Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca9-09-35101/USCOURTS-ca9-09-35101-0/pdf.json

Nature of Suit Code: 160
Nature of Suit: Stockholder's Suits
Cause of Action: 

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FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

FORREST G. QUINN, 

Plaintiff-Appellant,

v.

No. 09-35101

ANVIL CORPORATION; ANVIL

D.C. No. EMPLOYEE STOCK OWNERSHIP PLAN;  2:08-cv-00182-RSL GENE ANDERSON; P. K. CONNOR;

OWEN OLSEN; JOHN MACPHERSON; OPINION

HENRY KEI; JOHN E. JOHNSON; JOHN

E. JOHNSON, LLC; DOES 1-20,

Defendants-Appellees. 

Appeal from the United States District Court

for the Western District of Washington

Robert S. Lasnik, Chief District Judge, Presiding

Argued and Submitted

May 6, 2010—Seattle, Washington

Filed August 24, 2010

Before: Kim McLane Wardlaw and Ronald M. Gould,

Circuit Judges, and Richard Mills, Senior District Judge.*

Opinion by Judge Gould

*The Honorable Richard Mills, Senior United States District Judge for

the Central District of Illinois, sitting by designation. 

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COUNSEL

Mark Ferrario (argued), Tami D. Cowden, Greenberg Traurig,

LLP, Las Vegas, Nevada, for the appellant.

Scott A. Smith (argued), William P. Brewer, Riddell Williams

P.S., Seattle, Washington, for the appellees. 

OPINION

GOULD, Circuit Judge:

Forrest Quinn appeals the district court’s judgment dismissing for lack of standing his diversity derivative action seeking

damages from Anvil Corporation (“Anvil”), its board of

directors (the “Board”), and others for breach of fiduciary

duty, breach of contract, and negligence. During the pendency

of Quinn’s suit, Anvil proposed an amendment to its articles

of incorporation (the “Amendment”), which, among other

things, would effect a reverse stock split divesting Quinn of

his fifty shares of Anvil stock. The district court denied

Quinn’s motion preliminarily to enjoin the Amendment. After

the Amendment passed, the court denied Quinn’s request for

further discovery and dismissed Quinn’s derivative action

because, lacking shares, Quinn lost standing to assert claims

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derivatively on behalf of the corporation under Federal Rule

of Civil Procedure 23.1’s continuous ownership requirement.

The district court denied Quinn’s motion for reconsideration

of the dismissal. We have jurisdiction under 28 U.S.C.

§ 1291, and we affirm.

I

Anvil is a privately held Washington company that provides engineering services to petroleum companies in the

Northwest. Quinn’s uncle, Lorren Levorsen, founded Anvil in

1971. Quinn was employed by Anvil in the late 1970s and

early 1980s. In 1996, Levorsen established an Employee

Stock Ownership Plan (“ESOP”) for Anvil employees. In

1997, Levorsen gave his remaining Anvil stock to a family

limited-liability company, with equal ownership interests

divided among Quinn, Levorsen’s niece, and Levorsen’s two

stepsons. Beginning in 2001, Quinn wrote letters to Levorsen

and Anvil’s leadership urging the adoption of more aggressive

strategies to increase the value of Anvil’s stock. Quinn also

wrote Anvil’s executives to report asserted deficiencies that

he perceived in the valuation of Anvil’s stock made in connection with the administration of the ESOP. 

Beginning in 2003, Quinn initiated a series of related lawsuits against Anvil and its leadership, alleging undervaluation

of its stock. Quinn’s first lawsuit was dismissed on jurisdictional grounds shortly after being filed in 2003 in California.

Quinn’s second lawsuit, brought in Washington state court in

2004, was settled in 2007. In February 2008, Quinn filed this

derivative shareholder suit in the United States District Court

for the Western District of Washington. The only Anvil stock

Quinn owned when he filed the suit was fifty shares given to

him by his parents before the commencement of this suit.

