Estate of Flake ex rel. Flake v. Hoskins

• Decision Date: 15 December 2000
• Docket Number: No. CIV.A.98-2450-KHV.,CIV.A.98-2450-KHV.
• Citation: 124 F.Supp.2d 666
• Parties: ESTATE OF John L. FLAKE, by its executor Gloria FLAKE, on behalf of itself and all others similarly situated, Plaintiff, v. William K. HOSKINS, et al., Defendants.
• Court: U.S. District Court — District of Kansas

Page 666

124 F.Supp.2d 666

ESTATE OF John L. FLAKE, by its executor Gloria FLAKE, on behalf of itself and all others similarly situated, Plaintiff, v. William K. HOSKINS, et al., Defendants.

No. CIV.A.98-2450-KHV.

United States District Court, D. Kansas.

December 15, 2000.

Robert L. Howard, Darrell L. Warta, Timothy B. Mustaine, Foulston & Siefkin L.L.P., Wichita, KS, James D. Oliver, Foulston & Siefkin L.L.P., Topeka, KS, Lynda J. Grant, Peter E. Zinman, Goodkind, Labaton, Rudoff & Sucharow LLP, New York, NY, Samuel P. Logan, Logan Law Firm LLC, Olathe, KS, Leigh R. Lasky, Lasky and Rifkind, Ltd., Chicago, IL, C. Maxwell Logan, Bozeman, MT, for John Flake.

Michael Thompson, Brian D. Martin, Blackwell Sanders Peper Martin, LLP, Kansas City, MO, H Douglas Hinson, Rebecca Lamberth, Theodore J Sawicki, Oscar N Persons, Alston & Bird, Atlanta, GA, for William K Hoskins, Barrett Brady, Clarence L Roeder, Kay Nichols Callison, William V Morgan, Mark C Demetree, J.C. Nichols Co.

Michael Thompson, Brian D. Martin, Michael C. Phillips, Blackwell Sanders Peper Martin, LLP, Kansas City, MO, H Douglas Hinson, Rebecca Lamberth, Deborah Evans, Theodore J Sawicki, Craig H Kuglar, Oscar N Persons, Alston & Bird, Atlanta, GA, for Highwoods Properties, Inc.

MEMORANDUM AND ORDER AND ORDER TO SHOW CAUSE

VRATIL, District Judge.

For itself and on behalf of similarly situated class members, the Estate of John L. Flake brings suit against William K. Hoskins, Barrett Brady, Kay Nichols Callison, Mark C. Demetree, William V. Morgan, Clarence L. Roeder, Thomas J. Turner III, Highwoods Properties, Inc. and J.C. Nichols Company ("JCN"), for breach of corporate fiduciary duties and ERISA fiduciary duties and violation of federal securities law. On August 28, 2000, the Court sustained in part defendants' motion for summary judgment. See Memorandum And Order (Doc. # 216) filed August 28, 2000 ("August 28 Order"). This matter comes before the Court on Defendants' Motion To Reconsider (Doc. # 226) filed September 12, 2000 and Defendants' Request For Oral Argument On Their Motion For Reconsideration (Doc. # 248) filed October 27, 2000. Initially, the Court finds that oral argument will not materially assist in the disposition of the instant motions. Accordingly, defendants' request for oral argument is overruled. For reasons set forth below, the Court sustains in part defendants' motion to reconsider.

Motion To Reconsider Standards

The Court has discretion whether to grant a motion to reconsider. See Hancock v. City of Okla. City, 857 F.2d 1394, 1395 (10th Cir.1988). The Court may recognize any one of three grounds justifying reconsideration: an intervening change in controlling law, availability of new evidence, or the need to correct clear error or prevent manifest injustice. See Major v. Benton, 647 F.2d 110, 112 (10th Cir.1981); Burnett v. Western Resources, Inc., 929 F.Supp. 1349, 1360 (D.Kan.1996). A motion to reconsider is not a second opportunity for the losing party to make its strongest case, to rehash arguments, or to dress up arguments that previously failed. See Voelkel v. Gen. Motors Corp., 846 F.Supp. 1482, 1483 (D.Kan.), aff'd, 43 F.3d 1484, 1994 WL 708220 (10th Cir. 1994). Such motions are not appropriate if the movant only wants the Court to revisit issues already addressed or to hear new arguments or supporting facts that could have been presented originally. See Van Skiver v. United States, 952 F.2d 1241, 1243 (10th Cir.1991), cert. denied, 506 U.S. 828, 113 S.Ct. 89, 121 L.Ed.2d 51 (1992).

Analysis

I. Plaintiff's Claims Of Omission/Misrepresentation

Plaintiff alleges that in the proxy discussing the Highwoods transaction, and the letters from JCN to employee stock ownership plan ("ESOP") participants and JCN shareholders, defendants made numerous misrepresentations and omissions which violated federal securities laws, Section 14(a) of the Securities Exchange Act of 1934, 15 U.S.C. § 78n; Section 11 of the Securities Act of 1933, 15 U.S.C. § 77k; and Section 12(a)(2) of the Securities Act of 1933, 15 U.S.C. § 77l. Each statute requires plaintiff to show that the underlying fact was false and that defendants were negligent in not discovering otherwise. See Wilson v. Great Am. Indus., Inc., 855 F.2d 987, 995 (2d Cir.1988); Gould v. Am.-Hawaiian Steamship Co., 535 F.2d 761, 777-78 (3d Cir.1976) (Section 14(a) only requires negligence); Herman & MacLean v. Huddleston, 459 U.S. 375, 382, 103 S.Ct. 683, 74 L.Ed.2d 548 (1983) (Section 11 only requires negligence); Wertheim & Co. v. Codding Embryological Sciences, Inc., 620 F.2d 764, 767 (10th Cir.1980) (Section 12(a)(2) only requires negligence). In its previous order, the Court sustained defendants' motion for summary judgment on several claims but overruled defendants' motion as to ten other alleged misrepresentations and omissions. See August 28 Order at 119-21. Defendants now argue that the Court should have sustained their motion for summary judgment as to five of those misrepresentations and omissions.

