Gorman v. Coogan, Docket No. 03-173-P-H (D. Me. 1/13/2004), Docket No. 03-173-P-H.

• Decision Date: 13 January 2004
• Docket Number: Docket No. 03-173-P-H.
• Parties: JOHN J. GORMAN, et al., Plaintiffs, v. H. WILLIAM COOGAN, JR., et al., Defendants and FIRSTMARK CORPORATION, Nominal Defendant.
• Court: U.S. District Court — District of Maine

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JOHN J. GORMAN, et al., Plaintiffs, v. H. WILLIAM COOGAN, JR., et al., Defendants and FIRSTMARK CORPORATION, Nominal Defendant.

Docket No. 03-173-P-H.

United States District Court, D. Maine.

January 13, 2004.

RICHARD A. GOREN, RUBIN, HAY & GOULD, P.C., FRAMINGHAM, MA, for Plaintiff JOHN J GORMAN, individually and derivatively on behalf of FIRSTMARK CORPORATION

SEAN T. CARNATHAN, RUBIN, HAY & GOULD, P.C., FRAMINGHAM, MA, for Plaintiff JOHN J GORMAN, individually and derivatively on behalf of FIRSTMARK CORPORATION

RICHARD A. GOREN, FRAMINGHAM, MA, RUBIN, HAY & GOULD, P.C., for KURT J RECHNER, individually represented by and derivatively on behalf of FIRSTMARK CORPORATION

SEAN T. CARNATHAN, FRAMINGHAM, MA, RUBIN, HAY & GOULD, P.C., for KURT J RECHNER, individually represented by and derivatively on behalf of FIRSTMARK CORPORATION

RICHARD A. GOREN, FRAMINGHAM, MA, RUBIN, HAY & GOULD, P.C., for PHIL A WHITNEY, individually and on behalf of all others similarly situated and derivatively on behalf of FIRSTMARK CORPORATION

SEAN T. CARNATHAN, FRAMINGHAM, MA, RUBIN, HAY & GOULD, P.C., for PHIL A WHITNEY, individually and on behalf of all others similarly situated and derivatively on behalf of FIRSTMARK CORPORATION

RICHARD A. GOREN, FRAMINGHAM, MA, RUBIN, HAY & GOULD, P.C., for KARIN WHITNEY, individually and on behalf of all others similarly situated and derivatively on behalf of FIRSTMARK CORPORATION

SEAN T. CARNATHAN, FRAMINGHAM, MA, RUBIN, HAY & GOULD, P.C., for KARIN WHITNEY, individually and on behalf of all others similarly situated and derivatively on behalf of FIRSTMARK CORPORATION

