Court Opinion

ID: 3065755
Source: CourtListenerOpinion
Date Created: 2015-10-14 22:39:39.061441+00
Date Added: 2024-06-11T11:41:25.926464
License: Public Domain

FILED
                           NOT FOR PUBLICATION                             DEC 31 2013

                                                                        MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                       U.S. COURT OF APPEALS

                            FOR THE NINTH CIRCUIT

ARKANSAS TEACHER RETIREMENT                      No. 10-56340
SYSTEM, FIRE & POLICE PENSION
ASSOCIATION OF COLORADO;                         D.C. No. 2:07-cv-06923-MRP-
LOUISIANA MUNICIPAL POLICE                       MAN
EMPLOYEES’ RETIREMENT SYSTEM;
CENTRAL LABORERS PENSION
FUND; PUBLIC EMPLOYEES                           MEMORANDUM*
RETIREMENT SYSTEM OF
MISSISSIPPI,

              Plaintiffs - Appellants,

  v.

ANGELO R. MOZILO; DAVID
SAMBOL; HENRY G. CISNEROS;
ROBERT J. DONATO; JEFFREY M.
CUNNINGHAM; MARTIN R. MELONE;
ROBERT T. PARRY; OSCAR P.
ROBERTSON; KEITH P. RUSSELL;
STANFORD L. KURLAND; CARLOS
M. GARCIA; ERIC P. SIERACKI;
COUNTRYWIDE FINANCIAL
CORPORATION, Nominal Defendant,

              Defendants - Appellees,

____________________________,

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
HARLEY W. SNYDER; MICHAEL E.
DOUGHERTY; BANK OF AMERICA
CORPORATION,

              Defendants,

  And

ROBERT L. GARBER,

              Third-party-plaintiff.

                  Appeal from the United States District Court
                      for the Central District of California
               Mariana R. Pfaelzer, Senior District Judge, Presiding

                     Argued and Submitted November 8, 2012
                     Submission Withdrawn January 10, 2013
                         Resubmitted December 27, 2013
                              Pasadena, California

Before: REINHARDT and THOMAS, Circuit Judges, and NAVARRO, District
Judge.**

      In this shareholder derivative action, five institutional investors have sued on

behalf of the former Countrywide Financial Corporation (“Countrywide”),

asserting state and federal derivative claims for breach of fiduciary duty and

securities law violations against former Countrywide officers and directors. While

the suit was pending in the district court, Countrywide merged into a wholly-

        **
             The Honorable Gloria M. Navarro, District Judge for the U.S. District
Court for the District of Nevada, sitting by designation.

                                         -2-
owned subsidiary of Bank of America Corporation in a stock-for-stock transaction

that divested the plaintiffs of their Countrywide shares. Nominal defendant

Countrywide then moved for judgment on the pleadings, arguing that the merger

destroyed the plaintiffs’ standing to pursue derivative claims on Countrywide’s

behalf. The district court granted the defendant’s motion, finding that the plaintiffs

cannot satisfy the “continuous ownership” requirement for shareholder derivative

standing under Fed. R. Civ. P. 23.1 and Delaware law.

      On appeal, the parties agree that Delaware law governs the plaintiffs’

derivative standing, with both parties relying on Ark. Teacher Ret. Sys. v. Caifa,

996 A.2d 321 (Del. 2010).

      We certified the question of post-merger derivative standing to the Supreme

Court of the State of Delware, pursuant to Delaware Supreme Court Rule 41. The

Supreme Court graciously accepted our certification of the following question:

      Whether, under the “fraud exception” to Delaware’s continuous ownership
      rule, shareholder plaintiffs may maintain a derivative suit after a merger that
      divests them of their ownership interest in the corporation on whose behalf
      they sue by alleging that the merger at issue was necessitated by, and is
      inseparable from, the alleged fraud that is the subject of their derivative
      claims.

      The Delaware Supreme Court issued its decison and answered our question

in the negative, holding that the Countrywide-Bank of America merger

                                         -3-
extinguished the plaintiffs’ derivative standing. Arkansas Teacher Retirement

System v. Countrywide Financial Corp. 75 A.3d 888, 897 (Del. 2013).

         The Delaware Supreme Court’s opinion is self-explanatory and dispositive

of this appeal. We need not, and do not, reach any other question urged on appeal.1

We deny all pending motions as moot. We affirm the judgment of the district

court.

         AFFIRMED.

         1
         Following the decision of the Delaware Supreme Court, Plaintiffs urge us
now to decide the question of standing under federal common law. However, prior
to certification, all parties agreed that Delware law controlled, and we certified the
question of standing to the Delware Supreme Court on that basis. Under the
doctrine of law of the case, we decline to revisit that decision. Jeffries v. Wood,
114 F.3d 1484, 1489 (9th Cir. 1997) (en banc). We leave any decision as to federal
common law for another day.

                                          -4-