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# FI LED OC T 21 2010 M OLLY C. DW Y ER, CLERK U . S. C O U R T OF APPE ALST h e H o n o rab le R o n ald B . L eigh ton , U n it ed S tat es D istri ct Ju d g e f o r th e W estern ** D i s tr i ctof W as hi ngt on, s i tt i ng bydes i gnat i on. 2 A r gue d a nd S ubm i tt e d O c t obe r7, 2010 S a n F r a n c is c o , C a lif

o rn ia B e f o r e : R YME R a n dN. R . S MI T H, C i r c u i tJ u d g e s , a n dL E I GH T ON , ** D i stri ctJudg e. P lain ti ff C o n g re g atio n B eth A ar o n (“C B A ”) ap p ea ls th e D istrict C o u rt’s d is m is s a l w ith p r e

ju d ic e o f its d e r iv a tiv e s ta te a n df e d e r a l c la im s . A ar on v . Y ang , N o . 0 8 -cv -0 5 4 3 8 -R M W , 2 0 0 9 W L 1 6 8 9 7 0 7 (N . D . C al . Ju n e 1 5 , 2 0 0 9 ). C B A al so appe a l s the D i s tr i c tC ourt ’ s de ni a l of l e a ve t o a m e nd i t s c om pl a i nt . W e ha ve j u r i s d i c t i o n p u r s u a n tt o 2 8 U . S. C. § 1 2 9 1 , a n dw e a f f i rm. D i s m i s s a l s unde rF e de r a l R ul e of C i vi l P r oc e dur e 12( b) ( 6) a r e r e vi e w e d de n o v o . McN

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t v . I qbal , 129 S . C t . 1937, 1949 ( 2009) ( quot i ng B el l A t lan t i c Corp. v. T

w om bl ey , 550 U . S . 544, 570 ( 2007) ) . A di s tr i c tc ourt ’ s de c i s i on w he the rt o gr a ntl e a ve t o a m e nd a c o m p la in t is r e v ie w e df o rab u s e o f

d is c r e tio n . B ow le s v . R e ade , 198 F . 3d 752, 757 (9th C i r. 19 99 ). I n F e brua ry2008, M i c r os of tm a de a n ope n bi d f

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C ha nc e ry . I n M a r c h 2009, the C ourtof C ha nc e ryappr ove d a S ett l em entA gree m entthati ncl ud ed a r el ea se of al l cl ai m s r el at ed t o the D i re ct orD e f e n d a n ts ’ c o n d u c t o p p o s in g M ic r o s o f t’s b id , w ith e x c e p tio n s n o t r e le v a n t h e r e . T h e D is tr ic t C o u rt h e ldth a t C B A ’s c la im s a g a in s t th e D ir e c to r - D e f e n d a n ts w e r e b a rr e db yth e S e ttle m e n t A g r e e m e n t a n dth u s a ls o b a rr e du n d e rth e F u ll F a ith and C re di tA ct , 28 U . S . C . § 1 73 8. T he F ul l F ai th and C re di tA ctre qu i re s f eder al court s t o g i ve st at e c ou rtj ud gm ent s “ the sam e pre cl usi ve ef fe ctas w ou l d b e gi ven thatj ud gm entun der the l aw of the S t at e i n w hi ch the j ud gm entw as re nd er ed. ” Mi gra v. W arre n C i t y Sch. D ist. B d. O

f E du c. , 46 5 U . S . 75 , 81 (198 4). T he D i stri ct C ou rtthere fore di sm i ss ed C B A ’ s c l ai m s und erF eder al R ul e of C i vi l P roce du re 12( b) ( 6) w i th pr e

j udi c e . O n appe a l , C B A a s s e rt s tha ti t s s t a t e l a w c l a i m ofCBA r a i s e s tw o s t a t e l a w c l a i ms , e n tr e n c h me n ta n dc o rp o r a t e w a s t e . CBA 1 on l y m akes an ar gu m entre gardi ng entre nchm entand d oes notdi sput e the D i stri ct C ourt ’ s c ha r a c t e r i z a t i on of the w a s t e c l a i m a s de r i va t i ve of the e ntr e nc hm e nt cl ai m . T h u s, th e w ast e cl ai m fai l s i f th e en tren ch m en tcl ai m fai l s. 4 entre nchm ent and federa l l aw cl ai m s of vi ol at i on of the S ec uri t i es E xchang e A ct

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t b id , w h ic h is e x p r e s s lye n c o m p a s s e db yth e S e ttle m e n t A g r e e m e n t. P a r a doxi c a l l y , C B A a l s o a s s e rt s tha tthe a c tof e nt e r i ng i nt o the S e tt l e m e nt A g r e e m e n t c o n s titu te s e n tr e n c h m e n t b e c au s e it p r o te c ts th e D ir e c to r - D e f e n d a n ts f r o m h a v in g to a n s w e rf

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t erM i cr osoftm ade i t s bi d. In the P roxy S t at em ent , the D i re ct orD e f e nda nt s e ndor s e d the S e ve r a nc e P l a ns a nd oppos e d as t oc khol de r ’ s P a yf or P e r f o rm a n c e P r o p o s a l th a t w o u ldh a v e tie de x e c u tiv e c o m p e n s a tio n m o r e c lo s e ly t o com pany performance. T he P roxy S t at em entas se rt ed thatthe B oard w as m a ki ng i t s r e c om m e nda t i ons unde ra dvi s e m e ntof i nde pe nde ntc om pe ns a t i on c ons ul t a nt s . C B A c l a i m s the D i r e c t or - D e f e nda nt s vi ol a t e d the S e c ur i t i e s E xc ha nge A c t b ym is le a d in g in v e s to r s in to f a ls e lyb e lie v in g th e in d e p e n d e n t c o n s u lta n ts s upport e d both of

the B oa r d’ s r e c om m e nda t i ons . C l a i m s of S e c ur i t i e s E xc ha nge A c tvi ol a t i ons r e l a t e d t o the S e ve r a nc e P l a ns a r e c l e a r l ye nc om pa s s e d bythe S e tt l e m e ntA gr e e m e nt . H ow e ve r , C B A ar gue s the r e c om m e nda t i ons r e ga r di ng the S ever ance P l ans and the P ayfor P er form ance P ropo sa l , tho ug h si m i l ari n n ature, ar e f ac tual l y i nd ependentand the P ayfor P er form ance re com m endat i on has6

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th e P r o x yS ta te m e n t a r e b a rr e db yth e S e ttle m e n t A g r e e m e n t. F i n al l y, th e D i stri ctC o u rtd en i ed C B A l eav e t o am en di t s co m p l ai n tb ecau se th e c o u rtv i e w e da n ya tt e mp tt o c u r e th e c o mp l a i n t ’ s d e f i c i e n c i e s t o b e f

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