Court Opinion

ID: 9675
Source: CourtListenerOpinion
Date Created: 2010-04-25 05:47:57+00
Date Added: 2024-06-11T08:06:51.607395
License: Public Domain

UNITED STATES COURT OF APPEALS
                         FOR THE FIFTH CIRCUIT

                        _______________________

                              No. 95-30323
                        _______________________

JULES SCHWING, on behalf of Jules B. Schwing,
Individually and as Testamentary Executor obo
Marie Landry Schwing Succession,

                                                     Plaintiff-Appellant,

                                  versus

NEW IBERIA BANCORP, INC.; JAMES W. SCHWING,
SR.; ERNEST FREYOU,

                                                    Defendants-Appellees.

_________________________________________________________________

           Appeal from the United States District Court
               for the Western District of Louisiana
                            (94-CV-2119)
_________________________________________________________________

                              June 26, 1996

Before POLITZ, Chief Judge, JONES, and BENAVIDES, Circuit Judges.

By EDITH H. JONES, Circuit Judge:*

           This    appeal   arises    from   ongoing    disputes    between

shareholders over whether the bank owned by New Iberia Bancorp,

Inc. ought to be put up for sale.          Appellant Jules Schwing, the

minority shareholder pressing for sale, has zealously pursued

litigation in two federal district court suits to affect the

     *
            Pursuant to Local Rule 47.5, the court has determined that this
opinion should not be published and is not precedent except under the limited
circumstances set forth in Local Rule 47.5.4.
conduct of shareholder meetings.        The first suit, involving the

shareholder meeting eventually held December 28, 1994, was resolved

by mutual agreement with the court’s assistance.          The controversy

on appeal here is whether the second suit was similarly resolved

and rendered moot.     Appellant Jules Schwing contends it was not.

We disagree and affirm.

           Schwing filed suit on January 6, 1995, three days after

a board of directors meeting amended corporate bylaws with regard

to the conduct of the next shareholders’ meeting.                Schwing’s

complaint alleged breaches of fiduciary duty by the directors under

Louisiana law and breaches of proxy rules under federal law.              His

complaint asserted that appellees violated the proxy rules by

failing to disclose their proposed amendment to the bylaws and by

sending a letter to shareholders on December 29, 1994, to the

effect that    a   shareholder   proposal   to   create   a   committee    to

investigate possible    sale of the bank had “failed” to be approved

by a sufficient number of shareholders at the previous day’s

meeting.

           District Judge Haik, sitting in for Judge Doherty, heard

argument on Schwing’s temporary restraining order and preliminary

injunction motions a week later and denied both.          No testimony was

taken at the hearing, although both parties had briefed their

positions.    Judge Haik’s order has written through it “denied” on

the face of appellant’s proposed order granting temporary and

preliminary injunctive relief.

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            Judge Haik appears to have been strongly influenced by

two facts.    First, counsel for Schwing had completely misread the

impact of the bylaw as to the deadline for submitting shareholder

proposals before the next shareholder meeting.             In reality, Jules

Schwing had plenty of time to do what he intended to do to

influence the meeting and selection of new directors.                  Second,

Jules Schwing, himself a director, had attended the January 3 board

meeting at which the complained-of bylaw was adopted, and he voted

for it without objection or complaint.               Judge Haik must have

reasonably wondered why the adoption of a bylaw in which appellant

concurred could have breached the fiduciary duty of other directors

toward dissenting minority shareholders.           Judge Haik concluded, in

short, that there was no irreparable harm done to Jules Schwing.

            Appellant nevertheless believed he was entitled to an

evidentiary hearing on his complaint and so importuned Judge

Doherty at the earliest possible moment.1             Judge Doherty held a

nearly   three-hour     telephone     conference    with    all   counsel    on

Schwing’s “motion to reconsider,” after which she denied it.                In a

subsequent hearing held February 13, Judge Doherty reiterated her

denial of the motion to reconsider, observing that Judge Haik had

three times told her that he intended to and did deny the requests

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            Later, appellant attempted to amend his complaint to add a new claim
based on a letter sent to the shareholders by management on January 13, 1995.
Judge Doherty struck this proposed amendment, and Schwing has not explicitly
briefed any error in her denial to this court. The issue is therefore deemed
abandoned. Gladden v. Roach, 864 F.2d 1196, 1198 n.1 (5th Cir. 1989).