DEIRDRE M. SMITH, DRUMMOND, WOODSUM & MACMAHON, PORTLAND, ME, for Defendant H WILLIAM COOGAN, JR

DEIRDRE M. SMITH, DRUMMOND, WOODSUM & MACMAHON, PORTLAND, ME, for SUSAN C COOGAN

DYLAN SMITH, VERRILL & DANA, PORTLAND SQUARE, PORTLAND, ME, for ROBERT R KAPLAN, SR

JACQUELINE RIDER, VERRILL & DANA, PORTLAND, ME, for ROBERT R KAPLAN, SR

DYLAN SMITH, VERRILL & DANA, PORTLAND, ME, for JOHN T WYAND

JAMES T. KILBRETH, VERRILL & DANA, PORTLAND, ME, for JOHN T WYAND

JACQUELINE RIDER, VERRILL & DANA, PORTLAND, ME, for JOHN T WYAND

DEIRDRE M. SMITH, VERRILL & DANA, PORTLAND, ME, for DONALD V CRUIKSHANKS

DYLAN SMITH, VERRILL & DANA, PORTLAND, ME, for JOHN MCCOWN, for JOHN McCOWN

JAMES T. KILBRETH, VERRILL & DANA, PORTLAND, ME, for JOHN McCOWN

JACQUELINE RIDER, VERRILL & DANA, PORTLAND, ME, for JOHN McCOWN

DEIRDRE M. SMITH, VERRILL & DANA, PORTLAND, ME, for R BRIAN BALL

DYLAN SMITH, VERRILL & DANA, PORTLAND, ME, for FIRSTMARK CORPORATION

JAMES T. KILBRETH, VERRILL & DANA, PORTLAND, ME, for FIRSTMARK CORPORATION

JACQUELINE RIDER, VERRILL & DANA, PORTLAND, ME, for FIRSTMARK CORPORATION

MEMORANDUM DECISION ON DEFENDANTS'

MOTION FOR HEARING AND RECOMMENDED DECISION

ON DEFENDANTS'MOTIONS TO DISMISS

DAVID COHEN, Magistrate Judge.

The eight defendants named in this case — Firstmark Corporation ("Firstmark"), John T. Wyand, Robert R. Kaplan, John D. McCown, H. William Coogan, Jr., Susan C. Coogan, Donald V. Cruickshanks and R. Brian Ball (collectively, "Defendants") — move pursuant to Federal Rule of Civil Procedure 12(b)(6) to dismiss all counts against them in this action alleging a mix of federal-securities-law and state-law violations. See Defendants' Motion To Dismiss, etc. ("Firstmark Motion") (Docket No. 43) at 1; Motion To Dismiss of Defendants William and Susan Coogan, etc. ("Coogan Motion") (Docket No. 39) at 1; Motion To Dismiss of Defendant Donald Cruickshanks, etc. ("Cruickshanks Motion") (Docket No. 40) at 1; Motion To Dismiss of Defendant R. Brian Ball, etc. ("Ball Motion") (Docket No. 41) at 1 (collectively, "Motions To Dismiss").¹ Ancillary thereto, the Defendants move pursuant to Local Rule 7(f) for oral argument. See Defendants' Request for Oral Argument ("Hearing Motion") (Docket No. 60). I deny the Hearing Motion on the ground that the parties' papers provide a sufficient basis on which to decide the Motions To Dismiss and recommend that the Motions To Dismiss be granted.²

I. Applicable Legal Standards

"In ruling on a motion to dismiss [under Rule 12(b)(6)], a court must accept as true all the factual allegations in the complaint and construe all reasonable inferences in favor of the plaintiffs." Alternative Energy, Inc. v. St. Paul Fire & Marine Ins. Co., 267 F.3d 30, 33 (1st Cir. 2001). The defendants are entitled to dismissal for failure to state a claim only if "it appears to a certainty that the plaintiff would be unable to recover under any set of facts." State St. Bank & Trust Co. v. Denman Tire Corp., 240 F.3d 83, 87 (1st Cir. 2001); see also Wall v. Dion, 257 F. Supp.2d 316, 318 (D. Me. 2003).

Ordinarily, in weighing a Rule 12(b)(6) motion, "a court may not consider any documents that are outside of the complaint, or not expressly incorporated therein, unless the motion is converted into one for summary judgment." Alternative Energy, 267 F.3d at 33. "There is, however, a narrow exception for documents the authenticity of which are not disputed by the parties; for official public records; for documents central to plaintiffs' claim; or for documents sufficiently referred to in the complaint." Id. (citation and internal quotation marks omitted); see also, e.g., Young v. Lepone, 305 F.3d 1, 11 (1st Cir. 2002) ("When the factual allegations of a complaint revolve around a document whose authenticity is unchallenged, that document effectively merges into the pleadings and the trial court can review it in deciding a motion to dismiss under Rule 12(b)(6).") (citations and internal quotation marks omitted).

The parties rely on a number documents expressly incorporated within, or central to, the Plaintiffs' complaint. See, e.g., Firstmark Motion at 2 n.2; Plaintiffs' Opposition to Defendants' Motions To Dismiss ("Opposition") (Docket No. 45) at 3, 47 n.20. To the extent that I find excerpts from these documents appropriate for consideration in the context of a Rule 12(b)(6) motion and material to disposition of this recommended decision, I weave them into my recitation of the facts.