Quinn named as defendants Anvil, the ESOP, several thencurrent Board members, and others (“Defendants”). Quinn

alleged that appraisals used for ESOP valuation were flawed

and resulted in undervaluation of Anvil’s stock. Quinn sought

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damages for breach of fiduciary duty, breach of contract, and

negligence. 

On July 14, 2008, while Quinn’s lawsuit was pending,

Anvil’s Board unanimously adopted a resolution to amend

Anvil’s articles of incorporation (the “Resolution”). The Resolution stated that the proposed Amendment would “restrict

ownership of substantially all of the Company’s common

stock to employees and the ESOP” and effect a reverse stock

split whereby each sixty shares of Class A Common Stock

would be automatically converted to one share of common

stock. A shareholder with less than sixty shares would not be

entitled to receive a fractional share, but would instead

receive a cash payment in lieu thereof. Thus the Resolution

would eliminate share ownership of those holding less than

sixty shares. The Resolution set a shareholder vote on the

Amendment for August 5, 2008. 

On or about July 15, 2008, Anvil’s Board distributed proxy

materials to Anvil’s shareholders. The proxy materials said

that the purpose of the Amendment was to facilitate employee

ownership of Anvil, which Anvil considered to be an important part of its culture and also “important to its clients and

suppliers.” The Amendment would achieve this goal by permitting Anvil to repurchase employees’ shares at the end of

their employment and by conducting the reverse stock split.

The proxy materials explained that, as a result of the reverse

stock split, a shareholder with fewer than sixty shares would

get cash but would “no longer be an Anvil shareholder.” One

of the persons with fewer than sixty shares, the Board disclosed, was Quinn. Based on the Board’s determination that

$120 exceeded the fair value of a share of Class A Common

Stock, holders of fractional shares would receive a payment

equivalent to the share fraction—the ratio of shares held

divided by sixty shares—multiplied by $7,200.1 The materials

1For example, a hypothetical shareholder owning 121 shares of Class A

Common Stock would receive two new shares of common stock, and a

cash payment of $120 for the 1/60 fractional share. 

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also stated that a dissenting shareholder “with fewer than 60

shares of Class A Common Stock” had appraisal rights to

“obtain payment of the fair value of the shareholder’s shares.”

On July 18, 2008, Defendants filed with the district court

a “Notice of Action that May Leave Plaintiff with no Anvil

Shares.” The notice told Quinn and the court that an August

5 shareholder meeting had been scheduled to vote on the

Amendment, and that the Amendment, if approved, would,

among other things, effect a reverse stock split leaving Quinn

with no shares and, consequently, no standing to pursue this

case. Quinn moved for a temporary restraining order and for

a preliminary injunction against the shareholder vote. On

August 4, the district court denied the motion and, the next

day, the shareholders approved the Amendment with near

unanimity. Quinn notified Anvil that he would exercise his

appraisal rights. 

Thereafter, Defendants filed a supplemental motion to dismiss the action for lack of standing. The district court stayed

further discovery pending resolution of the motion. Quinn

opposed the motion with declarations and exhibits, and simultaneously moved for leave to conduct discovery, arguing that

further discovery was necessary to oppose Defendants’

motion. The court granted the supplemental motion to dismiss, reasoning that because Quinn no longer held any shares

of Anvil stock, he did not meet Federal Rule of Civil Procedure 23.1’s requirement that a plaintiff in a derivative shareholder suit hold shares throughout the litigation. The district

court rejected Quinn’s argument that the reverse stock split

should be unwound due to fraud or procedural irregularity,

reasoning that Quinn had no evidence of fraud and that the

procedural irregularities asserted by Quinn were unsupported

or immaterial. The district court also rejected as without foundation in Ninth Circuit caselaw Quinn’s argument that he

should be able to maintain his derivative suit based on equitable considerations because, as Quinn contended, Anvil’s

reverse stock split had no purpose other than to end his lawQUINN v. ANVIL CORPORATION 12673

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suit. The district court was not persuaded that Quinn was entitled to further discovery. 

