* This order and judgment is not binding precedent, e xcept under the

doctrines of law of the case, res judicata, and col lateral estoppel. The court generally disfavors the citation of orders and judg ments; nevertheless, an order and judgment may be cited under the terms and condi tions of 10th Cir. R. 36.3. 

## F I L E D United States Court of Appeals Tenth Circuit 

### APR 7 1998 

### PATRICK FISHER Clerk UNITED STATES COURT OF APPEALS FOR THE TENTH CIRCUIT

MARK BONDIETT and RONALD G. ROSSI, as individuals,

Plaintiffs-Appellants,

v. NOVELL, INC., a Delaware Corporation; ROBERT J. FRANKENBERG, ALAN ASHTON, ELAINE R. BOND, HANS-WERNER HECTOR, JACK L. MESSMAN, LARRY W. SONSINI, IAN R. WILSON, JOHN R. YOUNG and DAVID R. BRADFORD, as individuals,

Defendants-Appellees. No. 97-4054 (D.C. No. 96-CV-303J) (D. Utah)

ORDER AND JUDGMENT *

Before BRORBY , BARRETT , and BRISCOE , Circuit Judges.-2-

After examining the briefs and appellate record, th is panel has determined unanimously that oral argument would not materiallyassist the determination of this appeal. See Fed. R. App. P. 34(a); 10th Cir. R. 34.1.9. The c ase is therefore ordered submitted without oral argument. Plaintiffs Bondiett and Rossi appeal from the distr ict court’s order granting defendant Novell’s motion to dismiss their sharehol ders’ proxy challenge. Our jurisdiction arises from 28 U.S.C. § 1291; see United States v. Storey , 2 F.3d 1037, 1040 (10th Cir. 1993). We review a district court’s dismissal pursuant to Fed. R. Civ. P. 12(b)(6) de novo, whether based on jurisdiction, see Painter v. Shalala , 97 F.3d 1351, 1355 (10th Cir. 1996), or failure t o state a claim, see Chemical Weapons Working Group, Inc. v. United Stat es Dep’t of the Army , 111 F.3d 1485, 1490 (10th Cir. 1997). Plaintiffs originally asserted claims against Novel l under sections 10 and 14(a) of the Securities Exchange Act of 1934, Utah’ s criminal code, and the corporate law of both Utah and Delaware. Novell mo ved to dismiss the claims under Fed. R. Civ. P. 12(b)(6) for failure to state a claim. After a hearing, the district court granted Novell’s motion, dismissing the federal claims with prejudice and the state claims without prejudice. Plaintiffs now appeal, raising essentially a single argument challenging the distr ict court’s dismissal of their1 Plaintiffs’ opening brief contains two references t o their section 10 claim:

one asserts that they, along with other purchasing shareholders, are entitled to relief under section 10; the second asserts that th e same standards of materiality apply to both sections 10 and 14. Because plaintif fs present no specific argument regarding their section 10 claim, they have abandon ed that claim on appeal. See United States v. Hardwell , 80 F.3d 1471, 1492, reh’g granted in part on othe r grounds , 88 F.3d 897 (10th Cir. 1996). Similarly, plainti ffs present no argument on their related state claims; any issues regarding those claims are also waived. See State Farm Fire & Casualty Co. v. Mhoon , 31 F.3d 979, 984 n.7 (10th Cir. 1994). -3- section 14(a) proxy claim against Novell. Plaintif fs have waived all other issues by failing to pursue them on appeal. 1 Initially, we address a jurisdictional issue raisedby defendant Novell on appeal. Based on a provision in the 1995 Securitie s Reform Act, Novell contends that this court lacks appellate jurisdiction becaus e the district court’s order is not final. That provision requires district courts to make findings about the parties’ compliance with Rule 11 of the Federal Rules of Civ il Procedure. See 15 U.S.C. § 78u-4(c)(1). The district court in this case did not make the required findings as part of its order granting Novell’s motion to di smiss. Novell argues that the district court’s order is no t appealable until the required findings are made, based on the mandatory nature of the statute and the court’s failure to file a judgment pursuant to Fed. R. Civ. P. 58. Further, it asserts that the issues raised by the Rule 11 inqui ry are so intertwined with the issues raised on appeal that proceeding without the required findings would result-4-

