Qualcomm v. American Wireless Group
| Decision Date | 15 November 2007 |
| Docket Number | No. 2005-IA-01829-SCT.,No. 2005-IA-01827-SCT.,No. 2005-IA-01995-SCT.,No. 2005-IA-01841-SCT.,No. 2005-IA-01883-SCT.,No. 2005-IA-01894-SCT,,2005-IA-01827-SCT.,2005-IA-01829-SCT.,2005-IA-01841-SCT.,2005-IA-01883-SCT.,2005-IA-01894-SCT,,2005-IA-01995-SCT. |
| Citation | 980 So.2d 261 |
| Parties | QUALCOMM INCORPORATED v. AMERICAN WIRELESS LICENSE GROUP, LLC, and Homer A. Whittington, Jr., as Trustee for the Homer A. Whittington, Jr. Revocable Trust, et al. Qualcomm Incorporated v. Homer A. Whittington, Jr., et al. Harvey P. White, Scot B. Jarvis, Susan G. Swenson, Thomas J. Bernard, Jeffrey P. Williams, Anthony R. Chase, Michael B. Targoff, Jill E. Barad, Robert C. Dynes, James E. Hoffmann, Stewart Douglas Hutcheson, Daniel O. Pegg, Leonard C. Stephens and Qualcomm Incorporated v. American Wireless License Group, LLC, and Homer A. Whittington, Jr., as Trustee for the Homer A. Whittington, Jr. Revocable Trust, et al. Harvey P. White, Scot B. Jarvis, Susan G. Swenson, Thomas J. Bernard, Jeffrey P. Williams, Anthony R. Chase, Michael B. Targoff, Jill E. Barad, Robert C. Dynes, James E. Hoffmann, Stewart Douglas Hutcheson, Daniel O. Pegg, Leonard C. Stephens and Qualcomm Incorporated v. Homer A. Whittington, Jr., et al. Harvey P. White, Scot B. Jarvis, Susan G. Swenson, Thomas J. Bernard, Jeffrey P. Williams, Anthony R. Chase, Michael B. Targoff, Jill E. Barad, Robert C. Dynes, James E. Hoffmann, Stewart Douglas Hutcheson, Daniel O. Pegg, Leonard C. Stephens and Qualcomm Incorporated v. American Wireless License Group, LLC. Harvey P. White, Scot B. Jarvis, Susan G. Swenson, Thomas J. Bernard, Jeffrey P. Williams, Anthony R. Chase, Michael B. Targoff, Jill E. Barad, Robert C. Dynes, James E. Hoffmann, Stewart Douglas Hutcheson, Daniel O. Pegg and Leonard C. Stephens v. Homer A. Whittington, Jr., as Trustee for the Homer A. Whittington, Jr., Revocable Trust, et al. |
| Court | Mississippi Supreme Court |
David W. Clark, Mary Clay W. Morgan, Jackson, Glenn Gates, Taylor B. Wade Smith, IV, Columbus, Christy Michelle Sparks, Ridgeland, Attorneys for Appellants.
Eugene Coursey Tullos, Raleigh, Peter J. Tepley, Christopher A. Shapley, Jackson, Joseph Anthony Sclafani, Meredith Jowers Lees, Page Anderson Poerschke, J. Michael Rediker, Attorneys for Appellees.
Before DIAZ, P.J., CARLSON and RANDOLPH, JJ.
¶ 1. This case involves civil liability for alleged violations of federal and state securities law and for fraud. The appeal is from the circuit court's denial of the defendants' motions to dismiss, or, in the alternative, to compel arbitration. Finding that the trial court did not err in denying the motions, we affirm the judgment and remand for further proceedings.
¶ 2. The individual plaintiffs are members of American Wireless License Group (AWG), a Mississippi limited liability company.1 The individual defendants ("Leap defendants") are current and former officers and directors of Leap Wireless International, Inc., or its successors in interest. Until September 1998, Leap was a subsidiary of the corporate defendant, Qualcomm Incorporated. The plaintiffs allege that Qualcomm still exercised control over Leap during the time period in question.
¶ 3. On June 8, 2001, Leap transferred approximately 1.9 million shares of unregistered Leap stock to AWG in exchange for wireless telephone licenses. The agreement provided that the shares were to be transferred in a private offering not subject to the registration requirements of the Securities Act of 1933. The agreement also contained a provision that any dispute arising from or related to the agreement would be submitted to binding arbitration at the election of either Leap or AWG.
¶ 4. Pursuant to the agreement, Leap registered AWG's stock with the Securities and Exchange Commission on June 15, 2001, and AWG began selling its stock on the public market in the fall of 2001. According to the complaint, AWG had disposed of all its Leap stock by December 2001, and it was during this time that the plaintiffs purchased Leap stock on the public market.