Quinn moved for reconsideration of the dismissal and

argued, based on financial information he received from

Anvil after electing appraisal, that Anvil had undervalued its

shares in setting the compensation for fractional shares in the

reverse stock split. The district court denied Quinn’s motion,

concluding that even if it considered this new evidence, it

would not unwind the reverse stock split because the new evidence did not suggest fraud. Quinn’s timely appeal followed.

II

The first issue raised by Quinn’s appeal is whether we

should reverse the district court’s decisions not to enjoin or

unwind the reverse stock split and restore Quinn’s shares.

Quinn’s request that the district court unwind the reverse

stock split is properly understood as a request for preliminary

equitable relief. See Yamamoto v. Omiya, 564 F.2d 1319,

1323-24 (9th Cir. 1977) (shareholder’s suit seeking to void a

sale consummated through allegedly misleading and deceptive proxy solicitations characterized as a request for “equitable relief”).2

 We review the district court’s decisions denying

the preliminary injunction against the reverse stock split for

abuse of discretion. See Nader v. Brewer, 386 F.3d 1168,

1169 (9th Cir. 2004) (per curiam) (denial of preliminary

injunction reviewed for abuse of discretion); see also MacDonald v. Grace Church Seattle, 457 F.3d 1079, 1081 (9th

Cir. 2006) (denial of motion for reconsideration reviewed for

abuse of discretion). A district court abuses its discretion in

denying a preliminary injunction if it bases its decision on “an

erroneous legal standard or clearly erroneous findings of

2To the extent that Quinn argues that the reverse stock split was inoperative to deprive him of standing even though he now has no shares, his

argument is that he has equitable standing, which we address below in Part

III. 

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fact.” Cal. Pharmacists Ass’n v. Maxwell-Jolly, 596 F.3d

1098, 1104 (9th Cir. 2010); see also United States v. Hinkson,

585 F.3d 1247, 1262 (9th Cir. 2009) (en banc).

[1] Quinn attacks the reverse stock split on two state-law

grounds: first, that it was fraudulent, and second, that the

Amendment was procedurally flawed. Entitlement to a preliminary injunction requires showing, among other things,

likely success on the merits. Cal. Pharmacists, 596 F.3d at

1104. Because Quinn sought the appraisal remedy, Washington law precludes him from attacking the Amendment unless

he shows that it was fraudulent or procedurally flawed. See

Wash. Rev. Code § 23B.13.020(2); Sound Infiniti, Inc. v. Snyder, 186 P.3d 1107, 1112 (Wash. Ct. App. 2008), review

granted 203 P.3d 379. Quinn, however, has not demonstrated

likelihood of success on the merits of his state-law claims that

the Amendment involved fraud or procedural irregularity. We

hold that the district court was within its discretion in not

enjoining or unwinding the reverse stock split.3See Cal.

Pharmacists, 596 F.3d at 1104; Hinkson, 585 F.3d at 1262.

[2] Arguing that the Amendment was fraudulent, Quinn

takes issue with the Board’s statements in the proxy materials

that $120 was “not less than the current fair value” of a share

of Class A Common Stock and was “higher than its current

value.” Under Washington law, a representation is only fraudulent if it is both material and false. See Baertschi v. Jordan,

413 P.2d 657, 660 (Wash. 1966). The district court did not

find the representations concerning the share value fraudulent,

stating, “Plaintiff seeks to draw a one-to-one correlation

between net income and stock price, a valuation process that

3The district court articulated the preliminary injunction standard in

denying Quinn’s motion for preliminary relief. Although the district court,

in its orders granting Defendants’ supplemental motion to dismiss and

denying Quinn’s motion for reconsideration, did not again recite this standard in declining to unwind the reverse stock split, we may affirm the dismissal on any ground supported by the record. See United States v.

Washington, 573 F.3d 701, 706 (9th Cir. 2009). 

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ignores all other facts that affect the value of a company’s

stock (such as one-time asset sales, planned expenditures, and

prospects for new business).” This finding was not clearly

erroneous. The $120 figure exceeded the most recent

independent-appraisal price of $93.97 and was also higher

than prior independent appraisals. Nor was the share price

material to the Amendment because Anvil’s shareholders,

other than those few with less than sixty shares, retained their

equity in Anvil with only fractional shares cashed out. See

Martin v. Miller, 600 P.2d 698, 699-700 (Wash. Ct. App.

