Court Opinion

ID: 3200866
Source: CourtListenerOpinion
Date Created: 2016-05-05 17:01:25.791222+00
Date Added: 2024-06-11T07:39:14.251174
License: Public Domain

UNITED STATES DISTRICT COURT
                              FOR THE DISTRICT OF COLUMBIA

                                              }
TASEKO MINES Ltd.,                            }
                                              }
                Plaintiff,                    }
                                              }
        v.                                    }         Civil Action No. 16-390 (GK}
                                              }
RAGING RIVER CAPITAL, et al., }
                                              }
                Defendants.                   }
~~~~~~~~~~~~~~~~->

                                  MEMORDANDUM OPINION

        Plaintiff Taseko Mines Limited                    ( "Taseko" or "the Company")

brings this action against Raging River Capital LP, Raging River

Capital GP LLC, Granite Creek Partners, LLC, Westwood Capital LLC,

Paul M.      Blythe Mining Associates Inc.,                  Jonathan G.   Lee Partners

LLC, Paul Blythe, Nathan Milikowsky, Mark Radzik, Henry Park, and

Jonathan Lee       (collectively "Defendants"), alleging violations of

Section 13(d)       of the Securities Exchange Act of 1934                   ("Exchange

Act"). 15 U.S.C.          §   78m(d).

        This matter is now before the Court on Plaintiff's Motion for

a Preliminary Injunction ("Injunction Motion")                       [Dkt. No. 38], as

well as Plaintiff's Motion for Reconsideration ("Recon. Motion")

[Dkt. Nos. 45, 46-2]. Upon consideration of the Motions, Opposition

[Dkt.    Nos.    49-2],       Reply   [Dkt.       No.   51-2],   and the entire record

herein, and for the reasons set forth below, the Motions shall be

granted.

                                                  1
I.        Background

          A.      Factual Overview

          Only a brief recitation of the facts is necessary at this

juncture         to   decide      the     present   Motions.     For   a   more   detailed

summary, see the Court's April 26, 2016 Memorandum Opinion ("Mem.

Op. " )    [Dkt . No. 4 4] .

          Taseko is a Canadian-based mining company whose shares are

traded on both the NYSE MKT and the Toronto Stock Exchange. Amended

Complaint         ~   2   ("Am.    Compl.")     [Dkt.   No.    13].    In January 2016,

Defendants acquired more than 5% of Taseko common shares ("Taseko

Shares")         and disclosed their acquisitions of shares by filing a

Schedule 13D on January 13, 2016 ("First 13D"), as required by the

Exchange Act. Id.           ~     5. In December 2015 and January and February

2016,          Defendants    acquired        Taseko     senior    notes    due    in   2019

("Notes"). Am. Compl.              ~    38. During that same time period, Raging

River Capital 2 LLC also acquired Taseko senior notes due in 2019

("Additional Notes"). Opp'n at 26.

          Shortly after acquiring their shares, Defendants called for

a    shareholder meeting to vote on the removal of three current

Taseko         directors    and     the    addition of     four   new directors        they

nominated. Id. The shareholder meeting is currently scheduled for

May 10, 2016.

          Over the course of this litigation, Defendants have amended

their Schedule 13D disclosures on three separate occasions. See

                                                2
First Amended 13D, Exhibit 2 to Motion to Dismiss                                  [Dkt. No. 28-

2];   Second Amended 13D,             discussed in Opp'n at 4; Third Amended

13D, Exhibit A to Reply to Motion to Dismiss [Dkt. No. 36-2].

       On April       26,    2016,     the Court granted in part Defendants'

Motion      to    Dismiss     [Dkt.       No.   4 3] .    Plaintiff's         remaining        claim

relates      to     alleged        undisclosed           agreements      regarding            Taseko

securities.         See      Mem.     Op.       at       14-18.    In        its     Motion      for

Reconsideration,            Plaintiff       asks     the     Court      to     reconsider        the

dismissal of its claim that Defendants have not properly disclosed

their purpose in purchasing the Notes.

       B.        Securities Exchange Act of 1934

       Section 13 (d)         of    the     Exchange Act          requires         entities     that

acquire a 5% or more interest in an issuing corporation to file a

Schedule     13D setting forth certain information.                                See   15   U.S.C.

§   78m(d); 17 C.F.R.         §    240.13d-101.

       Currently at issue is Item 4 of the Schedule 13D. The statute

requires, inter alia, that the filer state:

      if the purpose of the purchases or prospective purchases
      is to acquire control of the business of the issuer of
      the securities, any plans or proposals which such
      persons may have to liquidate such issuer, to sell its
      assets to or merge it with any other persons, or to make
      any, other major change in its business or corporate
      structure;

15 U.S.C.        78m(d) (1) (C).      Similarly,         the Regulation requires that

the filer "[s]tate the purpose or purposes of the acquisition of

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securities of the issuer," including any plans that might relate

to the purchase of additional securities, extraordinary corporate

transactions, the sale or transfer of a material amount of assets

of    the     issuer,      and       other      intended        corporate     changes     or

transactions. 17 C.F.R.            §    240.13d-101

II.   Legal Standard

      A.      Reconsideration

      A district court may revise its own interlocutory decisions

"at any time before the entry of a judgment adjudicating all the

claims and all the parties' rights and liabilities." Fed. R. Civ.

P. 54(b). Rule 54(b) permits the district court to reconsider an

interlocutory       order         "as     justice       requires,"        which    requires

"determining,            within         the         Court's      discretion,        whether

reconsideration is necessary under the relevant circumstances."

Cobell v.     Norton,      224 F.R.D.          266,    272    (D.D.C.    2004));   see also

Singh v. George Washington Univ., 383 F. Supp. 2d 99, 101 (D.D.C.

2005).      The   term     "' [a]s      justice       requires'     indicates      concrete

