Fraud

Federal Rule of Civil Procedure 9(b) provides, in pertinent part: "In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake." Fed. R. Civ. P. 9(b). "At a minimum, Rule 9(b) requires that a plaintiff set forth the 'who, what, when, where, and how' of the alleged fraud . . . and must set forth the time, place, and contents of the false representation, the identity of the party making the false statements and the consequences thereof." United States ex rel. Sikkenga v. Regence Bluecross Blueshield of Utah, 472 F.3d 702, 726-27 (10th Cir. 2006) (internal quotations and citations omitted).

Additionally, in the Private Securities Litigation Reform Act of 1995 ("PSLRA"), 15 U.S.C. § 78u-4(b), Congress has set forth further pleading requirements for private securities fraud actions. See Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 313 (2007). Specifically, "[t]he PSLRA requires plaintiffs to state with particularity both the facts constituting the alleged violation,and the facts evidencing scienter, i.e., the defendant's intention 'to deceive, manipulate, or defraud.'" Id. (citing 15 U.S.C. § 78u-4(b)(1), (2); Ernst & Ernst v. Hochfelder, 425 U.S. 185, 194, and n. 12). "As set out in § 21D(b)(2) of the PSLRA, plaintiffs must 'state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind.'" Id. at 314 (quoting 15 U.S.C. § 78u-4(b)(2)).

[T]o determine whether a complaint's scienter allegations can survive threshold inspection for sufficiency, a court governed by § 21D(b)(2) must engage in a comparative evaluation; it must consider, not only inferences urged by the plaintiff . . . , but also competing inferences rationally drawn from the facts alleged. An inference of fraudulent intent may be plausible, yet less cogent than other, nonculpable explanations for the defendant's conduct. To qualify as "strong" within the intendment of § 21D(b)(2), we hold, an inference of scienter must be more than merely plausible or reasonable—it must be cogent and at least as compelling as any opposing inference of nonfraudulent intent.

Id.

III. Discussion

A. Preemption

When addressing questions of preemption, a court must begin its analysis "with the assumption that the historic police powers of the States [are] not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress." Altria Grp., Inc. v. Good, 555 U.S. 70, 77 (2008) (internal quotation and citation omitted). In determining whether a federal statute preempts state law, the United States Supreme Court has opined that a court must answer a question of congressional intent. Barnett Bank of Marion Cnty., N.A. v. Nelson, 517 U.S. 25, 30 (1996) (citations omitted). Specifically, "[d]id Congress, in enacting the Federal Statute, intend to exercise its constitutionally delegated authority to set aside the laws of a State? If so, the Supremacy Clauserequires courts to follow federal, not state, law." Id. The Supreme Court further opined that:

Sometimes courts, when facing the pre-emption question, find language in the federal statute that reveals an explicit congressional intent to pre-empt state law. More often, explicit pre-emption language does not appear, or does not directly answer the question. In that event, courts must consider whether the federal statute's "structure and purpose," or nonspecific statutory language, nonetheless reveal a clear, but implicit, pre-emptive intent. A federal statute, for example, may create a scheme of federal regulation "so pervasive as to make reasonable the inference that Congress left no room for the States to supplement it." Alternatively, federal law may be in "irreconcilable conflict" with state law. Compliance with both statutes, for example, may be a "physical impossibility," or, the state law may "stan[d] as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress."

Id. at 31 (internal citations omitted).

The National Bank Act, 12 U.S.C. § 215a, provides, in pertinent part: "One or more national banking associations or one or more State banks, with the approval of the Comptroller, under an agreement not inconsistent with this subchapter, may merge into a national banking association located within the same State, under the charter of the receiving association." 12 U.S.C. § 215a(a). Thus, the Act "governs the merger of national banks with state or other national banks." State of Colo. ex rel. Colo. State Banking Bd. v. Resolution Trust Corp., 926 F.2d 931, 938 n.14 (10th Cir. 1991).

Congress originally enacted § 215a's sections governing bank mergers and consolidations with the goal of simplifying the merger of national bank associations. Comty. Bank of Ariz. v. G.V.M. Trust, 366 F.3d 982, 986 (9th Cir. 2004); NoDak Bancorporation v. Clarke, 998 F.2d 1416, 1422 (8th Cir. 1993). "When 12 U.S.C. § 215a(b) was amended in 1952, Congress' motivation was to bring the National Bank Act into parity with state statutes." NoDak Bancorporation, 998 F.2dat 1422. Congress final procedural amendments to § 215a sought to further simplify and expedite the merger and consolidation process. Id.

Having carefully reviewed the parties' submissions, the Court finds that § 215a does not preempt plaintiffs' Oklahoma tort and securities claims. Here, the crux of defendants' argument is that "Section 215a's purpose . . . would be defeated if [d]efendants are subjected to a collateral attack arising from a merger procedure and appraisal methods that are governed by federal banking law." Defendant's Motion to Dismiss [docket 13] at 27. However, absent further argument as to a specific "irreconcilable conflict" between § 215a and the Oklahoma tort and securities laws at bar, the Court finds that said state laws do not stand as an obstacle to the accomplishment and execution of § 215a's purposes. Moreover, given that one of § 215a's amendments was enacted to bring § 215a into parity with...