Opinion ID: 797281
Heading Depth: 3
Heading Rank: 1

Heading: Plaintiffs Have Standing to Litigate the Assigned LLNC Claim

Text: 45 In order for plaintiffs to have standing, they must show that they suffered an injury in fact, there was a causal connection between the injury and the conduct complained of, and the injury is likely to be redressed by a favorable decision. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). 46 Defendants argue that Dux and Davis lack standing to raise the LLNC claims because they were assigned only claims that accrued as of immediately prior to the bankruptcy filing, and no such claims accrued as of that date because plaintiffs suffered damages only when the bankruptcy petition was filed. Plaintiffs argue that the jury found damages as of the LLNC board of directors' decision to file bankruptcy on May 3, 2001, and therefore the LLNC claim accrued on that date. Thus, the question is whether the jury found actual damages before May 9, 2001. Under California law, a cause of action accrues with the infliction of appreciable and actual harm, however uncertain in amount. Davies v. Krasna, 14 Cal.3d 502, 121 Cal.Rptr. 705, 535 P.2d 1161, 1169 (1975). 47 Plaintiffs had standing to assert the LLNC claim because they suffered harm before May 9, 2001. Several of the original jury instructions clearly asked the jury whether the defendants breached their fiduciary duty as a result of the LLNC board's decision to file bankruptcy on May 3, 2001, and the jury's original verdict found several defendants had breached their duty on this basis. We agree with the district court's analysis: 48 Defendants' argument fails to consider the main factual issue for the jury: whether the directors on the board breached their fiduciary duty by choosing the bankruptcy alternative rather than some other course of action expected to provide the company and its shareholders with more value. The directors decided to file for bankruptcy on May 3, 2001. It is at this point in time that a breach of fiduciary duty claim may have accrued. If plaintiffs' damages were reasonably certain and not speculative at the time of wrongdoing, then the cause of action accrued. 49 Dux Capital Mgmt. Corp., 2004 WL 2472247, at  (citations omitted). 50 Believing that the jury may have interpreted Question One on the special verdict form to ask what the value of the stock was once the bankruptcy proceeding started — that is, after the bankruptcy petition was filed — the district court reinstructed the jury. In giving its curative instruction, the district court first re-read Jury Instruction XXXVIII, which stated in part, plaintiffs would have to prove the value of the shares held by the common stockholders as of the date of the decision to commence bankruptcy proceedings. Jury Instruction XXXVIII (emphasis added). The district court explained to the jury that if it construed Question One to mean upon filing and commencing the bankruptcy petition, did the stock have value at that point, then that was not our intent. The court further explained: 51 Rather, what our intent was was to ask you to tell us what value, if any, the stock had immediately before the bankruptcy proceedings commenced. . . . have plaintiffs proven by a preponderance of the evidence that the common stock of Long Life Noodle Company, Inc. had any value as of immediately before the company's petition to commence bankruptcy proceedings on May 9, 2001. 52 . . . it is a before and after comparison. If you were to find that there were any value immediately before and that that got wiped out in the bankruptcy and that there was another alternative that would have preserved more value to the shareholders, then that is what we are trying to get at. . . . 53 (Emphasis added). 54 Seizing upon this curative instruction, defendants argue on appeal (as they argued below) that the district court told the jury to ignore May 3, the date of the decision to file, and instead instructed it to compare the loss caused by the actual filing of the petition on May 9. See Dux Capital Mgmt. Corp., 2004 WL 1936309, at -17. But the district court did not tell the jury to ignore May 3. The jury determined that LLNC common stock had a value of $2 per share prior to defendants' decision to commence bankruptcy proceedings on May 3, 2001, and that this stock had no expected value after the defendants' decision. See id. at -18. This is clear in light of the district court's concern that the jury had originally interpreted Question One to mean the value of the shares after the bankruptcy petition and its addressing this by reminding the jury of Jury Instruction XXXVIII 8 while giving its curative instruction. See id. at -18. Hence, plaintiffs had standing to assert the LLNC claim because it accrued before May 9, 2001. 55