in separate, and therefore, inefficient, appeals. We disagree. While the statute mandates Rule 11 findings “upon final adjudication, ” it does not require that those findings be made as part of the court’s orderdisposing of the merits of the case. Further, Rule 11 matters are routinely decid ed after final judgment, often resulting in separate appeals. Compare White v. General Motors Corp. , 977 F.2d 499, 500 (10th Cir. 1992) (separate appeal of sanct ions orders) withBarrett v. Tallon , 30 F.3d 1296, 1298 (10th Cir. 1994) (deciding tog ether two separate appeals from district court order, one leveling Rul e 11 sanctions). We conclude that the statute does not compel a different resultin this case. Plaintiffs’ single argument on appeal rests squarel y on their characterization of the district court’s ruling as based solely on standing. See Appellant’s Br. at 16-17, 20-21. They further cont end that Novell’s motion to dismiss was “unsuccessful except as to result,” Rep ly Br. at 1, that the court’s ruling was not based on any argument advanced by No vell before the district court, id. , and assert that the district court “made no subst antive determination on the merits of the case, but held it was unable to h ear the matter.” Id. at 2. These arguments misrepresent both the record and the district court’s ruling. While the district court discussed plaintiffs’ standing, or w hat he termed “status” to bring a proxy challenge absent personal reliance, see Appellant’s App. at 33, 38-39, it is clear from the record that the court heard argumentfrom the parties on all of the2 Plaintiffs obliquely contend that their suit may be a derivative action by

challenging the district court’s statement at the h earing to the contrary. See Appellant’s Br. at 24. This argument has no merit; plaintiffs’ attorney clearly conceded at the hearing before the district court t hat their action was not a derivative suit. See Appellant’s App. at 37. -5- bases Novell urged in support of its motion to dism iss and discussed grounds other than reliance as a basis for its dismissal, i ncluding injury and causation.
See id. at 33-35. Further, the district court’s oral ruli ng expressly concludes that plaintiffs failed to state a claim and its final wr itten order expressly grants Novell’s motion to dismiss, which was based solely on Fed. R. Civ. P. 12(b)(6), and not on jurisdictional grounds. See Appellant’s App. at 29. Based on their assertion that the district court di smissed the case only because it concluded plaintiffs did not have standi ng to bring a section 14(a) claim against Novell absent personal reliance on th e challenged proxy statements, plaintiffs argue that the dismissal was in error. They contend that personal reliance is not required to bring a section 14(a) p roxy challenge. We agree. See , e.g. , 7547 Corp. v. Parker & Parsley Dev. Partners , 38 F.3d 211, 230 (5th Cir. 1994). Nonetheless, because we disagree with plaintiffs that lack of reliance was the sole basis for the district court’s ruling and because alternate grounds discussed at the hearing support that ruling, cf. United States v. Sandoval , 29 F.3d 537, 542 n.6 (10th Cir. 1994), we affirm the dismis sal of plaintiffs’ case. 23 Plaintiffs did not include in their appendix on app eal a copy of their brief

