NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
COMPARTMENT IT2, LP; et al.,

Plaintiffs

- Appellants,

v. FIR TREE, INC., DBA Fir Tree Partners; et al., Defendants

- Appellees. No. 18

- 15753
D.C. No. 2:17

- cv - 01035

- MMD

- VCF

MEMORANDUM *

Appeal from the United States District Court for the District of Nevada Miranda M. Du, District Judge, Presiding Argued and Submitted July 12, 2019 Portland, Oregon Before: TASHIMA, GRABER, and OWENS, Circuit Judges. The IT Funds appeal from the Rule 12(b)(6) dismissal of their Nevada

- law stockholder claims against the former majority shareholder

— Fir Tree, Inc.

— and individual directors o f CIG Wireless, Inc. (CIGW). The district court dismissed the IT Funds’ claims because they failed to either (1) state direct stockholder claim s or (2) comply with Federal Rule of Civil Procedure 23 , which is a

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36

- 3. 

# FILED

JUL 23 2019 MOLLY C. DWYER, CLER K U.S. COURT OF APPEAL S2

prerequisite for bringing a derivative claim. The IT Funds contend that the district court erred becau se their complaint stated two direct stockholder claims alleging unlawful equity expropriation and challenging the validity of CIGW’s cash

- out
merger . We affirm. The IT Funds failed to state a “dual” direct and derivative claim of equity expropriation. P arametric Sound Corp. v. Eighth Jud. Dist. Ct. , 401 P.3d 1100, 1109 (Nev. 2017) (citing Gentile v. Rossette , 906 A.2d 91, 99

– 100 (Del. 2006)). Equity expropriation claims are “a species of corporate overpayment claim[s]” that arise when a controlling shar eholder “causes the corporation to issue ‘excessive’ shares of its stock in exchange for assets of the controlling stockholder that have a lesser value.” Gentile , 906 A.2d at 99

– 100. The IT Funds failed to allege that CIGW issued excessive shares of its stock to Fir Tree in exchange for lower

- valued
assets. The IT Funds pled only that Fir Tree obtained additional grants of preferred stock without providing further financing to CIGW . However, the IT Funds d id not allege that these grants constituted an o verpayment or that CIGW was owed any “further financing” for the issuance of these shares. The IT Funds’ complaint acknowledge d that these grants of shares were made in lieu of cash dividends and triggered by Fir Tree’s contractual anti

- dilution protectio ns. The IT Funds also failed to state a direct claim challenging CIGW’s cash

- out merger. To c hallenge the validity of a merger directly , a shareholder must plead3

“wrongful conduct that goes to the approval of the merger,” Parametric , 401 P.3d
at 1106 (citation omitted) , which causes “harm that is not dependent on any injury to the corporation,” id. at 1108. Here, the IT Funds do not allege that they suffered harm independent of the corporation ’s

. Rather, the IT Funds identif ied the harm as the abandonment of “ any effo rt to build CIGW’s value , ” argu ing that the value of
CIGW

— and, incidentally, the common stock

— might have increased but for the
merger. Accordingly, t he IT Funds fail ed to plead that the merger caused them independent harm.
AFFIRMED.