1979) (stating that a fact is material if a reasonable person

would attach importance to its existence in determining his or

her action).

[3] Quinn next contends that the proxy materials were

fraudulent because they omitted material facts. Quinn argues

that it was fraud for Anvil not to disclose Quinn’s allegations,

that the Amendment would end Quinn’s lawsuit, that Anvil

employees who brought future derivative suits would risk termination, and that certain Anvil Board members had conflicts

of interest because they either had a financial interest in the

Amendment due to their acquisition of undervalued option

stock or are defendants (or related to a defendant) in this suit.

But these omissions were not fraudulent because Quinn has

not established that there is a substantial likelihood that this

information would have been important to shareholders in

deciding how to vote on the Amendment. See Guarino v.

Interactive Objects, Inc., 86 P.3d 1175, 1185 (Wash. Ct. App.

2004). The proxy materials disclosed that the Amendment

would divest Quinn of his shares, severing Anvil’s relationship with Quinn. The Amendment was neither a referendum

on the directors nor the independent appraisal process, so the

greater specificity concerning Quinn’s allegations and the

nature of his lawsuit that Quinn suggests was required was not

necessary. There was no need for Anvil to disclose that

employees would bring future suits at risk of termination

because Quinn’s contention of potential retaliation is unsupported. 

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Concerning the alleged Board-member conflicts, we reject

Quinn’s conclusory assertion that certain Board members

were conflicted because they “owned shares based on Anvil’s

faulty appraisals.” And even assuming, as Quinn argues, that

three of the seven Board members—P.K. Connor, John MacPherson, and Scott Anderson—were conflicted because of

their ties to this suit, the remaining four directors unanimously

voted to adopt the Amendment. This was sufficient to establish a quorum, see Wash. Rev. Code § 23B.08.720(3), and to

validly ratify the Amendment, see id. §§ 23B.08.710,

23B.08.720(1). Anvil’s treatment of these alleged conflicts, if

they were conflicts at all, was procedurally proper and not

fraudulent.

[4] Quinn also did not show that the Amendment was otherwise procedurally flawed. Quinn argues that shareholders

had to approve the Amendment through separate group voting. See Wash. Rev. Code § 23B.10.040(1). Quinn is mistaken. The Redemption Agreement between Levorsen and

Anvil did not create a separate series or class of stock entitled

to a separate vote.4 Separate group voting was unnecessary.

Because Quinn cannot show likelihood of success on his

state-law claims of fraud and procedural infirmity in the

Amendment, we conclude that the district court did not abuse

its discretion in declining preliminarily to enjoin or unwind

the reverse stock split.

III

The second issue raised by Quinn’s appeal is whether,

despite not holding shares after the Resolution was implemented, Quinn meets Federal Rule of Civil Procedure 23.1’s

standing requirements for a shareholder derivative action. We

review de novo whether Quinn has derivative standing to

4Because we earlier concluded that Quinn has not shown that the

Amendment was fraudulent, we likewise reject his contention that fraud

rendered the Amendment procedurally infirm. 

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assert claims on behalf of Anvil. Kona Enters., Inc. v. Estate

of Bishop, 179 F.3d 767, 769 (9th Cir. 1999).

[5] The normal rule is that a corporation is run by its management, and the corporation itself has the right to make

claims. See Potter v. Hughes, 546 F.3d 1051, 1058 (9th Cir.

2008) (“[T]he general rule of American law is that the board

of directors controls a corporation.”). A derivative action is an

extraordinary process where courts permit “a shareholder to

step into the corporation’s shoes and to seek in its right the

restitution he could not demand in his own.” Lewis v. Chiles,

719 F.2d 1044, 1047 (9th Cir. 1983) (quotation marks omitted); see Kayes v. Pac. Lumber Co., 51 F.3d 1449, 1463 (9th

Cir. 1995) (“Because of the fear that shareholder derivative

suits could subvert the basic principle of management control

over corporate operations, courts have generally characterized

shareholder derivative suits as a remedy of last resort.” (quotation marks omitted)). 

