Court Opinion

ID: 6344789
Source: CourtListenerOpinion
Date Created: 2022-05-27 14:02:39.848412+00
Date Added: 2024-06-11T09:03:04.032389
License: Public Domain

IN THE SUPREME COURT OF IOWA

                                 No. 21–0098

                  Submitted March 23, 2022—Filed May 27, 2022

KENDALL J. MEADE, Individually and on behalf of all others similarly
situated,

      Appellee,

vs.

PETER S. CHRISTIE, STEPHEN A. CRANE, JONATHAN R. FLETCHER, and
GRETCHEN H. TEGELER,

      Appellants,

and

EMC INSURANCE GROUP, INC., BRUCE G. KELLEY, and EMCC CASUALTY
COMPANY,

      Defendants.

      Appeal from the Iowa District Court for Polk County, Lawrence P.

McLellan, Business Specialty Court Judge.

      Corporate directors seek interlocutory review of the Iowa Business

Specialty Court’s denial of their motion to dismiss a shareholder’s claims for

breach of fiduciary duties. REVERSED AND REMANDED.

      McDermott, J., delivered the opinion of the court in which all justices

joined.
                                      2

      Michael W. Thrall (argued), Mark C. Dickinson, Lynn C. Herndon, and

Angel A. West (until withdrawal) of Nyemaster Goode, P.C., Des Moines, for

appellants.

      Juan Monteverde (argued) of Monteverde & Associates PC, New York, New

York, and Gary Dickey of Dickey, Campbell, & Sahag Law Firm, PLC, Des Moines,

for appellee.

      William C. Brown of Brown, Winick, Graves, Gross and Baskerville, P.L.C.,

Des Moines, for amici curiae Iowa Association of Business and Industry and the

Iowa Business Council.
                                        3

McDERMOTT, Justice.

      This appeal involves a shareholder’s challenge to a corporate merger

involving the purchase of a publicly traded company’s shares in what’s known

as a “going private transaction.” The shareholder alleges that the corporation’s

directors abdicated their fiduciary duties by agreeing to a flawed merger process

with the acquirer that resulted in too low a price for the minority shareholders’

stock. The corporate directors filed a motion to dismiss the shareholder’s claims,

invoking statutory director protections—known as “director shield” laws—that

prevent holding directors liable for many types of claims for money damages. The

Iowa Business Specialty Court rejected the directors’ arguments and denied their

motion to dismiss. The directors filed an application for interlocutory review,

which we granted. This case presents our court’s first opportunity to examine

Iowa’s director shield protections and the procedural requirements that

accompany them.

                                        I.

                                       A.

      Because this case involves an appeal from the denial of a motion to

dismiss, we accept the facts as alleged in the petition as true. McGill v. Fish,

790 N.W.2d 113, 116 (Iowa 2010).

      Employers Mutual Casualty Company (EMCC) was founded in 1911 in Des

Moines as a mutual insurance company. A “mutual” company is owned by its

policyholders; a “stock” company, in contrast, is owned by stockholders.
                                        4

      EMCC formed EMC Insurance Group, Inc. (EMCI) in 1974 as a special type

of subsidiary called a “downstream subsidiary” that would serve as EMCC’s

holding company. Under this structure, EMCC, the old insurance company,

became a subsidiary of EMCI, the new company. When EMCI became a publicly

traded company in 1982, this structure—EMCI serving as a holding company for

EMCC—enabled EMCC to access public capital markets as a source of funding

for its business while maintaining its status as a policyholder-owned mutual

insurance company. All the while, EMCC owned a majority of the shares in

EMCI, which meant that EMCC controlled its own holding company. EMCI

employed no staff, leased no facilities, and owned no information technology, but

instead relied completely on “EMCC’s employees, facilities, and information

technology to conduct its business.”

      Bruce Kelley was EMCC’s president and CEO and served on its board of

directors throughout the events of this case. Kelley was also EMCI’s president

and CEO. EMCI’s shareholders elected its board of directors. Kelley served on

EMCI’s board of directors (at times relevant to this lawsuit) with four other

members: Peter S. Christie, Stephen A. Crane, Jonathan R. Fletcher, and

Gretchen H. Tegeler.