A. Misrepresentation That The Reason For The Highwoods Transaction Was To Further JCN's Strategy for Growth

Plaintiff argues that the proxy falsely stated that JCN entered into the Highwoods transaction to further its growth strategy. In their motion for summary judgment, defendants did not address this claim because they thought that the Court had previously dismissed it. See Flake v. Hoskins, 55 F.Supp.2d 1196 (D.Kan.1999). Defendants contend that despite their failure to seek summary judgment on the issue, plaintiff cannot prove that this purported reason for the merger is false, i.e. plaintiff cannot prove that the JCN growth strategy was not a motivating factor for the Highwoods transaction. Given the number of claims remaining for trial and in the interest of judicial efficiency, the Court will construe defendants' motion to reconsider this issue as a supplemental motion for summary judgment. See Cooperman v. David, 23 F.Supp.2d 1315, 1319 (D.Wyo. 1998) (additional factual issues and legal arguments raised in motion to reconsider may warrant reexamination of case within framework of a motion for summary judgment), aff'd, 214 F.3d 1162 (10th Cir.2000); In re Indep. Serv. Orgs. Antitrust Litig., 964 F.Supp. 1479, 1482 (D.Kan.1997) (same). Plaintiff notes that defendants' argument is untimely, but it nevertheless responds on the merits. The Court cannot discern from plaintiff's response, however, whether it has additional evidence to present on the claim. Accordingly, on or before December 27, 2000, plaintiff may present evidence to controvert defendants' contention that plaintiff cannot show that the stated reason for the Highwoods transaction, i.e. to further JCN's strategy for growth, was false.

B. Omission That The Highwoods Transaction Was Defensive In Nature

Plaintiff alleges that the proxy failed to disclose the material fact that the Highwoods transaction was "defensive." In their motion for summary judgment, defendants argued that (1) the truth of this allegation was unsupported by the record; (2) the allegation was merely a disguised breach of fiduciary duty claim; and (3) the allegation was immaterial as a matter of law. See Exhibit A to Memorandum In Support Of Defendants' Motion For Summary Judgment (Doc. # 154) filed April 22 2000. In its previous order, the Court rejected defendants' first two arguments, but it did not address the materiality of the alleged omission.

"An omitted fact is material if there is a substantial likelihood that a reasonable investor would consider it important in deciding how to vote." TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 449, 96 S.Ct. 2126, 48 L.Ed.2d 757 (1976); see Grossman v. Novell, Inc., 120 F.3d 1112, 1119 (10th Cir.1997). "Put another way, there must be a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the `total mix' of information made available." TSC, 426 U.S. at 449, 96 S.Ct. 2126. A proxy need not "characterize disclosed information, as long as there is disclosure of all pertinent facts." Lewis v. Potlatch Corp., 716 F.Supp. 807, 810 (S.D.N.Y. 1989); see Bolger v. First State Fin. Servs., 759 F.Supp. 182, 196 (D.N.J.1991) (plaintiffs did not state a Rule 14a 9 claim by alleging that defendant failed to properly characterize compensation of CEO as "gross overcompensation"); see also Kowal v. MCI Communications Corp., 16 F.3d 1271, 1277 (D.C.Cir.1994) (omission of pejorative characterization is not material under 10b-5 when factual matters are disclosed); Gannon v. Cont'l Ins. Co., 920 F.Supp. 566, 580 (D.N.J.1996) (same). "Although generally more a factual question under the mixed standard of review, the question of materiality is to be resolved as a matter of law when the information is `so obviously important [or unimportant] to an investor, that reasonable minds cannot differ on the question of materiality.'" Connett v. Justus Enters. of Kan., Inc., 68 F.3d 382, 384 (10th Cir. 1995) (quoting Garcia v. Cordova, 930 F.2d 826, 829 (10th Cir.1991) (citations omitted)).

Plaintiff claims that in the proxy, defendants did not disclose that the transaction with Highwoods was defensive in nature. Plaintiff ignores the fact that defendants disclosed the underlying facts of the transaction in a manner which was sufficient for a reasonable shareholder to understand the nature of the transaction. "[T]he use of a particular pejorative adjective w[ould] not alter the total mix of information available to the investing public." Kowal, 16 F.3d at 1277 (citing Basic Inc. v. Levinson, 485 U.S. 224, 231-32, 108 S.Ct. 978, 99 L.Ed.2d 194 (1988)). Defendants' omission of the title "defensive" is immaterial as a matter of law. See TSC, 426 U.S. at 449, 96 S.Ct. 2126; see also Bolger, 759 F.Supp. at 196; Lewis, 716 F.Supp. at 810. The Court therefore sustains defendants' motions to reconsider and for summary...