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for temporary restraining order and preliminary injunctive relief.

Judge   Doherty      therefore   decided        that       the    instant       case   was

effectively dismissed, and counsel for Schwing declared that under

that interpretation, “I’m out of court.”

           Schwing now comes to this court, seeking a hearing on the

preliminary injunction and a declaration, contrary to the view of

the district court, that his case is not moot.                     Neither of these

contentions    is    persuasive.         The       order    of    hearing       Schwing’s

contentions may have been somewhat irregular, in view of Judge

Haik’s statement that he was leaving the case for a more complete

hearing   before      Judge   Doherty,         followed      by    Judge        Doherty’s

conclusion    that    a   hearing   on       the    motions      for     both    TRO   and

preliminary    injunctive     relief      had       been    held    by    Judge    Haik.

Nevertheless, Schwing had nearly three hours in a teleconference on

his motion for reconsideration to persuade Judge Doherty of his

position, and he failed. The “irregularity” was spawned as much as

anything by Schwing’s initial misunderstanding of the deadlines

fixed by the old and new bylaws, an error that he and his counsel

should never have made.

           Further, there was no need for an evidentiary hearing on

the preliminary injunction.         Schwing has never pointed to a single

material disputed fact issue that required an evidentiary hearing

to resolve.       On the contrary, the events on which Schwing’s

complaint was based are not controverted by appellees.                      Only their

legal significance was in dispute.                   Through his briefing and

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opportunity for extensive argument to the district court, Schwing

fully presented his motion for preliminary injunction.           There was

no denial of fair hearing on the request.

          While Schwing also vigorously asserts that the case is

not moot, a close reading of the record proves the opposite.

          First, Schwing admits that he misunderstood the bylaw

provision relating to the deadline date for shareholder proposals.

That issue, the main focus of his motion for temporary restraining

order, is clearly moot.

          Second, his complaint concerning the December 29 letter

to shareholders is no longer viable for several reasons.                The

controversy   represented   by   the   December   29   letter,   over   the

formation of a shareholder committee to explore the sale of the

bank, has been resolved favorably to Jules Schwing by the Louisiana

Court of Appeals.    New Iberia Bancorp, Inc., et al v. Jules A.

Schwing, et al consolidated with Jules A. Schwing, et al v. New

Iberia Bancorp, Inc., Nos. 95-867 and 95-868 (December 6, 1995).

Because Schwing won this case in state court, there is no reason

for him to pursue an injunction against proxy violations on the

scope of disclosure about that matter in federal court.           We also

note there was a serious question whether the December 29 letter

might even be a proxy solicitation covered under SEC Rule 14a-9,

when it plainly had nothing to do with shareholder “solicitation”

or with the other matters concerning the April, 1995 shareholder

meeting that Schwing has complained of.       Finally, the December 29

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letter, while aggressively asserting the bank’s position that the

shareholder     proposal       had   “failed,”         could    hardly     have     been

”misleading”; as the bank points out, the position management took

in the December 29 letter was consistent with the position espoused

by the bank in the proxy materials submitted before the December 28

shareholders’ meeting.          Significantly, those proxy materials had

been agreed to by Schwing as part of the resolution of the previous

federal district court case.

          Third,       Schwing’s     attempt      to    amend   his    complaint     to

challenge the January 13 letter sent by the board of directors

(reporting the adoption of the amended bylaw) was stricken by the

court and is not before this court.                     As well, Schwing’s oral

complaint about the sale of corporate treasury shares was never

properly before the district court or this court.

          In short, the only matters complained of in Schwing’s

January 6 complaint -- relating to the January 3 amendment of the

bylaws   which    he    approved        and     the     December      29   letter     to

shareholders     --     have     been     disposed        of,      rendering      those

controversies between the parties moot.                 From what appears in the

record, the district court has heroically managed this case and

appellant’s     previous    case     to       resolve    repeated      “failures      to

communicate”.     The district court was not, however, required to

conduct an ongoing inquisition of the appellees’ conduct based on

every event that happened after the filing of appellant’s complaint

in this action. Once the specific matters charged by the complaint

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were put in their proper context, and the parties made certain

agreements relating to those matters, no further relief could be

granted by the court.

          The judgment of the district court is AFFIRMED.

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