United States District Court, D. Delaware
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For Plaintiff Stanley Black & Decker, Inc.: Raymond J. DiCamillo, RICHARDS, LAYTON & FINGER, P.A., Wilmington, DE; Joseph W. Hovermill, Joseph L. Beavers, Matthew R. Schroll, Alexander P. Creticos , MILES & STOCKBRIDGE P.C., Baltimore, MD.
For Defendants David T. Gulian, John A. Roberts, Eric N. Rubino, Manuel A. Henriquez, Mark S. Denomme, and Roy Y. Liu.: Gary W. Lipkin, DUANE MORRIS LLP, Wilmington, DE; Matthew A. Taylor, James H. Steigerwald, Robert M. Palumbos, Lynne E. Evans, DUANE MORRIS LLP, Philadelphia, PA.
STARK, United States District Judge.
Pending before the Court is Defendants David T. Gulian, John A. Roberts, Eric N. Rubino, Manuel A. Henriquez, Mark S. Denomme, and Roy Y. Liu's (collectively, " Defendants" ) Motion to Dismiss Plaintiff Stanley Black & Decker, Inc.'s (" Stanley" or " Black & Decker" or " Plaintiff" ) Amended Complaint Pursuant to Rule 12(b)(6). (D.I. 16) For the reasons set forth below, the Court will grant in part
and deny in part Defendants' motion to dismiss.
Plaintiff filed this action against Defendants on October 8, 2012, alleging securities violations and common law tort claims, in relation to Black & Decker's acquisition through merger of InfoLogix, Inc. (" InfoLogix" ). (D.I. 1) On March 1, 2013, Defendants moved to dismiss Plaintiff's claims for failure to state a claim. (D.I. 11) On April 5, 2013, Plaintiff responded to Defendants' motion by filing its First Amended Complaint (" FAC" ). (D.I. 14) On May 6, 2013, Defendants moved to dismiss the FAC for failure to state a claim. (D.I. 16) The parties completed briefing on the motion to dismiss on June 17, 2013. (D.I. 17, 18, 19) The Court heard oral argument on the motion on November 25, 2013. (D.I. 23) (" Tr." )
II. FACTUAL BACKGROUND
In August 2010, Stanley began negotiations with officers and directors of InfoLogix to potentially acquire the company. (D.I. 14 at ¶ 26) Stanley sought to acquire InfoLogix on a debt-free basis. ( Id. at ¶ 32) As a result of the negotiations, Stanley agreed to acquire InfoLogix for an enterprise value of $61,158,724 (" Stanley Acquisition" ). ( Id. at ¶ 27) On December 15, 2010, Stanley entered into a merger agreement (" Merger Agreement" ) with InfoLogix and executed a Purchase and Sale Agreement (" PSA" ) with Hercules Technology I, LLC (" HTI" ) and its parent company, Hercules Technology Growth Capital, Inc. (" Hercules" ), which had advanced money to InfoLogix in the course of the Stanley Acquisition. ( Id. at ¶ ¶ 33, 36, 42) At all times relevant to the Stanley Acquisition, Defendants Gulian, Roberts, and Rubino were senior officers and directors of InfoLogix, and Defendants Henriquez, Denomme, and Liu were senior officers and directors of Hercules. ( Id. at ¶ ¶ 3-8) Between the fall of 2009 and closing of the Stanley Acquisition on January 18, 2011, Defendants Henriquez, Denomme, and Liu served as directors on the board of directors of InfoLogix as well. ( Id. at ¶ ¶ 16-18) The Closing Memorandum for the Stanley Acquisition was executed by Defendants Gulian, Roberts, and Rubino on January 18, 2011. ( Id. at ¶ 41)
Before the Stanley Acquisition took place, InfoLogix had engaged two other financial advisors, SSG Capital Advisors, LLC (" SSG" ) and Thomas Weisel Partners Group, Inc. (" TWP" ), to help it secure financing. ( Id. at ¶ ¶ 22, 24) InfoLogix's engagement agreements with SSG and TWP required it to pay certain success fees. ( Id. at ¶ ¶ 23, 25) These fees were not disclosed to Stanley. ( Id. at ¶ 79(e)) After the Stanley Acquisition, the two firms were owed outstanding fees totaling nearly $5 million. ( Id. at ¶ ¶ 1, 49) When SSG and TWP demanded payment, Stanley investigated the claims and negotiated a settlement with SSG for $800,000 and with TWP for $3,538,856, totaling $4,338,856. ( Id. at ¶ ¶ 50, 52-54, 56-58) Consequently, Stanley alleges that while it negotiated to acquire InfoLogix on a debt-free basis, instead it absorbed nearly $5 million of transaction-related liabilities. ( Id. at ¶ 49)
III. LEGAL STANDARDS
A. Motion to Dismiss
When presented with a motion to dismiss for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6), courts conduct a two-part analysis. See Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009). First, courts separate the factual and legal elements of a claim, accepting " all of the complaint's well-pleaded facts as true, but [disregarding]
any legal conclusions." Id. at 210-11. This first step requires courts to draw all reasonable inferences in favor of the non-moving party. See Maio v. Aetna, Inc., 221 F.3d 472, 500 (3d Cir. 2000). However, the Court is not obligated to accept as true " bald assertions," Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir. 1997), " unsupported conclusions and unwarranted inferences," Schuylkill Energy Res., Inc. v. Pa. Power & Light Co., 113 F.3d 405, 417 (3d Cir. 1997), or allegations that are " self-evidently false," Nami v. Fauver, 82 F.3d 63, 69 (3d Cir. 1996).