      In October 2018, EMCC decided to attempt to purchase the publicly traded

stock of EMCI that it didn’t own, commonly referred to as a “going private

transaction.” EMCC soon retained investment bank Boenning & Scattergood,

Inc., to provide financial analysis and to assist EMCC’s board in the going private

transaction. On November 15, EMCC sent a nonbinding proposal letter to EMCI’s
                                        5

board offering to purchase the EMCI stock that EMCC didn’t already own for $30

per share. The next day, EMCC filed the proposal letter with the Securities and

Exchange Commission (SEC) and issued a press release announcing the offer.

      After EMCI’s board received the proposal letter and EMCC made the offer

public, EMCI established a “Special Committee” consisting of its four directors

other than Kelley. In December 2018, the Special Committee retained Willkie

Farr & Gallagher, LLP, for legal representation. The Special Committee also

retained investment bank Sandler O’Neill & Partners, L.P., to act as its financial

advisor. In January 2019, the Special Committee instructed Sandler O’Neill to

perform a due diligence investigation of EMCI, including requesting business and

financial information, and to schedule management meetings to discuss EMCI’s

business and future.

      Meanwhile, EMCC had received an unsolicited proposal from a group of

investors proposing a joint venture transaction involving EMCI. EMCC’s board

of directors unanimously rejected the proposal without notifying EMCI’s board.

EMCI’s Special Committee received notice of the proposal on January 24, about

a month after EMCC received it.

      The next day, EMCI received notice of a proposal from one of its

shareholders, Gregory Shepard, requesting that he be made a candidate for its

board of directors and a member of the Special Committee. A few days later,

Shepard filed a Schedule 13D (a form required when a person or group acquires

more than 5% of a voting class of a company’s stock) with the SEC, stating that

he owned 5.09% of EMCI’s common stock and that he believed EMCI’s “common
                                       6

stock was significantly undervalued.” On February 25, the Special Committee

decided not to invite Shepard to be a board member of EMCI.

      Meanwhile, on January 31, EMCC publicly announced that it would not

“consider any alternative merger or transaction involving a third party” that

would involve EMCC merging with or into a third party.

      On February 22, the Special Committee met with Willkie Farr and Sandler

O’Neill and discussed an alternative proposal (prepared by Sandler O’Neill) that

would replace certain insurance pooling agreements between EMCI and EMCC.

The alternative proposal was presented to EMCC’s board in early March. EMCC’s

senior executives met with the deputy commissioner-supervisor of the Iowa

Insurance Division, who informed the executives that the alternative proposal

was unlikely to receive regulatory approval. EMCC’s board rejected the

alternative proposal and kept the $30-per-share proposal on the table.

      On March 20, the Special Committee responded to EMCC with a

counteroffer of $40 per share of EMCI stock based on financial projections by

Sandler O’Neill. On March 25, Shepard sent another letter to the Special

Committee raising his concerns about its independence, Kelley’s and EMCC’s

control, and the “gross inadequacy of EMCC’s offer,” and stating his belief that

the fair price was $50 per share.

      The Special Committee and EMCC exchanged counteroffers until, on

April 20, the Special Committee accepted EMCC’s offer to buy out the minority

shareholders at $36 per share. The final merger agreement included a “no shop”

provision, which prohibited EMCI from soliciting bids from other potential
                                         7

purchasers. On September 18, EMCI held a special meeting of shareholders to

vote on the transaction. A majority of the minority shareholders—that is, a

majority of the non-EMCC shareholders—voted to approve the merger at $36 per

share. The shareholders were paid cash for their shares the next day and had

their shares canceled.

                                         B.

      Kendall Meade, the plaintiff in this case, owned shares of EMCI at the time

of EMCC’s buyout. Meade filed a class action lawsuit on behalf of himself and

the other former owners of common stock of EMCI.

      The petition alleges three causes of action. Meade’s first cause of action,

against EMCI’s individual directors (Christie, Crane, Fletcher, Tegeler, and

Kelley), alleges that the directors breached “fiduciary duties of care, loyalty, good

faith, and candor owed to the public shareholders of EMCI.” His second cause of

action, against EMCC, alleges that EMCC breached fiduciary duties it owed to

the minority shareholders of EMCI. And Meade’s third cause of action, against

EMCI, alleges that EMCI aided and abetted the other defendants’ breaches of

fiduciary duties.

