Ryan v. Ryan

• Decision Date: 07 May 2018
• Docket Number: No. 16-3149,16-3149
• Parties: Stacy RYAN, Plaintiff–Appellant v. Constance "Connie" RYAN; Streck, Inc., Defendants–Appellees
• Court: U.S. Court of Appeals — Eighth Circuit

889 F.3d 499

Stacy RYAN, Plaintiff–Appellant

v.Constance "Connie" RYAN; Streck, Inc., Defendants–Appellees

No. 16-3149

United States Court of Appeals, Eighth Circuit.

Submitted: December 13, 2017

Filed: May 7, 2018

Bonnie M. Boryca, Paul D. Heimann, Karen Marie Keeler, Nicholas F. Sullivan, ERICKSON & SEDERSTROM, Omaha, NE, for Plaintiff–Appellant.

Larry Welch, Sr., Larry E. Welch, Jr., Damien J. Wright, WELCH LAW FIRM, Omaha, NE, for Defendant–Appellee Constance Connie Ryan.

Victoria H. Buter, Thomas Harlan Dahlk, KUTAK & ROCK, Omaha, NE, for Defendant–Appellee Streck, Inc.

Before WOLLMAN, LOKEN, and MELLOY, Circuit Judges.

LOKEN, Circuit Judge.

Streck, Inc. ("Streck") is a successful, closely held Nebraska corporation founded by Dr. Wayne Ryan in 1982. In 1985, Dr. Ryan and his wife Eileen gifted equal amounts of voting and nonvoting Streck stock to their five children. Daughter Constance Ryan ("Connie") has been president of Streck since 1993 and CEO and chairman of the board since 2013. In mid-2012, exercising its right to purchase under a revised Redemption Agreement ("RRA"), Streck purchased daughter Stacy Ryan's voting and nonvoting shares for $9,280,235. In August 2015, Stacy filed this action against Streck and Connie, alleging violations of § 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b) ; Securities and Exchange Commission Rule 10b-5, 17 C.F.R. § 240.10b-5 ; and multiple violations of Nebraska law in connection with Streck's redemption of Stacy's stock.¹ The district court² granted Defendants' motions to dismiss and denied post-dismissal motions to alter or amend the judgment and for leave to file an amended complaint. Stacy appeals those rulings. We affirm the order dismissing the Complaint but remand for further consideration of whether Stacy's post-dismissal motion to alter or amend presented newly discovered evidence warranting alteration of the order dismissing her breach of contract claim.

I. Background

The following facts are alleged in Stacy's 124–paragraph Complaint and are taken as true for the purposes of ruling on Defendants' motions to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure. Taking into account subsequent stock splits, the Ryans gifted each of their children 5,500 voting shares and 2,789,470 nonvoting shares of Streck stock. All five children executed stock redemption agreements in 1989 and 2003 providing that each would receive book value if he or she redeemed shares with Streck. In mid-2007, without Stacy's knowledge, Streck and Connie revoked Connie's stock redemption agreement, and Connie purchased 154,000 Streck voting shares, without Board approval, in exchange for her promissory note.

In December 2007, Connie sent Stacy the proposed RRA, which significantly revised the prior agreement. Paragraph 7 of the RRA provided that Streck "shall have the right to repurchase the stock, in whole or in part, owned by Stockholder at any time." Paragraph 9 provided that the stock "shall be purchased at the fair market value of the stock (subject to any applicable discounts or adjustments) as set forth in the most recent valuation prepared by Juris Valuation Advisors [JVA] ... immediately preceding the date of the written notification of the option exercised by Stockholder or the Corporation." Connie advised that fair market value would be determined by JVA on an annual basis. Though initially hesitant, Stacy signed the RRA after being told it was intended for use if Streck was sold to a third party and negotiating a "tag-along/drag-along" provision giving her the right to receive the same price as controlling shareholders if at least 51% of Streck's stock was sold. Unbeknownst to Stacy, while her other siblings signed RRAs, Connie did not.

In March 2012, Dr. Ryan notified the Ryan siblings he planned to buy all outstanding Streck stock and remain CEO with new management, and that the most recent stock valuation was $3.32 per nonvoting share and $3.49 per voting share, giving them each a total valuation of almost $9.3 million. In April, he emailed the siblings asking if they wanted to retain ownership of their shares. Stacy replied that she was concerned about Connie's involvement in Streck and wanted more information before deciding whether to sell her shares. She received no response.

