Capstar Fin. Holdings, Inc. v. Gaylon M. Lawrence & the Lawrence Grp., No. 3:17-cv-01421

CourtUnited States District Courts. 6th Circuit. United States District Court of Middle District of Tennessee
Writing for the CourtWAVERLY D. CRENSHAW, JR., CHIEF UNITED STATES DISTRICT JUDGE
Citation333 F.Supp.3d 794
Docket NumberNo. 3:17-cv-01421
Decision Date24 September 2018
Parties CAPSTAR FINANCIAL HOLDINGS, INC., Plaintiff, v. Gaylon M. LAWRENCE and The Lawrence Group, Defendants.

333 F.Supp.3d 794

CAPSTAR FINANCIAL HOLDINGS, INC., Plaintiff,
v.
Gaylon M. LAWRENCE and The Lawrence Group, Defendants.

No. 3:17-cv-01421

United States District Court, M.D. Tennessee, Nashville Division.

Filed September 24, 2018


333 F.Supp.3d 796

James N. Bowen, Steven Allen Riley, Riley, Warnock & Jacobson, Nashville, TN, Scott Stevenson, Stephen R. DiPrima, Wachtell, Lipton, Rosen & Katz, New York, NY, for Plaintiff.

Austin K. Purvis, V. Austin Shaver, John S. Hicks, Baker, Donelson, Bearman, Caldwell & Berkowitz, PC, Christopher E. Thorsen, Bradley Arant Boult Cummings LLP, Nashville, TN, for Defendants.

MEMORANDUM OPINION

WAVERLY D. CRENSHAW, JR., CHIEF UNITED STATES DISTRICT JUDGE

When Gaylon Lawrence attempted a creeping takeover of Capstar Financial Holdings, Inc. ("Capstar"), by buying over 10% of Capstar's stocks, Capstar filed this action to stop him. Before the Court is Defendants' Motion to Dismiss. (Doc. No. 22.) For the following reasons, the Motion is granted in part and denied in part.

I. ALLEGATIONS

After four years of growth, on July 1, 2016, Capstar filed a preliminary prospectus for an initial public offering of its common stock on the NASDAQ Global Select Market. (Doc. No. 1 at 5.) Days later, Lawrence called Capstar's Chief Executive Officer Claire Tucker and indicated that he would like to acquire Capstar. (Id. ) On behalf of Capstar, Tucker rejected Lawrence's advances, but informed him that she would notify the Chairman of Capstar's Board of Directors, Dennis Buttorff, of Lawrence's interest. (Id. ) Lawrence then called Buttorff himself and arranged a lunch meeting to express his desire to acquire Capstar. (Id. )

On August 29, 2016, Capstar filed a registration statement with the Securities and Exchange Commission. (Id. ) Two days later, The Lawrence Group, a company Lawrence uses as his "investment vehicle" (id. at 1) but is not registered with the Federal Reserve Board as a bank holding company (id. at 15), submitted a letter proposal offering to acquire Capstar or, alternatively, a majority of its shares. (Id. at 5-6.) Two days later, Capstar's Board of Directors voted unanimously to decline The Lawrence Group's proposal and proceed with Capstar's initial public offering. (Id. at 6.) The Lawrence Group subsequently sent letters to two of Capstar's largest shareholders and separately requested to purchase all of their stock, totaling more than 30% of Capstar's stock. (Id. ) The shareholders declined. (Id. )

Eleven months after Capstar released its initial public offering, Lawrence began purchasing Capstar stock. (Id. ) On August 11, 2017, Lawrence filed a Schedule 13D form with the Securities and Exchange Commission, which is required whenever a person or group acquires over five percent of a company's stock. (Id. at 7.) The Schedule 13D indicated that Lawrence was purchasing

333 F.Supp.3d 797

stock that, in the aggregate, would put him as a 6.2 percent owner. (Doc. No. 20-1 at 3.) Lawrence described his purpose of acquiring Capstar's stock under Item 4 of the form:

The Reporting Person acquired the securities described in Schedule 13D for investment purposes, and he intends to review his investments in the Issuer on a continuing basis. Any actions the Reporting Person might undertake may be made at any time and from time to time without prior notice and will be dependent upon the Reporting Person's review of numerous factors....

Depending upon overall market conditions, other investment opportunities available to the Reporting Person, and the availability of the Issuer's securities at prices that would make the purchase or sale of the Issuer's securities desirable, the Reporting Person may acquire additional securities of the Issuer, or retain or sell all or a portion of the securities then held, in the open market or in privately negotiated transactions.

The Reporting Person and his representatives may, from time to time, engage in discussions with members of the management and the board of directors of the Issuer.... Except as set forth above, the Reporting Person has no present plans or proposals which relate to or would result in any of the transactions required to be described in Item 4 of Schedule 13D.

(Id. at 4.) Two weeks later, Lawrence amended his Schedule 13D to reflect that he had purchased more stock and he was a 7.2 percent owner of Capstar. (Doc. No. 1 at 7; Doc. No. 20-2.) He did not amend his Item 4 disclosure. (Doc. No. 1 at 7; Doc. No. 20-2.) Lawrence amended his Schedule 13D three more times in the next two months, each time increasing the percentage of stock he owned, but he never amended his Item 4 disclosure. (Doc. No. 1 at 7; Doc. No. 20-3; Doc. No. 20-4; Doc. No. 20-5.) His final disclosure, filed on October 17, 2017, indicated that he had purchased in the aggregate 10.2 percent of Capstar's shares. (Doc. No. 1 at 7.) The Schedule 13D disclosures did not mention The Lawrence Group, but instead disclosed that Lawrence himself owned the stock. (Id. at 8-9.) Lawrence did not notify the Federal Reserve Board that he intended to purchase over ten percent of Capstar's stocks. (Id. at 10.)

II. Standard of Review

For the purposes of a motion to dismiss under Rule 12(b)(6), the Court must take all of the factual allegations in the complaint as true. Ashcroft v. Iqbal, 556 U.S. 662, 677, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim for relief that is plausible on its face. Id. 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. Id. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice. Id. When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief. Id. at 679. A legal conclusion couched as a factual allegation need not be accepted as true on a motion to dismiss, nor are recitations of the elements of a cause of action sufficient. Fritz v. Charter Township of Comstock, 592 F.3d 718, 722 (6th Cir. 2010).

III. Analysis

The Complaint alleges three causes of action against Lawrence and The Lawrence Group: (1) filing a misleading Schedule 13D disclosure, in violation of Section 13(d) of the Exchange Act,

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1 practice notes
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    • September 24, 2018
    ...Blanch's accounts as included in her bankruptcy, closed, and with a zero balance. Blanch does not dispute that her personal obligation 333 F.Supp.3d 794to pay any amount once due on either account was discharged by her bankruptcy, and she does not contend that Macy's or Citibank ever made a......
1 cases
  • Blanch v. Trans Union, LLC, NO. 3:17-cv-01494
    • United States
    • United States District Courts. 6th Circuit. United States District Court of Middle District of Tennessee
    • September 24, 2018
    ...Blanch's accounts as included in her bankruptcy, closed, and with a zero balance. Blanch does not dispute that her personal obligation 333 F.Supp.3d 794to pay any amount once due on either account was discharged by her bankruptcy, and she does not contend that Macy's or Citibank ever made a......

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