      EMCC, EMCI, and Kelley filed separate motions to dismiss. The four other

individual directors (Christie, Crane, Fletcher, and Tegeler) filed a joint motion

to dismiss. Each defendant argued that Meade’s claims were derivative rather

than direct and that, because Meade had failed to comply with the Iowa Code’s

requirements for bringing derivative claims, Meade’s claims must be dismissed.

Meade resisted. The business court held that Meade’s claims were direct rather
                                        8

than derivative because the alleged wrongful actions injured the shareholders

rather than EMCI, and the shareholders had suffered separate and distinct

injuries from EMCI.

      The four individual directors further argued that Meade failed to plead

around the statutory defenses available to the directors under these

circumstances. The business court rejected this argument, reasoning that Iowa

is a notice pleading state and that Meade’s allegations satisfied the pleading

standard set forth in the statute in any event, and denied the motion.

      The business court granted Kelley’s, EMCC’s, and EMCI’s motions to

dismiss. Those issues are not before us on this appeal. The only defendants not

dismissed by the business court were the EMCI directors other than

Kelley: Christie, Crane, Fletcher, and Tegeler. These four defendants (whom for

simplicity we will refer to simply as “the directors” in this opinion even though

Kelley isn’t included among them) filed an application for interlocutory appeal. A

week later, the directors filed an answer denying liability. We granted the

application and stayed further proceedings in the case.

                                       II.

      The directors in this appeal raise two issues: (1) that Meade failed to

affirmatively plead facts showing that Iowa’s director shield statute, Iowa Code

§ 490.831 (2019), did not protect the directors against his claims; and (2) that

Meade’s claims were derivative, not direct, and thus could not be brought unless

Meade had complied with our statutory requirements for derivative proceedings,
                                         9

id. §§ 490.740–.747. A finding in the directors’ favor on either issue would entitle

them to dismissal from this case.

      We review a district court’s ruling on a motion to dismiss to correct legal

error. Mueller v. Wellmark, Inc., 818 N.W.2d 244, 253 (Iowa 2012). A motion to

dismiss challenges a petition’s legal sufficiency. Shumate v. Drake Univ.,

846 N.W.2d 503, 507 (Iowa 2014). In ruling on a motion to dismiss, the court

considers only “the contents of the petition and matters of which the court can

take judicial notice.” Southard v. Visa U.S.A. Inc., 734 N.W.2d 192, 194

(Iowa 2007). In ruling on a motion to dismiss, the court accepts the facts alleged

in the petition as true, McGill, 790 N.W.2d at 116, and views the allegations in

the light most favorable to the plaintiff, Haupt v. Miller, 514 N.W.2d 905, 911

(Iowa 1994) (en banc). We may dismiss a claim “only if the petition shows no

right of recovery under any state of the facts.” Southard, 734 N.W.2d at 194

(quoting Comes v. Microsoft Corp., 646 N.W.2d 440, 442 (Iowa 2002)).

      The parties generally agree that this standard of review applies to the

question of whether Meade’s claims are direct or derivative. But they disagree on

whether this standard applies to claims that trigger enhanced pleading

requirements under Iowa’s director shield statute. Although the directors

contend that the business court’s ruling should be reversed even under the

typical dismissal standard, the directors argue that the unique protections

afforded directors under the director shield statute require us to apply a

“plausibility” standard in evaluating the claims. Because this question largely

merges with the parties’ arguments on the scope and application of the director
                                         10

shield statute, we’ll analyze this issue as part of our substantive analysis of that

statute.

                                         III.

                                         A.

      Corporate directors in Iowa must adhere to “standards of conduct” that

require directors to discharge their duties (1) in good faith, and (2) in a manner

that the director reasonably believes to be in the best interests of the corporation.

Iowa Code § 490.830(1)(a)–(b). Directors also, “when becoming informed in

connection with their decision-making function or devoting attention to their

oversight function, shall discharge their duties with the care that a person in a

like position would reasonably believe appropriate under similar circumstances.”

Id. § 490.830(2). These statutory duties generally fall within one of two broad

categories of fiduciary duties—a duty of care and a duty of loyalty—that we’ve

applied to corporate directors under earlier versions of the Iowa Business

Corporation Act. See 6 Matthew G. Doré, Iowa Practice Series: Business

Organizations § 28:3, Westlaw (database updated Nov. 2021) [hereinafter Doré];

see also Cookies Food Prods., Inc. v. Lakes Warehouse Distrib., Inc., 430 N.W.2d

447, 451 (Iowa 1988).

