Flake v. Hoskins
| Decision Date | 17 June 1999 |
| Docket Number | No. Civ.A. 98-2450-KHV.,Civ.A. 98-2450-KHV. |
| Citation | 55 F.Supp.2d 1196 |
| Parties | John L. FLAKE, on behalf of himself and all others similarly situated, Plaintiff, v. William K. HOSKINS, et al., Defendants. |
| Court | U.S. District Court — District of Kansas |
Lynda J. Grant, Peter E. Zinman, Goodkin, Labaton, Rudoff & Sucharow LLP, New York City, C. Maxwell Logan, Samuel P. Logan, Logan Law Firm LLC, Olathe, KS, Leigh R. Lasky, Lasky and Rifkind, Ltd., Chicago, IL, for Plaintiff.
Michael Thompson, Brian D. Martin, Blackwell Sanders Peper Martin LLP, Kansas City, MO, H. Douglas Hinson, Rebecca Lamberth, Alston & Bird, Atlanta, GA, for Defendants.
This matter comes before the Court on defendants' Motion To Dismiss Pursuant to Fed. R. Civ, P. 12(b)(1) and 12(b)(6) (Doc. # 18) filed January 6, 1999, defendants' Motion For Reconsideration (Doc. # 43) filed March 18, 1999, and defendants' Motion For Oral Argument (Doc. # 44) filed March 23, 1999. Defendants move to dismiss, all six of plaintiff's claims. Defendants also seek reconsideration of the Court's refusal to consider evidence outside of the complaint, in connection with the motion to dismiss. For the reasons stated below, the Court finds that the motion for reconsideration should be denied and that the motion to dismiss should be sustained in part and denied in part. The Court held oral argument on May 26, 1999, and therefore sustains defendants' motion for oral argument.
The Court has discretion whether to grant or deny a motion to reconsider. See Hancock v. City of Oklahoma 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 chance for the losing party to make his strongest case or to dress up arguments that previously failed. Shinwari v. Raytheon Aircraft Co., 25 F.Supp.2d 1206, 1208 (D.Kan.1998) (citing Voelkel v. General Motors Corp., 846 F.Supp. 1482, 1483 (D.Kan.), aff'd 43 F.3d 1484 (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. Id. (citing 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)).
On March 16, 1999, the Court entered an order stating that it would not consider matters outside of the pleadings when ruling on defendants' motion to dismiss. See Order (Doc. # 40) filed March 16, 1999. Defendants ask the Court to reconsider that decision, but they have not demonstrated any of the three grounds which might justify relief. The issue has been already addressed. While defendants cite cases which allow the consideration of outside documents, the matter is within the Court's discretion. See Lowe v. Town of Fairland, 143 F.3d 1378, 1381 (10th Cir.1998); GFF Corp. v. Associated Wholesale Grocers, 130 F.3d 1381, 1384 (10th Cir.1997). The Court finds that consideration of such evidence is better suited for a motion for summary judgment and exercises its discretion in refusing to consider the outside evidence at this earlier stage of the litigation.
In ruling on a motion to dismiss for failure to state a claim under Fed.R.Civ.P. 12(b)(6), the Court must assume as true all well pleaded facts in plaintiff's complaint and view them in a light most favorable to plaintiff. Zinermon v. Burch, 494 U.S. 113, 118, 110 S.Ct. 975, 108 L.Ed.2d 100 (1990); see also Swanson v. Bixler, 750 F.2d 810, 813 (10th Cir.1984).
The Court must make all reasonable inferences in favor of plaintiff. Zinermon, 494 U.S. at 118, 110 S.Ct. 975; see also Fed.R.Civ.P. 8(a); Lafoy v. HMO Colorado, 988 F.2d 97, 98 (10th Cir.1993). The issue in reviewing the sufficiency of plaintiff's complaint is not whether he will prevail, but whether he is entitled to offer evidence to support his claims. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974). The Court may not dismiss a cause of action for failure to state a claim unless it appears beyond a doubt that plaintiff can prove no set of facts in support of his theory of recovery that would entitle him to relief. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); see also Jacobs, Visconsi & Jacobs, Co. v. City of Lawrence, 927 F.2d 1111, 1115 (10th Cir.1991). Although plaintiff need not precisely state each element of his claims, he must plead minimal factual allegations on those material elements that must be proved. Hall v. Bellmon, 935 F.2d 1106, 1110 (10th Cir. 1991).
