Braun v. Nev. Chem.s Inc., 20090493-CA
| Decision Date | 09 July 2010 |
| Docket Number | No. 080919636,No. 20090493-CA,20090493-CA,080919636 |
| Parties | Irving S. Braun,individually and on behalf of all others similarly situated,Plaintiff and Appellant, v. Nevada Chemicals, Inc.; E.Bryan Bagley; Nathan L. Wade; John T. Day; James E. Solomon; M. Garfield Cook; Nevada Chemicals, Inc.;Oaktree Capital Management,LP; Calypso Acquisition Corp.;Cyanco Holding Corp.; and OCM Principal Opportunities Fund IV, LP,Defendants and Appellees. |
| Court | Utah Court of Appeals |
Jon V. Harper and Heather M. Sneddon, Salt Lake City, for Appellant
Robert S. Clark, Stephen E. Hale, Jenifer L. Tomchak, Mark F. James, and Phillip J. Russell, Salt Lake City, for Appellees
This opinion is subject to revision before publication in the Pacific Reporter.
For Official Publication
Third District, Salt Lake Department
The Honorable Sandra N. Peuler
Before Judges Thorne, Voros, and Roth.
¶1 Plaintiff Irving S. Braun owned two hundred shares of the more than seven million outstanding shares of Defendant Nevada Chemicals, Inc. He challenged the sale of Nevada Chemicals to Defendants Oaktree Capital Management, LP; Calypso Acquisition Corp.; Cyanco Holding Corp.; and OCM Principal Opportunities Fund IV, LP ("the Buyout Group"). Plaintiff initially brought a direct class action against the Buyout Group, Nevada Chemicals, and individual directors of Nevada Chemicals (collectively, Defendants) but later amended his complaint, changing it to a derivative action. In both actions, he claimed that Defendants "breached their fiduciary duties and negotiated the merger for inadequate consideration due to their own self-interests." The trial court dismissed Plaintiff's action for lack of standing. We affirm.
¶2 On September 5, 2008, Nevada Chemicals announced it had signed an agreement to be acquired by the Buyout Group via a tender offer for $13.37 per share. Before the deadline for Nevada Chemicals to file their required disclosures with the Securities and Exchange Commission, Plaintiff filed a direct class action suit alleging that Defendants had breached their fiduciary duties by failing to negotiate an adequate purchase price and by failing to disclose material information about the transaction. Defendants moved to dismiss Plaintiff's complaint, arguing that Plaintiff was required to bring his claim in a shareholder derivative action rather than as a direct claim. Defendants also alleged that Plaintiff had failed to satisfy the conditions precedent for asserting a shareholder derivative action. Plaintiff countered that his claim was properly pleaded as a direct class action claim but that if he needed to bring a shareholder derivative action, he had standing to do so. Plaintiff attached to his response a proposed Verified Amended Derivative Complaint for Breach of Fiduciary Duty. He also moved for a preliminary injunction to halt the acquisition.
¶3 On October 15, 2008, the trial court held a hearing on Defendants' motion to dismiss and Plaintiff's motion for a preliminary injunction (the October 15 hearing). At the hearing, the trial judge indicated that she thought the action should probably be derivative rather than direct, but she invited argument on the question. Defendants agreed to Plaintiff's amending his complaint so long as he did not contest their motion to dismiss. But if he opposed their motion to dismiss and lost, they reserved the right to argue that the dismissal should be with prejudice and to oppose his motion to amend. Faced with this choice, Plaintiff agreed to withdraw his direct claim and amend his complaint to state a derivative claim. He also withdrew his motion for a preliminary injunction. Defendants' motion to dismiss was accordingly rendered moot.
¶4 No preliminary injunction having been entered, the tender offer was completed and, seven days after the hearing, the Buyout Group acquired the tendered shares. That same day, Plaintiff filed his Verified Amended Derivative Complaint for Breach of Fiduciary Duty. The next day, October 23, 2008, the trial courtentered an order memorializing the October 15 hearing (the October 23 Order). That order recited that Plaintiff had formally withdrawn his motion for a preliminary injunction and ordered him to file an amended derivative complaint no later than October 22, 2008, which Plaintiff had in fact done the previous day.