      While section 490.830 of the Iowa Business Corporation Act provides the

standards of conduct for directors, section 490.831 sets out when a director can

be liable for money damages. Compare Iowa Code § 490.830, with id. § 490.831.

Section 490.831 states in relevant part:
                                         11

              1. A director shall not be liable to the corporation or its
      shareholders for any decision as director to take or not to take
      action, or any failure to take any action, unless the party asserting
      liability in a proceeding establishes both of the following:

             a. That any of the following apply:

             (1) No defense interposed by the director based on any of the
      following precludes liability:

            (a) A provision in the articles of incorporation authorized by
      section 490.202, subsection 2, paragraph “d”.

Id. § 490.831(1)(a)(1)(a).

      The Code section referenced in the final quoted portion, section

490.202(2)(d), is commonly referred to as the “director shield statute.” It permits

corporations to include in their articles of incorporation provisions that

immunize directors from liability, with some limited exceptions, and in part

states:

      A provision eliminating or limiting the liability of a director to the
      corporation or its shareholders for money damages for any action
      taken, or any failure to take any action, as a director, except liability
      for any of the following:

           (a) The amount of a financial benefit received by a director to
      which the director is not entitled.

           (b) An intentional infliction of harm on the corporation or the
      shareholders.

             (c) A violation of section 490.832.

             (d) An intentional violation of criminal law.

Id. § 490.202(2)(d)(1).

      As discussed earlier, when ruling on a motion to dismiss, courts generally

cabin their factual analysis to the claims set forth in the plaintiff’s petition and

the matters on which the court can take judicial notice. Southard, 734 N.W.2d
                                       12

at 194. Meade’s petition makes no reference to EMCI’s articles of incorporation.

But EMCI’s articles are publicly filed with the Iowa Secretary of State. The

directors requested that the business court take judicial notice of them. The

business court, finding EMCI’s articles “capable of accurate and ready

determination from a source that cannot be reasonably questioned,” thus took

judicial notice of EMCI’s articles of incorporation. Meade doesn’t challenge this

determination on appeal.

       EMCI’s restated articles of incorporation (on file since 2004) contained

director shield provisions identical to the language set forth in section

490.202(2)(d). EMCI’s directors thus were protected from liability to the full

extent permitted under the Iowa Business Corporation Act with the same four

exclusions. See Iowa Code § 490.202(2)(d)(1).

       As relevant in this case, Meade must establish two conditions to avoid the

dismissal of his claims against the directors. First, he must show that the

directors have “interposed” no defense that would shield them from liability. Id.

§ 490.831(1)(a)(1). Second, he must show that the directors’ conduct violated one

of the statutory standards of conduct, meaning that their actions were either not

in good faith, not in the best interests of the corporation, or that the directors

were not reasonably informed about the transaction. Id. § 490.831(1)(b)(1),

(2)(a)–(b).

       The director liability statute states that when a shareholder pursues a

claim for money damages against a director, “the party asserting liability in a

proceeding” must establish that “[n]o defense interposed by the director” would
                                         13

shield the director from liability. Id. § 490.831(1)(a)(1). The phrase “by the

director” naturally suggests that the director bears the burden of interposing one

of the defenses to liability listed in the statute. The business court held that the

directors hadn’t actually interposed any defenses to Meade’s claims, and thus

Meade’s claim couldn’t be dismissed based on the director shield protections.

      But the statute doesn’t prescribe a particular pleading in which the

defense must be made. Black’s Law Dictionary defines interposition, a noun form

of the verb interpose, as “[t]he act of submitting something (such as a pleading

or motion) as a defense to an opponent’s claim.” Interposition, Black’s Law

Dictionary (11th ed. 2019). The statute doesn’t require interposition in, for

example, a list of affirmative defenses in an answer. The directors didn’t initially

file an answer because they filed a pre-answer motion to dismiss. See

Iowa R. Civ. P. 1.421(1)(f) (permitting a defendant to assert that a plaintiff failed

to state a claim for relief in a pre-answer motion). The directors instead, as part

of their motion to dismiss, asked the business court to take judicial notice of

EMCI’s publicly filed articles of incorporation. The court did. The directors

recited the director shield protections in the articles of incorporation as a defense

to Meade’s claim. This satisfies the directors’ burden to interpose a defense to

liability under section 490.202(2)(d).