opposing the motion to dismiss before the district court. Novell’s reply brief before the district court states that “[p]laintiffs evade most of defendant’s contentions, and ignore most of the case law presented in defendant’s brief.” Appellee’s Supp. App., Vol. II, at 245. -6- Plaintiffs’ section 14(a) claim asserted that Novel l omitted or misstated material facts within certain proxy materials with intent to mislead or deceive its shareholders. The challenged proxy statement calle d for re-election of current directors to another term and a vote on certain sal ary proposals. The alleged omissions and misstatements from the proxy statement dealt with prior and planned future acquisitions and asset sales, the impact of those transactions on Novell, and the financial condition of the company. On appeal, as in its motion to dismiss before the district court, Novell contends that the required transactional causation for a section 14(a) proxy claim is lackin g. They argue that plaintiffs have “failed to allege any connection between the a lleged misrepresentations or omissions in the Proxy Statement and any decision m ade at the Novell shareholders’ meeting.” Appellee’s Br. at 11. Out side of a conclusory statement that their claims against Novell are “directly rele vant” to the matters voted on at the shareholder’s meeting, Reply Br. at 7, plaintif fs do not address causation on appeal. Further, the record suggests that they als o failed to address this issue before the district court, despite Novell’s argumen ts on point. 34 The court recognizes that, at this date, appellants ’ equitable claims may be

moot. See Buckley v. Archer-Daniels-Midland Co. , 111 F.3d 524 (7th Cir. 1997); General Elec. Co. ex rel. Levit v. Cathcart , 980 F.2d 927, 934-35 (3d Cir. 1992). However, in light of our determination that plainti ffs’ section 14(a) claim lacks the required transactional causation to the matters voted upon at the April 1996 shareholders’ meeting, analysis of this possibilityis not necessary. We also note that neither of the parties raised the issue of moo tness. -7- The Supreme Court discussed causation as an elementof section 14(a) claims in Mills v. The Electric Auto-Lite Co. , 396 U.S. 375, 385 (1970): Where there has been a finding of materiality, a sh areholder has made a sufficient showing of causal relationship be tween the violation and the injury for which he seeks redress if, as here, he proves that the proxy solicitation itself, rather t han the particular defect in the solicitation materials, was an essent ial link in the accomplishment of the transaction. Upon review of the entire record on appeal, we agre e with Novell that causation under these circumstances is too attenuated to stat e a claim under section 14(a). None of the alleged omissions or misrepresentations in the challenged proxy statement relate to matters which were voted on at the shareholders’ meeting. 4 Case law on point supports our conclusion. For example, in General Electric Co. ex rel. Levit v. Cathcart , 980 F.2d 927 (3d Cir. 1992), the Third Circuit held that the nexus between a shareholder v ote to elect board members and indemnify officers and directors and the allege d omissions from the proxy statement regarding corporate misconduct and misman agement was insufficient to state a claim. The court said: “this is precisely the sort of claim that courts have-8-

repeatedly found insufficient to satisfy the transa ction causation requirement.” Id. at 933. In Cowin v. Bresler , 741 F.2d 410 (D.C. Cir. 1984), the District of Columbia Circuit addressed causation under similar circumstances and concluded that it was lacking because the injury alleged--con tinued fraudulent acts by the board of directors--“was not a direct result of the misleading proxy statement.” Id. at 428. The court stressed that damages must be s hown to have resulted directly from the authorized corporate transaction, rejecting a more lenient standard that would allow shareholders to file suiton “claims that have no direct relationship to the purpose of the proxy statement. ” Id. ; see also In re Westinghouse Sec. Litig. , 832 F. Supp. 948, 1000-01 (W.D. Pa. 1993) (concluding, without expressly discussing causation , that allegations of failure to disclose mismanagement of company did not state a c laim under section 14(a)), aff’d in part, rev’d in part on other grounds , 90 F.3d 696 (1996); cf. Royal Business Group, Inc. v. Realist, Inc. , 933 F.2d 1056 (1st Cir. 1991) (affirming district court’s dismissal of action to recover exp enses incurred in proxy context, ruling that plaintiffs could not contend they were harmed as shareholders by election, and noting “It is simply too much of a st retch to bring such a claim within the causative sphere required for viability under Section 14(a).”). Plaintiffs’ section 14(a) claim against Novell lack s the required transactional causation and therefore fails to stat e a claim pursuant to-9-

Fed. R. Civ. P. 12(b)(6). The judgment of the Unit ed States District Court for the District of Utah is AFFIRMED.

Entered for the Court

Wade Brorby Circuit Judge