Second, courts determine " whether the facts alleged in the complaint are sufficient to show that the plaintiff has a 'plausible claim for relief.'" Fowler, 578 F.3d at 211 (quoting Ashcroft v. Iqbal, 556 U.S. 662, 679, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009)). A claim is facially plausible " when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678. This is a context-specific determination, requiring the court " to draw on its judicial experience and common sense." Id. at 679. At bottom, " [t]he complaint must state enough facts to raise a reasonable expectation that discovery will reveal evidence of [each] necessary element" of a claim. Wilkerson v. New Media Tech. Charter Sch. Inc., 522 F.3d 315, 321 (3d Cir. 2008) (internal quotation marks omitted).
" [W]hen the allegations in a complaint, however true, could not raise a claim of entitlement to relief, this basic deficiency should . . . be exposed at the point of minimum expenditure of time and money by the parties and the court." Bell A. Corp. v. Twombly, 550 U.S. 544, 558, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (internal quotation marks omitted). Finally, although a non-fraud claim need not be pled with particularity or specificity, that claim must " give the defendant fair notice of what the . . . claim is and the grounds upon which it rests." Id. at 545.
B. Applicable Pleading Standards
The sufficiency of pleadings for non-fraud claims is governed by Rule 8 of the Federal Rules of Civil Procedure, which requires " a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2).
Claims alleging fraud or mistake are assessed under Rule 9(b), which requires that " a party must state with particularity the circumstances constituting fraud or mistake," Fed.R.Civ.P. 9(b), although " [m]alice, intent, knowledge, and other condition[s] of mind of a person may be averred generally," Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 319, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007).
For private securities fraud causes of action, the Private Securities Litigation Reform Act (" PSLRA" ) " imposes a heightened pleading requirement of factual particularity with respect to allegations of fraud." In re Rockefeller Ctr. Properties, Inc. Sec. Litig., 311 F.3d 198, 216 (3d Cir. 2002). The PSLRA requires plaintiffs asserting a § 10(b) claim under the Securities and Exchange Act of 1934 to " state with particularity both the facts constituting the alleged violation, and the facts evidencing scienter, i.e., the defendant's intention 'to deceive, manipulate, or defraud.'" Tellabs, 551 U.S. at 313 (citing 15 U.S.C. § 78u-4(b)(1)-(2)).
Plaintiff's FAC consists of five causes of action: Count I, alleging primary securities fraud liability under federal law,
against Defendants Gulian, Roberts, and Rubino; Count II, alleging secondary securities fraud liability under federal law, again against Defendants Gulian, Roberts, and Rubino; Count III, alleging common law fraud against Gulian, Roberts, and Rubino; Count IV, alleging negligent misrepresentation against Defendants Gulian, Roberts, and Rubino; and Count V, alleging civil conspiracy against Defendants Gulian, Roberts, Rubino, Henriquez, Denomme, and Liu. (D.I. 14)
Defendants seek dismissal on several grounds. Defendants contend that Counts I-IV should be dismissed against all Defendants because they fail to adequately plead that the alleged misrepresentations caused Plaintiff to suffer economic loss. With regard to Defendant Rubino individually, Defendants contend that Counts I-IV fail to plead a misrepresentation, that Count I additionally fails to plead scienter, and that Count II fails to plead control person liability. Defendants further argue that Counts III and IV against Defendants Gulian, Roberts, and Rubino improperly attempt to convert contractual breaches into tort claims of fraudulent and negligent misrepresentation. Finally, Defendants argue ...