¶5 Defendants moved to dismiss Plaintiff's amended derivative complaint on the ground that he lacked standing. He lacked standing, Defendants argued, because as a result of the completed acquisition he was no longer a shareholder in Nevada Chemicals. Plaintiff responded that he did have standing and that it would be unfair to extinguish his right to bring a derivative claim. On May 11, 2009, the trial court granted Defendants' motion to dismiss (May 11 Order). The court ruled that "Plaintiff lacks standing to bring a derivative action inasmuch as he is no longer a shareholder of Nevada Chemicals, Inc., and therefore does not fairly and adequately represent the interests of the shareholders." The trial court also observed that "Plaintiff's remedy for the claims alleged in the Amended Derivative Complaint is to exercise his statutory right to an appraisal of his shares" as provided by Utah Code section 16-10a-1302, see Utah Code Ann. § 16-10a-1302 (2009). Plaintiff appeals from this order.
¶6 Plaintiff first contends that the trial court erred in ruling that his claim was derivative rather than direct. Because the trial court never ruled one way or the other on this point, we have no order to review. Plaintiff next contends that the trial court erred in stating that Plaintiff's sole remedy was appraisal of his shares under Utah Code section 16-10a-1302. However, Plaintiff concedes that this ruling was unnecessary once the trial court determined that he lacked standing to bring a derivative action. The ruling was therefore advisory only, and for that reason, we do not review it. See Summit Water Distrib. Co. v. Summit County, 2005 UT 73, ¶ 50, 123 P.3d 437 (). Finally, Plaintiff does not challenge the trial court's ruling that he lacked standing to bring a derivative claim.
¶7 At the outset, Defendants contend that Plaintiff's appeal suffers from two procedural flaws. First, they argue that Plaintiff's claim is not properly before this court because he "is not challenging the order from which he is appealing, "namely, the trial court's May 11 Order dismissing Plaintiff's derivative action for lack of standing. Second, they argue that Plaintiff cannot challenge the trial court's dismissal of his direct claim because the court did not dismiss that claim; rather, they contend, Plaintiff voluntarily withdrew it.
¶8 In support of their first argument, Defendants cite no authority. Nevertheless, our cases have long held that a party may not appeal from a judgment in his or her favor. See, e.g., Klinge v. Southern Pac. Co., 89 Utah 284, 57 P.2d 367, 376 (1936). So if Plaintiff indeed had no quarrel with the trial court's final order of dismissal--if Plaintiff was content to have his complaint dismissed and simply challenged the ground on which it was dismissed--this appeal might not be properly before us. But that is not the situation.
¶9 Plaintiff appeals from a final order dismissing his derivative claim on the ground that he lacks standing to assert it. He lacks standing, the trial court reasoned, because as a result of the completed acquisition, he was no longer a shareholder of the company.1 Typically, a party appealing from such an order would contend that he does have standing to bring the derivative claim. Plaintiff does not. His opening brief states, "Although he believes it was erroneous, to streamline the issues on appeal [P]laintiff does not challenge the trial court's ruling that completion of a merger eliminates derivative standing." But, he continues, "reversal is required because the case [P]laintiff brought is direct, not derivative." (Emphasis added). Plaintiff thus contends that the trial court erred by dismissing his complaint. However, he argues that the dismissal was error not because the trial court erroneously ruled that helacked standing to bring a derivative suit--he is willing to concede this point for purposes of appeal--but because the trial court erroneously ruled that his claim was derivative. By appealing the trial court's final order, Plaintiff contends, he is entitled to challenge any intermediate ruling that led the court to its final (in his view) erroneous decision. We agree.
¶10 A party appealing from a final order may challenge any intermediate order of the court. See Zions First Nat'l Bank, N.A. v. Rocky Mountain Irrigation, Inc., 931 P.2d 142, 144 (Utah 1997) (); Davis v. Goldsworthy, 2008 UT App 145, ¶ 8 n.2, 184 P.3d 626 (mem.) (same); see also Librizzi v. Children's Mem'l Med. Ctr., 134 F.3d 1302, 1306 (7th Cir. 1998) (). Here, Plaintiff is challenging the dismissal of his complaint, which is a final order. He is therefore entitled to challenge an intermediate order of the court that constitutes one link in the chain of rulings leading to dismissal.
¶11 Defendants' second argument is that the intermediate link at issue here was not an order of the trial court at all, but Plaintiff's own choice to stipulate to amending his complaint from one alleging a direct claim to one alleging a derivative claim. The trial court never ruled, Defendants assert, that Plaintiff's claim must be brought as a...
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