      The statute then places a burden on “the party asserting liability in a

proceeding”—in other words, the plaintiff—to establish that no defense

interposed by the director protects the director from liability. Iowa Code

§ 490.831(1). The directors suggest that Meade needed to plead in his petition,
                                        14

even before the directors asserted any defense, facts that on their face expressly

referenced and negated the defendants’ defenses and that, having not done so,

Meade’s claim must be dismissed. To be sure, plaintiffs in director liability cases

would be wise to predict and attempt to overcome a director’s defenses in their

petitions, particularly when (as here) the publicly filed articles of incorporation

include director shield protections. But we don’t find that the statute requires

this type of anticipatory pleading. The phrase “interposed by a director” implies

that a director acts in response to some action by a plaintiff. Plaintiffs do not

bear some duty of raising defenses for directors, and thus need not themselves

plead and negate in their petitions each statutory defense that a director might

interpose.

                                        B.

      But this doesn’t end our inquiry. Having interposed the judicially-noticed

director shield protections as a defense in their motion to dismiss, the directors

argue that Meade in resistance to their motion needed to draw reasonable

inferences from the petition’s factual allegations to overcome the director shield

defenses. The business court ruled against the directors on this argument,

identifying two grounds. The business court first recited that Iowa courts

generally require only “notice pleading” in a petition and stated that “[t]he court

does not believe the statute requires the plaintiff must set forth facts in its

petition that ultimately establishes the unavailability of each of these defenses”

in the statute. On this point, we disagree with the business court’s interpretation
                                        15

of the statute, and thus its application of the general pleading standard to the

statute.

      To understand why the statute must be read in the manner that we

suggest, some background on the genesis of the statute is helpful. In the

mid-1980s, alarmed policymakers began enhancing protections for corporate

directors in response to court rulings that expanded directors’ personal liability

for money damages. See Comm. on Corp. L., Changes in the Revised Model

Business Corporation Act—Amendment Pertaining to the Liability of Directors,

45 Bus. Law. 695, 696 (1990) [hereinafter Comm. on Corp. L.]. The claims in

these lawsuits generally arose from unintentional breaches of directors’ duties

of care. Doré § 28:14. One case in particular—Delaware’s Smith v. Van Gorkom

decision—raised particular concerns among directors of increased financial risk

for serving on corporate boards, including concerns “about non-pecuniary costs

of litigation, such as damage to reputation, loss of time, and distraction from

other activities.” Comm. on Corp. L., 45 Bus. Law. at 696; see also Smith v. Van

Gorkom, 488 A.2d 858 (Del. 1985), overruled on other grounds by Gantler v.

Stephens, 965 A.2d 695 (Del. 2009) (en banc). As a result, “outside directors of

many publicly-held corporations resigned, declined to stand for re-election, or

refused nomination—a reversal of a trend encouraged by the Securities and

Exchange    Commission,     the   New   York   Stock   Exchange,     and   various

commentators.” Comm. on Corp. L., 45 Bus. Law. at 696. As one noted

commentator described it, “The threat of liability for persons serving on corporate

boards suddenly appeared very real.” Doré § 28:14.
                                         16

      After Delaware and another state amended their corporate codes to

authorize corporations to include director liability limitations in their articles of

incorporation, “[n]early all states followed suit with similar ‘director shield’ laws,

including Iowa in 1987.” Id. The drafters of the Model Business Corporation Act

(MBCA) have further increased protections for directors over the years. See id.

The Iowa Business Corporation Act’s director shield statute, which was amended

in 2003, is modeled after the one in the MBCA. Id. Effective January 1, 2003,

Iowa replaced its original Delaware-modeled director shield provision with the

MBCA model. Id.

