Popp Telecom, Inc. v. American Sharecom

• Decision Date: 27 February 2004
• Docket Number: No. 03-2124.,No. 03-2126.,03-2124.,03-2126.
• Citation: 361 F.3d 482
• Parties: POPP TELECOM, INC., formerly known as LDB International Corporation; Plaintiff-Appellant, Humbird Securities Company; Northern Securities Company; Plaintiffs-Appellants, Washington Sharecom, Inc., Plaintiff-Appellant, v. AMERICAN SHARECOM, INC.; Steven C. Simon; James J. Weinert; William J. King, Defendants-Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

361 F.3d 482

POPP TELECOM, INC., formerly known as LDB International Corporation; Plaintiff-Appellant Humbird Securities Company; Northern Securities Company; Plaintiffs-Appellants Washington Sharecom, Inc., Plaintiff-Appellant, v. AMERICAN SHARECOM, INC.; Steven C. Simon; James J. Weinert; William J. King, Defendants-Appellees.

No. 03-2124.

No. 03-2126.

United States Court of Appeals, Eighth Circuit.

Submitted: December 17, 2003.

Filed: February 27, 2004.

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Judith A. Rogosheske, argued, Minneapolis, MN (Caryn S. Glover and Sarah C. Madison, on the brief), for Appellants Popp Telecom and Washington Sharecom.

Timothy W.J. Dunn, argued, St. Paul, MN, for Northern Securities Company and Humbird Securities Company.

Timothy R. Thornton, argued, Minneapolis, MN (Richard G. Mark and Thomas J. Basting, Jr., on the brief), for Appellees.

Before WOLLMAN, LAY, and HANSEN, Circuit Judges.

LAY, Circuit Judge.

Popp Telecom, Inc., Washington Sharecom, Inc., Humbird Securities Company, and Northern Securities Company (collectively, the "Dissenters") appeal from the district court's¹ entry of summary judgment in favor of American Sharecom, Inc. (the "Corporation"), Steven C. Simon ("Simon"), James J. Weinert ("Weinert"), and William J. King ("King") (collectively, "ASI"). We affirm.

I. Background

This case makes its second appearance before this court. A detailed account of the events in this case is provided in our prior opinion, Popp Telcom, Inc. v. American Sharecom, Inc., 210 F.3d 928, 931-34 (8th Cir.2000). We provide an abbreviated chronology of the events here.

Simon, Weinert, and the Dissenters were shareholders of the Corporation. Simon, Weinert, and King were the President, Vice President, and Chief Financial Officer, respectively, of the Corporation and also served on its Board of Directors. On April 7, 1992, the Corporation's Board approved a "freeze-out" merger with Sharecom Holdings, Inc., a corporation owned exclusively by Simon and Weinert. To complete the merger, the Corporation had to pay all non-acquiring shareholders the fair value of their shares. Simon and Weinert received no cash proceeds but emerged as the owners of the surviving corporation. The Dissenters opposed the merger and challenged the proffered payment of $17,694.64 per share. The Corporation's shareholders approved the merger by a divided vote on May 8, 1992, and the merger became effective on that date.

Following the merger, the Corporation paid off each shareholder except the Dissenters. The Corporation then filed a petition for determination of value in Hennepin County District Court. The Dissenters filed a counterclaim alleging the merger was invalid due to fraud, but the court dismissed the counterclaim as outside the scope of the valuation proceeding. On June 28, 1994, the court found that the Corporation's stock had been undervalued and that each share was worth $111,893. About five months after the valuation proceeding and over two years after the merger, Rochester Telephone Corporation announced that it would acquire the Corporation for about $190 million worth of Rochester Telephone stock.

On December 16, 1994, the Dissenters moved the Minnesota Court of Appeals to remand the valuation proceeding to state court for reconsideration on the basis of newly discovered evidence that ASI had defrauded the court during the proceeding. However, because a satisfaction of judgment had been entered on the valuation proceeding, the Minnesota Court of Appeals ruled that the state district court lacked jurisdiction to vacate the judgment. See Am. Sharecom, Inc. v. LDB Int'l Corp., 553 N.W.2d 433, 435 (Minn.Ct.App. 1996) ("Sharecom II"). The court noted that the Dissenters had another available remedy in the form of a separate common law fraud action. Id. at 434.

The case now on appeal had its genesis in May of 1994, when the Dissenters served, but did not file, a complaint alleging several claims against ASI, including common law fraud. No suit was filed until the Dissenters filed an amended complaint in state court on November 8, 1996, alleging seven claims.² ASI removed the case to federal court on December 2, 1996, and the Dissenters filed their second amended complaint.