[6] Because of the extraordinary nature of a shareholder

derivative suit, Rule 23.1 establishes stringent conditions for

bringing such a suit. Potter, 546 at 1058 (“[S]trict compliance

with Rule 23.1 and the applicable substantive law is necessary

before a derivative suit can wrest control of an issue from the

board of directors.”). First, plaintiffs must comply with Rule

23.1’s pleading requirements, including that the plaintiff “allege with particularity the efforts, if any, made by the plaintiff

to obtain the action the plaintiff desires from the directors.”

Id. at 1056 (quotation marks omitted); see Fed. R. Civ. P.

23.1(b). Second, Rule 23.1 states that a derivative action

brought by “one or more shareholders . . . to enforce a right”

of a corporation “may not be maintained if it appears that the

plaintiff does not fairly and adequately represent the interests

of shareholders or members who are similarly situated in

enforcing the right of the corporation or association.” Fed. R.

Civ. P. 23.1(a). We have inferred from this language not only

“that a derivative plaintiff be a shareholder at the time of the

alleged wrongful acts” but also “that the plaintiff retain own12678 QUINN v. ANVIL CORPORATION

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ership of the stock for the duration of the lawsuit”—the socalled “continuous ownership requirement.” Lewis, 719 F.2d

at 1047. If a shareholder is divested of his or her shares during

the pendency of litigation, that shareholder loses standing. See

id.

[7] This second requirement, the continuous ownership

requirement, as the district court properly recognized, forecloses Quinn’s derivative action. By operation of the reverse

stock split, Quinn’s fifty shares were cancelled and Quinn

thereafter held no Anvil stock. Quinn’s derivative claims are

an “intangible asset” belonging to Anvil, not to Quinn. See id.

Quinn, a nonshareholder, cannot benefit from any recovery

the company obtains from Defendants in a derivative suit and

therefore, unlike Anvil’s continuing shareholders, Quinn does

not have “an interest in pursuing the claims.” See id. We

therefore hold that, after the reverse stock split, Quinn did not

meet Rule 23.1’s continuous ownership requirement.

Quinn nevertheless urges us to recognize an exception to

Rule 23.1’s continuous ownership requirement because, as he

describes it, Anvil conducted the reverse stock split only to

terminate his pending lawsuit, and the Amendment was permeated by fraud and procedural flaws.5

 We have rejected

applying an equitable exception to the continuous ownership

requirement, and Quinn provides no compelling reason why

we should apply one now. See id. at 1046-48 (rejecting argument of former shareholder that we should recognize equitable standing where the company’s leadership conducted an

asset sale during the pendency of the litigation to allegedly

“insulat[e] themselves from liability”);6 Kona, 179 F.3d at 770

5Although Quinn and Anvil present arguments about whether Quinn

would have standing under Washington law, we need not decide this issue.

The continuous ownership requirement imposed by Rule 23.1 of the Federal Rules of Civil Procedure is procedural and therefore applies in diversity actions such as this one. Kona, 179 F.3d at 769. 

6Quinn attempts to distinguish Lewis, arguing that, unlike in Lewis, 719

F.2d at 1048, here there was inadequate disclosure concerning the Board

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(rejecting equitable standing where former shareholder did

not challenge the stock foreclosure that divested shareholder

of shares and company was still in existence). 