      Delaware’s director shield exclusions do not match the MBCA’s (and thus

Iowa’s) director shield exclusions in an important way that enlightens our

analysis of the “intentional infliction of harm on the corporation or the

shareholders” exclusion in section 490.202(2)(d)(1)(b). Delaware’s exclusion will

not preclude liability for “acts or omissions not in good faith or which involve

intentional misconduct.” Del. Code Ann. tit. 8, § 102(b)(7) (2006). Delaware’s

precedent applying its director shield statute makes it clear that the “shield

forecloses claims against directors for gross negligence but does not apply to

‘conduct motivated by an actual intent to do harm’ (subjective bad faith) or to

lesser forms of bad faith, like a director’s ‘conscious disregard for . . .

responsibilities’ or ‘intentional dereliction of duty.’ ” Doré § 28:14 (omission in

original); see In re Walt Disney Co. Derivative Litig., 906 A.2d 27, 64–67

(Del. 2006) (en banc) (“[T]he legislature has also recognized this intermediate

category of fiduciary misconduct, which ranks between conduct involving
                                         17

subjective bad faith and gross negligence.”); see also Lyondell Chem. Co. v. Ryan,

970 A.2d 235, 240–44 (Del. 2009) (en banc). Under Delaware law, actions that

amount to “conscious disregard for responsibilities” or “intentional dereliction of

duty” fall under Delaware’s “bad faith” exception to the director shield—not

under the statute’s “actual intent to do harm” exception. Walt Disney, 906 A.2d

at 64–66; see also Doré § 28:14. In contrast to Delaware’s statute, Iowa’s director

shield statute includes no exception enabling liability for “acts not in good faith.”

Doré § 28:14. Compare Del. Code Ann. tit. 8, § 102(b)(7), with Iowa Code

§ 490.202(2)(d)(1)(b).

      The official comment to the MBCA’s director shield provision (the similarly

numbered section 2.02(b)(4)) further supports the notion that claims of reckless

conduct, conscious disregard of a duty, or intentional dereliction of a duty fail to

establish Iowa’s exception for “intentional infliction of harm on the corporation

or the shareholders.” Doré § 28:14. The comment states in relevant part:

      The use of the word ‘intentional,’ rather than a less precise term
      such as ‘knowing,’ is meant to refer to the specific intent to perform,
      or fail to perform, the acts with actual knowledge that the director’s
      action, or failure to act, will cause harm, rather than a general intent
      to perform the acts which cause the harm.

Model Bus. Corp. Act § 2.02, cmt. E (2016 rev. 2017).

      The business court determined that Meade sufficiently alleged liability in

his petition under the exclusion to liability in EMCI’s director shield provision

for “intentional infliction of harm on the corporation or the shareholders.”

Iowa Code § 490.202(2)(d)(1)(b). The business court recited allegations in

Meade’s petition alleging misconduct by the directors, including (1) failing to
                                        18

reject EMCC’s merger offer as inadequate and to maintain EMCI as a standalone

company; (2) failing to provide shareholders with Sandler O’Neill’s analysis of the

alternative proposal in the proxy statement; (3) failing to gather information

about or to understand Sandler O’Neill’s analysis; (4) failing to disclose to

shareholders Shepard’s interest in making an offer for EMCI; and (5) generally

engaging in a conflicted and flawed sales process that resulted in an insufficient

sales price that unfairly deprived EMCI’s minority shareholders of the true value

of their shares. The business court also recited Meade’s allegation that the

directors “intentionally failed to act in the face of a known duty to act,

demonstrating conscious disregard for their duties.”

      We disagree with the business court’s determination. Accepting Meade’s

allegations as true, we find Meade’s allegations insufficient to establish

“intentional infliction of harm on the corporation or the shareholders” by the

directors. The bulk of the allegations that the business court relies on recite

failures to perform duties or incompetent performance, none of which suffices.

Meade’s allegation that the directors consciously disregarded their duties is

similarly insufficient. The statute, in short, requires a plaintiff to show a

director’s specific intent to harm the corporation or its shareholders, as opposed

to recklessness or dereliction in performing (or failing to perform) their duties.

The statute sets a high bar, no doubt; but its elevated placement has been

determined by the legislature in its choice of language.

      In the specific context of claims against corporate directors, complaining

shareholders confront a heightened pleading requirement. This heightened
                                       19

pleading requirement protects directors not merely against having to pay

damages for inadequate claims, but also against the cost and stress of litigation

when plaintiffs are unable to allege claims that would permit them to receive

money damages. Nelson v. Lindamen, 867 N.W.2d 1, 7 (Iowa 2015) (“[S]tatutory

immunity, like common-law immunity, provides more than protection from

liability; it provides protection from even having to go to trial in some

circumstances.” (quoting Hlubek v. Pelecky, 701 N.W.2d 93, 96 (Iowa 2005))).