On June 19, Dr. Ryan wrote Stacy that Streck had decided to redeem her shares for $9,280,235 and she was required to sign the enclosed Stock Purchase Agreement (SPA) to complete the transaction. Stacy refused to sign the SPA. Streck wired payment for her shares to her bank account. When Stacy returned the payment, Dr. Ryan wrote that Stacy was no longer a Streck shareholder, the money was available to her, and Streck would follow the Nebraska guidelines for unclaimed property if she did not claim it. Streck's counsel denied Stacy's request for corporate records because she was not a shareholder. The notes of a June 11 meeting between Connie, Dr. Ryan, and his estate-planning lawyer reflect that redemption of the shares of siblings other than Connie would be completed by the end of Streck's fiscal year, after which Streck would distribute $10 million to each of the remaining shareholders—Dr. Ryan, Eileen, and Connie. On July 13, Dr. Ryan sent a memo to the siblings other than Stacy and Connie offering to purchase their stock for $3.49 per voting share and $3.32 per nonvoting share if they agreed to sell before July 27, 2012.

Streck's attorneys continued to urge Stacy to sign the SPA, advising that her siblings—including Connie—had signed SPAs and would be receiving the same price as Stacy for their voting and nonvoting shares. On August 22, Stacy signed the SPA, crossing out a mutual release of claims provision, a change that Streck accepted. The SPA provided that Stacy's $9,280,235 payment was "determined according to paragraph 9 of the [RRA]." Unbeknownst to Stacy, Connie did not execute an SPA and retained her shares. When Eileen died in 2013, Connie inherited 159,500 voting shares pursuant to a 2007 change to Eileen's trust, giving Connie two-thirds voting control of Streck. Stacy alleged that a professional appraisal completed in 2014 determined that the fair market value of outstanding Streck stock on March 7, 2013, with applicable discounts, was $8.33 per voting share and $8.09 per nonvoting share.

After voluntarily dismissing an amended complaint filed in state court, Stacy filed this action in federal court, alleging that a series of wrongful acts by Connie and Streck caused her to execute the SPA and complete the redemption of her shares in Streck "for substantially less than fair market value under the terms of the [RRA]." In addition to claims under Section 10(b) of the Exchange Act and SEC Rule 10b-5, she alleged violations of the Securities Act of Nebraska,³ breach of fiduciary duty, shareholder oppression, conversion, tortious interference with business expectancy, unjust enrichment, fraudulent misrepresentation and inducement, and breach of contract. For relief, Stacy sought to invalidate Connie's 2007 purchase of 154,000 voting shares, rescind the SPA, set aside the redemption of Stacy's shares, and "damages to which Plaintiff is entitled."

In the February 2016 order granting Defendants' motions to dismiss, the district court took judicial notice of an October 2011 JVA valuation determining that Streck stock was worth $3.49 per voting share and $3.32 per nonvoting share, the prices at which Streck redeemed Stacy's shares. The district court dismissed Stacy's claims under federal and Nebraska securities laws, and her claims of fraud, breach of fiduciary duty and shareholder oppression, because Stacy did not plausibly allege that wrongful acts caused her loss—she had "consented to Streck's repurchase of the stock at Streck's sole election" in the RRA and did not plead "sufficient facts to raise an inference that Defendants somehow manipulated the 2011 Valuation itself." The court dismissed conversion, tortious interference, and unjust enrichment claims because "the facts as pled in the Complaint reveal that Streck redeemed Stacy Ryan's shares in a method consistent with [her] rights under the [RRA]." The court dismissed the breach of contract claims because higher share valuations in the 2014 appraisal were not evidence contradicting the SPA provision that the purchase price paid for Stacy's shares was "determined according to paragraph 9 of the [RRA]."

Following entry of judgment of dismissal, Stacy filed a timely motion to alter or amend the judgment and for leave to file an amended complaint. See Fed. R. Civ. P. 15(a)(2), 59(e). The district court denied that motion and a subsequent Rule 59(e) motion. We will discuss these rulings in Part III of this opinion.

II. The Order Dismissing the Complaint

On appeal, Stacy contends that the district court erred by (1) taking judicial notice of the 2011 JVA Valuation without converting the motions to dismiss into motions for summary judgment; and (2) dismissing her claims for failing to plausibly allege actionable fraud and self-dealing.⁴

A. Judicial Notice of the 2011 JVA Valuation. Stacy argues the district court erred in taking judicial notice of excerpts from the 2011 JVA Valuation showing values of $3.49 per voting share and $3.32 per nonvoting share because these were "matters outside the pleadings" that may not be considered without converting Defendants' motions to dismiss into motions for summary judgment. See Fed. R. Civ. P. 12(d). However, documents "necessarily embraced by the complaint" may be considered in ruling on a Rule 12(b)(6) motion to dismiss. Enervations, Inc. v. Minn. Mining & Mfg. Co., 380 F.3d 1066, 1069 (8th Cir. 2004). This includes "documents whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the pleading." Ashanti v. City of Golden Valley, 666 F.3d 1148, 1151 (8th Cir. 2012) (quotation omitted); see Miller v. Redwood...