[8] To the extent that other courts have recognized exceptions to the continuous ownership requirement, these exceptions are inapplicable here. First, some courts have recognized

equitable standing where a shareholder challenges a corporate

transaction that resulted in no continuing shareholders that

could bring derivative claims. In Lewis, for example, we cited

state court decisions recognizing equitable standing “when

officers or directors breached their fiduciary duty in connection with” a corporate merger that resulted in “dissolution of

a corporation.” 719 F.2d at 1048 (emphasis added). Similarly,

the cases we cited in Kona (and relied upon by Quinn)

involved challenges to stock foreclosures or mergers where,

absent equitable standing, none of the original shareholders

could bring a claim on behalf of the company. 179 F.3d at 770.7

Although Quinn challenges the divesting transaction as fraudulent or procedurally flawed, his state-law claims are inadequate to support preliminary relief, and his challenge does not

fit within this exception because he challenges only a reverse

stock split. After the reverse stock split, in contrast to a stock

sale (or foreclosure) depriving all original shareholders of

stock or a merger involving a disappearing company, Anvil’s

corporate personhood persists with its original shareholders

continuing to hold stock in Anvil (unless they held fewer than

sixty shares). The interest that motivated the recognition of

equitable standing in the cases above—ensuring that a meanmembers’ purported conflicts and Quinn’s allegations. Even assuming that

Anvil’s disclosure to shareholders was less extensive than that in Lewis,

that alone is not enough for us to conclude that equity warrants a different

result here. 

7The state cases cited by Quinn likewise involved challenges to mergers. See Lewis v. Anderson, 477 A.2d 1040, 1046 n.10 (Del. 1984) (recognizing exceptions to the continuous ownership requirement in certain

merger cases); Platt Corp. v. Platt, 21 A.D.2d 116, 124 (N.Y. App. Div.

1964) (company ceased to exist after merger). 

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ingful mechanism exists to review the lawfulness of a transaction that divests all former shareholders of shares—is not

implicated here. 

[9] Second, courts have suggested that equitable standing

may be appropriate where there is no business justification for

a transaction other than to terminate a lawsuit. See Zauber v.

Murray Sav. Ass’n., 591 S.W.2d 932, 938 (Tex. Civ. App.

1979) (“If no valid business purpose exists, a court of equity

will consider the destruction of a stockholder’s status a nullity

and allow him to proceed with the suit in the name of the corporation.”); Teschner v. Chicago Title & Trust Co., 322

N.E.2d 54, 57-58 (Ill. 1974) (upholding a reverse stock split

where the defendant corporation represented that the purpose

of the reverse stock split was “to reduce corporate expenses

and simplify and facilitate procedures”). Anvil’s Resolution

and proxy materials explicitly related the Amendment’s legitimate business purpose of consolidating ownership of Anvil

within its employees for the benefit of Anvil’s employees, its

culture, and its relationship with clients and suppliers.8 Quinn,

however, has not offered credible evidence, but rather only

his self-serving assertions that the purpose of Anvil’s Amendment was to terminate his lawsuit. Because evidence showed

a legitimate reason for the transaction, this exception is therefore likewise inapplicable.

[10] Nor does our decision leave Quinn without potential

recourse for his grievances. A shareholder derivative suit is “a

remedy of last resort,” Kayes, 51 F.3d at 1463, and Quinn had

available to him in his appraisal rights a remedy of first resort.

Moreover, to the extent that Quinn is personally aggrieved,

8Although Anvil acknowledged that one of the consequences of the

Amendment was that Quinn lost standing to pursue his lawsuit and that the

shareholders were motivated in part to pass the Amendment in the hopes

that it would end the litigation, Anvil has consistently maintained that the

Amendment was motivated with the legitimate business purpose of

employee ownership in mind. 

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his recourse would be to bring a direct action against Anvil.

Equity does not favor permitting Quinn standing to pursue

derivative claims on behalf of Anvil, contrary to the requirements of Federal Rule of Civil Procedure 23.1 as consistently

interpreted by us to require continuous ownership. 