Plaintiff brings this action individually and on behalf of a class of shareholders of J.C. Nichols Company ("JCN"), a Missouri corporation, and on behalf of a subclass of shareholders who obtained JCN stock through participation in the JCN Employee Stock Ownership Plan ("ESOP"). Plaintiff brings suit against JCN; Highwoods Properties, Inc. ("Highwoods"); William K. Hoskins, the former chairman of JCN's board of directors ("board"); Barret Brady, former president, chief executive officer and director of JCN; and Clarence L. Roeder, Kay Nichols Callison, John A. Ovel, Thomas J. Turner, III, William V. Morgan and Mark C. Demetree, former directors of JCN.
Under Section 2.35 of the trust agreement which governs the ESOP, JCN is the "plan administrator," which the agreement defines as the person designated to administer the ESOP. Under Section 13.11, the plan administrator is a named fiduciary of the plan.
(b) renders investment advice for a fee or other compensation, direct or indirect, with respect to any monies or other property of the Trust or has any authority or responsibility to do so, or
(c) has any discretionary authority or discretionary responsibility in the administration of the Plan, including, but not limited to, the Trustees, the Employer and its representative body, and the Plan administrator.
Under Section 6.12 of the trust agreement, if the trustee received from someone other than JCN an unsolicited offer to purchase JCN stock, the trustee was required to ask the JCN board of directors for an advisory opinion whether the sale would be in the best interests of ESOP participants and beneficiaries.
ESOP participants had the right to vote their own shares, but could delegate their shares to be voted by the trustee of the JCN Employee Stock Option Trust ("ESOT"). The ESOT held some 1.4 million shares of JCN stock in trust on behalf of over 600 ESOP participants. The ESOT held over 30 percent of JCN's outstanding stock.
Starting on April 18, 1997, Intrust Bank, N.A. ("Intrust") served as trustee of the ESOT. Plaintiff was a member of the ESOP. As of May 29, 1998, JCN had approximately 4.6 million shares of outstanding common stock, with 3.2 million shares held by 148 shareholders and the remaining shares held by the trust on behalf of more than 600 ESOP participants.
In late 1996 and during the first half of 1997, JCN became a potential takeover target, with parties offering to purchase some or all JCN stock. On October 23, 1996, Integrated Property Management, Inc. ("Integrated") offered to buy all ESOP shares for $32.00 per share. At the time, the ESOP shares amounted to 22 percent of the outstanding stock of JCN. Around March of 1997, Realty Capital Corporation ("Realty") offered to purchase all ESOP shares at about $26.00 per share.
The Nichols family has owned JCN stock for decades, and its average tax basis in the stock is extremely low. Plaintiff alleges that defendants therefore wanted to prevent a cash buyout of JCN and instead looked for stock-for-stock transactions. Plaintiff alleges that defendants acted to limit the Nichols family tax liability, regardless of the benefits to the remaining JCN shareholders. The Nichols family controlled the JCN board, both through its power as a 26 percent shareholder, and through family and business relationships with several of the individual defendants.
Around May of 1997, realizing that JCN was a potential takeover target and that its control of JCN was threatened, the JCN board disseminated a proxy which attempted to solicit shareholder approval of antitakeover measures. At the same time, the individual defendants delayed transferring to the ESOT some 680,000 shares of stock to which it was entitled. If the ESOT had received these shares, it would have owned 33 percent of JCN instead of 22 percent, and would have been the single largest JCN, shareholder.
On May 9, 1997, Realty offered to purchase all shares of JCN for at least $26 per share in cash, or some higher price. The individual defendants voted unanimously to reject Realty's offer. On May 15, 1997, JCN issued a press release stating that it was "not for sale." The press release quoted Mr. Brady as stating that "[JCN's] opportunities for growth and development have never been more positive or more exciting." The press release also expressed the board's "strong belief that the proposed antitakeover measures are in the best interests of the shareholders of the Company."
As ESOT trustee, Intrust resisted defendants' antitakeover measures because the "poison pills" would adversely affect the ability of...
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