And those protections would be undermined if defendant directors had to engage

in pretrial discovery to find out exactly what wrong the plaintiff was charging

them with. Cf. Struck v. Mercy Health Servs.-Iowa Corp., ___ N.W.2d ___, ___,

2022 WL 1194011, at *5 (Iowa Apr. 22, 2022) (“A contrary holding would

undermine the legislative goal to enable healthcare providers to quickly dismiss

professional negligence claims that are not supported by the requisite expert

testimony.”).

      A lawsuit pursuing claims against a corporate director is the type of case

where a plaintiff can plead himself out of court by alleging facts that show he

has no claim. See Benskin, Inc. v. W. Bank, 952 N.W.2d 292, 306 (Iowa 2020).

“Allegations in a complaint are binding admissions, and admissions can of

course admit the admitter to the exit.” Jackson v. Marion County, 66 F.3d 151,

153–54 (7th Cir. 1995) (citations omitted). When “a provision in the articles of

incorporation” adopted pursuant to Iowa Code section 490.202(2)(d) “shelters

the director from liability for money damages” and when “such defense applies

to all claims in plaintiff’s complaint, there is no need to consider further the
                                                20

application of [Iowa Code section 490.831]’s standards of liability.” Model Bus.

Corp. Act § 8.31(a), cmt. A (2016 rev. 2017). “In that event, the court would

presumably grant the defendant director’s motion for dismissal or summary

judgment (or the equivalent) and the proceeding would be ended.” Id. Because

we find Meade’s allegations insufficient to establish “intentional infliction of

harm on the corporation or the shareholders” by the directors, his claims against

the directors must be dismissed.1

       Meade’s appeal brief includes a one-sentence request in the conclusion

asking that if we determine that his claims warrant dismissal, he be permitted

to amend his petition. As a general matter, a party may move to amend a petition

with the court’s permission under Iowa Rule of Civil Procedure 1.402(4).2 But

Meade has failed to share any facts suggesting that he has claims that are not

barred by the director shield provision that would warrant leave to amend.

       Meade’s resistance to the motion to dismiss in the district court made no

mention of any request to amend his petition. It is styled simply as a “resistance

to defendants’ motion to dismiss.” A contingent request for leave to amend with

a resistance to a motion to dismiss is permissible and allows courts to provide

leave to amend as an alternative form of relief. Meade accompanied his resistance

       1Iowa    Code section 490.1302 provides shareholders appraisal rights to obtain payment
for the fair value of their shares if they believe a merger buyout price is inadequate. Meade didn’t
seek to enforce his appraisal rights and instead pursued a class action lawsuit on behalf of
himself and the other former owners of EMCI’s common stock.
        2And indeed, Meade could have amended his petition without leave of court any time

before the directors filed a responsive pleading. Iowa R. Civ. P. 1.402(4). The directors didn’t
actually file a responsive pleading (their answer) until about a year after they filed their motion
to dismiss. Meade made no attempt to amend on his own during that period.
                                         21

with a seventy-eight-page brief explaining how his petition satisfied the legal

requirements to overcome the directors’ motion. The resistance brief, like his

appeal brief, included a single sentence, also in the conclusion, making a similar

request if we ruled against him. Meade failed to request or argue for leave to

amend    at   the   district   court’s   hearing   on   the   motion   to   dismiss.

“[A] post-dismissal motion to amend is ‘disfavored,’ independent of any other

consideration.” Plymouth County v. Merscorp, Inc., 287 F.R.D. 449, 464 (N.D.

Iowa 2012) (quoting U.S. ex rel. Roop v. Hypoguard USA, Inc., 559 F.3d 818, 823

(8th Cir. 2009)) (denying a request for leave to amend where the plaintiff “adopted

a strategy of vigorously defending his initial Complaint, despite its . . .

deficiencies [and] now wants a judicial reprieve”). We deny Meade’s request to

amend his petition.

                                         IV.

      Because we reverse the business court’s ruling on the directors’ motion to

dismiss for the reasons stated above, and because that holding is dispositive of

this appeal, we need not address the directors’ other arguments seeking

dismissal of the claims. We remand to the business court to enter judgment

consistent with this opinion and for further proceedings in the case.

      REVERSED AND REMANDED.