Quinn next protests that the district court, in deciding that

he did not meet Rule 23.1’s standing requirements, erred by

not taking as true his allegations that the Amendment was

fraudulent, procedurally infirm, and without legitimate business purpose, instead holding him to a level of proof required

at trial. But Quinn advanced no argument to the district court,

either in opposing dismissal or on reconsideration, that he was

entitled to rest on these allegations, without commensurate

proof, to establish standing. To the contrary, Quinn addressed

Defendants’ evidence head on and submitted declarations and

many exhibits. We will not entertain Quinn’s attack on the

procedure used by the district court in deciding Quinn’s suitability as a plaintiff under Rule 23.1. See Hornreich v. Plant

Indus., Inc., 535 F.2d 550, 552 (9th Cir. 1976) (“In determining the adequacy of appellant as a representative of other

shareholders [under Rule 23.1], the court was entitled to rely

not only upon the pleadings, but also the affidavits submitted

by the parties relating information of direct consequence to

the issue before the court. The appellant having made no

objection to the procedure followed in the district court . . .

is in no position to complain.” (citations omitted)); United

States v. Flores-Payon, 942 F.2d 556, 558 (9th Cir. 1991)

(“Issues not presented to the trial court cannot generally be

raised for the first time on appeal.”). 

[11] But our decision would be the same even if we gave

full force to Quinn’s position. Quinn quotes Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992), for the proposition that

he need only establish standing “with the manner and degree

of evidence required at the successive stages of the litigation,”

id. at 561. Quinn conceded in his opening brief that Defendants’ supplemental motion to dismiss “addressed matters that

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occurred subsequent to the filing of the Complaint, and

included matters extraneous to the pleadings,” and the district

court “could have considered the motion under the standards

of [Federal Rule of Civil Procedure] 56.” If, as Quinn argues,

Lujan’s standard applies, it directs that Quinn could “no longer rest on . . . mere allegations,” and at bare minimum had

to “set forth by affidavit or other evidence specific facts”

demonstrating that he met the requirements for derivative

standing. Id. (quotation marks omitted). He failed adequately

to do this. Although Quinn opposed with declarations and

exhibits the supplemental motion to dismiss, Quinn did not

show that he met the continuous ownership requirement of

Rule 23.1. We hold that the district court properly dismissed

Quinn’s action and was within its discretion in denying reconsideration of the dismissal.

IV

Quinn also challenges the district court’s denial of his

motion for leave to conduct discovery. We review district

court rulings on discovery matters for abuse of discretion.

Childress v. Darby Lumber, Inc., 357 F.3d 1000, 1009 (9th

Cir. 2004).

[12] Quinn contends that additional discovery was necessary to oppose Defendants’ supplementary motion to dismiss.

It is not settled how much, if any, discovery a derivative

plaintiff is entitled to receive before opposing a motion to dismiss for noncompliance with Rule 23.1’s continuous ownership requirement. Cf. In re Merck & Co., Inc. Secs.,

Derivative & ERISA Litig., 493 F.3d 393, 400 (3d Cir. 2007)

(“[D]erivative plaintiffs are not entitled to discovery to assist

their compliance with Rule 23.1” (internal quotation marks

omitted)); but cf. Fagin v. Gilmartin, 432 F.3d 276, 285 & n.2

(3d Cir. 2005) (stating that although “Rule 23.1 does not

address discovery, neither allowing nor prohibiting it,” where

material outside the pleadings must be assessed in deciding

demand futility, “limited discovery seems in order”). AssumQUINN v. ANVIL CORPORATION 12683

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ing without deciding that some discovery is warranted in

opposing a motion to dismiss predicated on Rule 23.1’s continuous ownership requirement where facts outside the pleadings must be considered, Quinn had an opportunity to conduct

discovery in advance of the shareholder vote. Quinn did not

demonstrate that further opportunity for discovery was justified or warranted. Contrary to Quinn’s contentions, he was

not entitled to further discovery or a hearing concerning the

valuation issues that underlie his derivative claims. As the district court noted, the valuation issue “ha[d] been beaten to

death, it seems, over the years of litigation.”

[13] Although Quinn claimed that protective orders prevented him from using material obtained through prior litigation, Quinn never filed a motion seeking relief from any

protective orders. Quinn’s one-sentence request to use confidential documents obtained in other litigation without filing

them under seal contained at the end of his “Statement

Regarding Filing Documents Under Seal” was not a formal

motion for relief from the protective order, and the district

court was within its discretion in not granting a request so tendered. We hold that the district court did not abuse its discretion in denying Quinn further discovery. See Hinkson, 585

F.3d at 1262.

AFFIRMED.

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