The district court eventually dismissed or granted summary judgment on all claims. The Dissenters appealed, and we reversed and remanded. See Popp Telcom, 210 F.3d at 944. On remand, the Dissenters filed their third amended complaint.³ The Dissenters later brought a motion to add a claim for punitive damages under Minnesota law. This motion was granted on May 7, 2002.

Briefly stated, the Dissenters' claims are based on their belief that Simon and Weinert used a series of schemes to steal control of the Corporation. The Dissenters claim that Simon and Weinert solicited and defrauded unwitting shareholders into selling their stock at low prices to John Van Heuvelen, a longtime friend of Simon. The Dissenters assert that Van Heuvelen was a "strawman" who was actually purchasing the stock for Simon and Weinert. According to the Dissenters, the low prices in the Van Heuvelen transactions allowed Simon and Weinert to depress the value of the Corporation's stock in later tender offers.

The Dissenters also claim that Simon and Weinert misrepresented the value of the Corporation's shares in their tender offers to other shareholders; used unexercised stock options to dilute the price they told shareholders could be paid for the Corporation; made material misrepresentations in, or omitted material facts from, tender offers in order for the Corporation to redeem stock; made material misrepresentations to financial institutions; and lied under oath and concealed information from the Dissenters and the court during the valuation proceeding.

Following the close of discovery, ASI moved for summary judgment. On March 20, 2003, the district court granted ASI's motion and dismissed all claims. The Dissenters now appeal.

II. Discussion

A. Standard of Review

We review the grant of summary judgment de novo, viewing the evidence in the light most favorable to the nonmoving party. See United Fire & Cas. Ins. Co. v. Garvey, 328 F.3d 411, 412-13 (8th Cir. 2003). Summary judgment is appropriate where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed. R.Civ.P. 56(c). Summary judgment is mandated if the nonmoving party fails to establish the existence of an essential element of its case. See Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). "[A] complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial." Id. at 323, 106 S.Ct. 2548.

B. RICO

The Dissenters' RICO claim had not been passed upon by the district court when this court first entertained the prior appeal. However, when the first case was remanded, the district court held that the Dissenters' RICO claim was barred by the Private Securities Litigation Reform Act of 1995 ("PSLRA").⁴ In making this ruling, the district court applied the framework set forth in Landgraf v. USI Film Products, 511 U.S. 244, 114 S.Ct. 1483, 128 L.Ed.2d 229 (1994), and concluded that application of the PSLRA to the Dissenters' RICO claim would not have retroactive effect.⁵ The district court was guided by the opinions of other courts who have addressed the issue in the context of RICO claims filed after the PSLRA's effective date based on conduct pre-dating the PSLRA. Compare Scott v. Boos, 215 F.3d 940, 945-49 (9th Cir.2000) (holding the PSLRA has retroactive effect when applied to RICO claims filed after the PSLRA's effective date based on conduct occurring prior to the effective date) with Kolfenbach v. Mansour, 36 F.Supp.2d 1351, 1353-54 (S.D.Fla.1999) (holding, on nearly identical facts, that application of the PSLRA did not have retroactive effect). Relying on the reasoning in Kolfenbach, the district court held that the Dissenters' right to assert their RICO claim expired on the PSLRA's effective date.

Although we agree with the district court's conclusion that the PSLRA bars the Dissenters' RICO claim, we hold that our prior decision in Professional Management Associates, Inc. Employees' Profit Sharing Plan v. KPMG, LLP, 335 F.3d 800 (8th Cir.2003), cert. denied, 540 U.S. 1162, 124 S.Ct. 1176, 157 L.Ed.2d 1207 (2004) (No. 03-864) (hereinafter "PMA"), is dispositive of the Dissenters' RICO claim. Therefore, we affirm the district court's grant of summary judgment on this claim, but we do so for reasons different from those articulated by the district court.

In PMA, we held that the Securities Litigation Uniform Standards Act of 1998 ("SLUSA") applied to and barred "all actions commenced after its enactment, even if the challenged conduct predate[d] SLUSA." Id. at 804. SLUSA, which was enacted on November 3, 1998, provides for removal to federal court and dismissal of certain class actions brought under state law by any private party alleging "an untrue statement or omission of a material fact in connection with the purchase or sale of a covered security." 15 U.S.C. § 77p(b)(1). The conduct at issue in PMA occurred between 1994 and 1997, but the class action lawsuit was not filed in state court until three years after SLUSA's enactment. PMA, 335 F.3d at 803. The district court concluded that the complaint filed in the case implicitly alleged misrepresentations and omissions in connection with the purchase of a covered security and dismissed the case under SLUSA. Id. at 802.

On appeal, the plaintiffs claimed the district court erred in applying SLUSA retroactively to the pre-enactment conduct. Id. at 803. In affirming the district court, this court concluded that no retroactivity analysis was needed because SLUSA merely established "a procedural rule regarding the filing of class action lawsuits alleging securities...