II. Factual Context

For purposes of the Motions To Dismiss I accept the following well-pleaded facts as true.³

Plaintiff German, a resident of Austin, Texas, has owned varying amounts of Firstmark common stock since approximately December 1998. Complaint ¶ 12. As of July 1, 2003 he was the beneficial owner of 1,286,788 shares of Firstmark common stock. Id. Plaintiff Rechner, a resident of Austin, Texas, has been the joint beneficial owner, with his wife, of 20,000 shares of Firstmark common stock since May 29, 2002. Id. ¶ 13. Plaintiffs Phil A. Whitney and Karin Whitney (together, "Whitneys"), residents of Cranberry Island, Maine, are the record owners of 3,289 shares of Firstmark common stock. Id. ¶ 14. The Whitneys' shareholder status devolved to them by operation of law through an inheritance from Mr. Whitney's parents in the mid-to late 1990s. Id. Mr. Whitney's parents owned the shares beginning prior to January 1, 1996. Id.

Nominal defendant Firstmark is a corporation organized under the laws of the State of Maine, with a principal place of business at 921 Hollo way Street, Durham, North Carolina. Id. ¶ 15. Defendant H. William Coogan, Jr., upon information and belief a resident of Richmond, Virginia, previously served as an officer and director of Firstmark and currently holds himself out as its chairman and chief executive officer. Id. ¶ 16.⁴ Defendant Susan Coogan, Coogan's wife and upon information and belief a resident of Richmond, Virginia, served as a director of Firstmark from June 1996 through 1999 and again in August and September 2002. Id. ¶ 17. Defendant Ball, upon information and belief a resident of Richmond, Virginia, previously served as a director of Firstmark and as its counsel. Id. ¶ 18. Defendant Cruickshanks, upon information and belief a resident of Richmond, Virginia, previously served as a director and chief executive officer of Firstmark. Id. ¶ 19. Defendant Kaplan, upon information and belief a resident of Richmond, Virginia, previously served as Firstmark's secretary and as its counsel. Id. ¶ 20. Defendants McCown, upon information and belief a resident of Pound Ridge, New York, and Wyand, upon information and belief a resident of Sarasota, Florida, currently hold themselves out as directors of Firstmark. Id. ¶¶ 21-22.

Prior to Coogan's involvement with the company, Firstmark was principally engaged through several subsidiaries in the financial-services business. Id. ¶ 28. As of May 1, 1996 Firstmark had 5,000,000 duly authorized shares of twenty-cent par-value common stock, with approximately 2,080,634 shares validly issued and outstanding as of March 31, 1996. Id. Firstmark also had duly authorized 250,000 shares of preferred stock. Id. Upon information and belief, as of May 1, 1996 57,000 shares of preferred stock were validly issued and outstanding. Id. As of May 1, 1996 Firstmark's common stock was registered with the Securities and Exchange Commission ("SEC") pursuant to section 12(g) of the Exchange Act and was listed on the NASDAQ Small Cap market. Id. ¶ 29.

In or about the spring of 1996 Coogan negotiated a deal to sell Firstmark a title-insurance company, a subsidiary of Southern Capital Corp. ("SCC"), that he owned along with Susan Coogan and Cruickshanks. Id. ¶ 30. On or about April 30, 1996 Firstmark and SCC entered into an agreement ("Merger Agreement") pursuant to which Firstmark would acquire SCC and would issue 40,000 shares of series B preferred stock to the Coogans and Cruickshanks. Id. ¶ 31. Pursuant to section 1.2 of the Merger Agreement, the Coogans, Ball and Cruickshanks were to be elected and appointed to serve on the Firstmark board of directors ("Board") "on the Effective Date." Id. Section 5.2 provided that, subject to shareholder approval of amendments to the Articles of Incorporation increasing the common stock and opting out of section 910 of the ...