¶ 5. At the time of the June registration, the Leap stock was valued at $30.42 per share. The complaint states that during October through December 2001, when the plaintiffs were buying Leap stock, its value had dropped to between $14.00 and $23.00 per share. On August 14, 2002, Leap announced that it had lost a purchase price adjustment dispute with MCG PCS, Inc., which sold wireless licenses to Leap in 2000. As a result of the MCG award, Leap was forced to file for bankruptcy protection. At the time the lawsuit was filed, the stock was valued below $.30 a share.
¶ 6. The plaintiffs filed suit against the Leap defendants and Qualcomm, alleging that Leap failed to disclose material facts about the MCG dispute in its communications with the plaintiffs and in various press releases and SEC filings, including the June 2001 registration statement. The plaintiffs claimed liability under Sections 11 and 15 of the Securities Act of 1933, Sections 717(a)(2) and 719 of the Mississippi Securities Act, and fraudulent misrepresentation.
¶ 7. Both the Leap defendants and Qualcomm filed a motion to dismiss pursuant to Mississippi Rule of Civil Procedure 12(b)(6). Yet, Qualcomm's motion to dismiss was treated as a Rule 56 motion for summary judgment because its submissions went outside the pleadings. In response to Qualcomm's motion, the plaintiffs filed a "Rule 56(f) Affidavit." Rule 56(f) of the Mississippi Rules of Civil Procedure provides, "[s]hould it appear from the affidavits of a party opposing the motion that he cannot for reasons stated present by affidavit facts essential to justify his opposition, the court may [1] refuse the application for judgment or [2] may order a continuance to permit affidavits to be obtained or depositions to be taken or discovery to be had or [3] may make such order as is just." The trial court entered an order denying Qualcomm's motion on the grounds that "a dispute of material fact" existed, but the order made no mention of the plaintiffs' Rule 56(f) motion.
¶ 8. The trial court's failure to address the Rule 56(f) issue has created confusion among the parties. The plaintiffs assert that because the trial court did not provide them with ten days' notice that Qualcomm's Rule 12(b)(6) motion would be considered a motion for summary judgment, this Court must affirm the trial court pursuant to Jones v. Regency Toyota, Inc., 798 So.2d 474, 476 (Miss.2001). Qualcomm argues that the denial of summary judgment was proper because the trial court implicitly denied relief under Rule 56(f) and the plaintiffs have failed to comply with Rule 56(e). In the alternative, Qualcomm argues that this Court should disregard the additional submissions attached to its motion, and treat it as a motion to dismiss under Rule 12(b)(6).
¶ 9. Because of the scant record, and because the trial judge did not rule on the Rule 56(f) issue, the Court is not in a position to consider a motion for summary judgment. Discovery has not yet begun indeed, the defendants have not even filed an answer to the complaint. Accordingly, Qualcomm's claims shall be treated in the context of a motion to dismiss under Rule 12(b)(6).
¶ 10. On appeal, Qualcomm and the Leap defendants argue: (1) the trial court erred in denying the motions to compel arbitration; (2) the federal securities claims fail because the plaintiffs do not have standing to sue and because the registration statement explicitly warned of the alleged omissions; (3) both the state securities and fraud claims should fail as a matter of law because there is no causal link between the alleged omissions and the plaintiffs' losses, there was adequate disclosure of the risks, and the plaintiffs failed to allege that the defendants acted with the requisite intent; and (4) the Leap defendants and Qualcomm cannot be liable for Leap's actions because they did not exercise the requisite control over the corporation.
¶ 11. Regarding the arbitration issue, it is well established that "[t]he grant or denial of a motion to compel arbitration is reviewed de novo." East Ford, Inc. v. Taylor, 826 So.2d 709, 713 (Miss.2002) (citing Webb v. Investacorp, Inc., 89 F.3d 252, 256 (5th Cir.1996)).
¶ 12. When reviewing a trial court's grant or denial of a motion to dismiss pursuant to Rule 12(b)(6), this Court also employs de novo review. HeartSouth, PLLC v. Boyd, 865 So.2d 1095, 1101 (Miss. 2003) (citing Tucker v. Hinds County, 558 So.2d 869, 872 (Miss.1990)). A Rule 12(b)(6) motion should not be granted unless it appears "to a certainty that the plaintiff is entitled to no relief under any set of facts that could be proved in support the claim." M.R.C.P. 12 cmt.
¶ 13. The threshold question in this case is whether the circuit court erred in denying arbitration, as a finding in favor of arbitration precludes a discussion of the merits. IP Timberlands Operating Co. v. Denmiss Corp., 726 So.2d 96, 108 (Miss.1998). See also AT & T Techs., Inc. v. Commun. Workers of Am., 475 U.S. 643, 649, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986) ().
¶ 14. The parties in this case do not dispute that the Federal Arbitration Act governs our analysis. This position is consistent with our holding in Smith Barney v. Henry, 775 So.2d 722, 725 (Miss.2001) ().
¶ 15. Under the FAA, this Court must conduct a two-step inquiry: first, whether the parties intended to arbitrate the dispute, and second, if they did intend to arbitrate, ...
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