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Abrams v. Wainscott

United States District Court, Third Circuit

November 13, 2013

RUTH ABRAMS, Plaintiff;
v.
JAMES L. WAINSCOTT, et al., Defendants.

Robert D. Goldberg, Esq., Biggs and Battaglia, Wilmington, DE; Alexander Arnold Gershon, Esq., Barrack, Rodos & Bacine, New York, NY; Michael A. Toomey, Esq., Rodos & Bacine, New York, NY; Daniel E. Bacine, Esq., Barrack, Rodos & Bacine, Philadelphia, PA, Attorneys for the Plaintiff.

Jon E. Abramczyk, Esq., Morris Nichols, Arsht & Tunnell LLP, Wilmington, DE; John P. DiTomo, Esq., Morris, Nichols, Arsht & Tunnell LLP, Wilmington, DE; Gregory A. Markel, Esq., Cadwalder, Wickersham & Taft LLP, Attorneys for the Defendants James L. Wainscott, Robert H. Jenkins, Richard A. Abdoo, John S. Brinzo, Dennis C. Cuneo, William K. Gerber, Dr. Bonnie G. Hill, Ralph S. Michael Ill. Shirley D. Peterson, Dr. James A Thomson, Albert E. Ferrara, Jr., David C. Hom, John F. Kaloski, Douglas W. Gant.

C. Barr Flinn, Esq., Young Conaway Stargatt & Taylor, LLP, Wilmington, DE; Adam W. Poff, Esq., Young Conaway Stargatt & Taylor, LLP, Wilmington, DE, Attorneys for Defendant AK Steel Holding Corporation.

MEMORANDUM OPINION

RICHARD G. ANDREWS, District Judge.

Presently before the Court for disposition is the Defendants James L. Wainscott, et al.'s Motion to Dismiss the Second Amended Complaint. (D.I. 33). This matter has been fully briefed. (D.I. 34, 35, 36, 37, 38, 39, 43). The Court has both federal question and diversity jurisdiction. For the reasons set forth herein, the Defendants' motion is GRANTED.

BACKGROUND

The Court dismissed the Plaintiffs First Amended Complaint as it lacked sufficient allegations to plead demand futility. (D.I. 27). The Plaintiff then timely refiled her complaint. (D.I. 28). The Defendants responded with the instant motion. (D.I. 33).

Plaintiff alleged in the Second Amended Complaint three distinct fact patterns:

(1) Defendants knowingly and intentionally violated the Long Term Performance Plan (the LTPP') by retroactively increasing the amounts the executive Defendants were entitled to receive under this plan...;
(2) AK Steel Holding Corporation's ('AK Steel'...) 2010 proxy statement... contained false or misleading information...; and
(3) Shareholders were coerced into voting for the performance goals of the LTPP... and the [Stock Incentive Plan ("SIP")]... because they were told that these performance goals would continue to be used with or without shareholder approval, but that without this approval compensation paid would cost [AK Steel] more money.

(D.I. 36 at 7 (internal citations omitted)). The Plaintiff alleges four derivative claims and one direct claim. The four derivative claims are: (1) Breach of Duties underĀ§ 14(a) of the Securities and Exchange Act, (2) Breach of Duty of Loyalty, (3) Waste (based on the payment of non-deductible compensation), and (4) Unjust Enrichment. (D.I. 28 at 22-25). The Plaintiff additionally alleges a direct claim of Coercion. (D.I. 28 at 25).

DISCUSSION FOR DERIVATIVE CLAIMS

1. Legal Standard

Pursuant to FED.R.Crv.P. 23.1(b)(3), a shareholder bringing a derivative action must file a verified complaint that states with particularity: "(A) any effort by the plaintiff to obtain the desired action from the directors or comparable authority and, if necessary, from the shareholders or members; and (B) the reasons for not obtaining the action or not making the effort." FED.R.Crv.P. 23.1(b)(3) "The purpose of the demand requirement is to afford the directors an opportunity to exercise their reasonable business judgment and waive a legal right vested in the corporation in the belief that its best interests will be promoted by not insisting on such right." Kamen v. Kemper Fin. Servs., Inc., 500 U.S. 90, 96 (1991) (internal quotation marks omitted). "Although Rule 23.1 provides the pleading standard for derivative actions in federal court, the substantive rules for determining whether a plaintiff has satisfied that standard are a matter of state law." King v. Baldino, 409 F.App'x 535, 537 (3d Cir. 2010). "Thus, federal courts hearing shareholders' derivative actions involving state law claims apply the federal procedural requirement of particularized pleading, but apply state substantive law to determine whether the facts demonstrate demand would have been futile and can be excused." Kanter v. Barella, 489 F.3d 170, 176 (3d Cir. 2007). The Delaware Supreme Court has ...


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