considerations" by the court, Williams v. Savage, 569 F. Supp. 2d

99,   108     (D.D.C.     2008),        such    as     "whether    the    court    patently

misunderstood the parties, made a decision beyond the adversarial

issues presented, made an error in failing to consider controlling

decisions or data, or whether a controlling or significant change

in the law has occurred."                In Def.      of Animals v.        Nat' 1 Inst.   of

                                                4
Health,       543 F.       Supp.   2d 70,    75       (D.D.C.      2008)    (internal citation

and quotation marks omitted) .

        "Furthermore,          the   party moving             to    reconsider    carries     the

burden of proving that some harm would accompany a denial of the

motion to reconsider."               Id.    at 76.          The court's discretion under

54(b)    is "subject to the caveat that, where litigants have once

battled for the court's decision, they should neither be required,

nor without good reason permitted, to battle for it again." Singh,

383 F. Supp. 2d at 101 (internal citations omitted).

        B.      Preliminary Injunction

        This court may issue interim injunctive relief only when the

rnovant demonstrates "[l] that [they are]                          likely to succeed on the

merits,       [2]    that    [they are]     likely to suffer irreparable harm in

the absence of preliminary relief,                     [3] that the balance of equities

tips in [his or her]               favor, and [4]           that an injunction is in the

public interest." Winter v. Natural Res. Def. Council,                                 Inc., 129

S. Ct.       365,    374    (2008)   (citing Munaf v. Geren,                 128 S. Ct.    2207,

2218-19       (2008)).       It is particularly important for the rnovant to

demonstrate a likelihood of success on the merits. Cf. Benten v.

Kessler,       505 U.S. 1084, 1085           (1992)          (per curiarn).     Indeed, absent

a "substantial indication" of likely success on the merits, "there

would    be     no    justification         for       the    court's       intrusion   into   the

ordinary processes of administration and judicial review."                                    Arn.

                                                  5
:·.

      Bankers Ass'n v.           Nat'l Credit Union Admin.,. 38 F. Supp.               2d 114,

      140 (D.D.C. 1999)          (internal quotation omitted).

            The other critical factor in the injunctive relief analysis

      is irreparable injury. A movant must "demonstrate that irreparable

      injury is likely in the absence of an injunction." Winter, 129 S.

      Ct. at 375 (citing Los Angeles v. Lyons, 461 U.S. 95, 103 (1983)).

      Provided that the plaintiff demonstrates a likelihood of success

      on the merits and of irreparable injury,                     the court "must balance

      the competing claims of injury and must consider the effect on

      each party of the granting or withholding of the requested relief."

      Amoco Prod. Co. v. Gambell, 480 U.S. 531, 542 (1987).

            Because a preliminary injunction is an extraordinary remedy,

      courts should grant such relief sparingly. Mazurek v. Armstrong,

      520 U.S. 968,    972        (1997). The Supreme Court has observed "that a

      preliminary injunction is an extraordinary and drastic remedy, one

      that should not be granted unless the movant, by a clear showing,

      carries the burden of persuasion."                     Id.   Therefore,      although the

      trial court has        the discretion to issue or deny a preliminary

      injunction,     it    is     not   a   form       of   relief      granted   lightly.   In

      addition, any injunction that the court issues must be carefully

      circumscribed        and    "tailored    to       remedy     the    harm   shown."   Nat' 1

      Treasury Employees Union v. Yeutter, 918 F.2d 968, 977 (D.C. Cir.

      1990) .

                                                    6
III. Analysis

     A.        Motion to Reconsider

     In     their      Reply    in   support      of     their    Motion      to    Dismiss,

Defendants argued that their Third Amended 13D (filed the same day

as the Reply) mooted Plaintiff's claim that Defendants had failed

to properly disclose their purpose in acquiring the Notes.                                See

Reply to Motion to Dismiss at 10-11                    [Dkt. No. 36). In the Third

Amended    13D,       Defendants     state       for     the   first    time       that   they

"acquired the Notes for investment purposes because they believed

the Notes represented an attractive investment opportunity" and

because they "intend to pursue a concerned shareholder campaign in

respect of the Issuer." Third Amended 13D at 2.

     The purpose given for acquiring the Notes was the same given

as to why Defendants acquired the Taseko shares. Plaintiff did not

object    to    the    sufficiency     of    Defendants'          stated      purpose      for

acquiring      the     Taseko    shares,     nor       did     they    file    a    Surreply

objecting,      and     therefore     the        Court     presumed     that       Plaintiff

accepted that the stated purpose was likewise sufficient for the

Notes.    See Mem.      Op.    at 13-14. Having found that Defendants had

sufficiently stated their purpose in acquiring the Notes, the Court

found Plaintiff's claim to have become moot and thereby dismissed

it. Id.

     Plaintiff asks the Court to reconsider its ruling, see Recon.

Motion at 2, because Defendants "did not accurately disclose their

                                             7
purpose for acquiring the Notes, which was not and could not have

been the same as their purpose in acquiring Taseko common shares."

Id.    Plaintiff also argues that,               because Defendants filed their

Third Amended 13D on the same day they_filed their Reply to the

Motion to Dismiss, Plaintiff did not have an opportunity to address

the adequacy of the newly filed Third Amended 13D.                       Id.    at 3-4.

Plaintiff further contends that Defendants did not disclose in the

Third Amended 13D their "true" purpose in acquiring the Notes and

that    they misstated the purpose               they did disclose.          Injunction

Motion at 21-23.

       First,     Plaintiff       states    that    Defendants       could     not   have

acquired the Notes in order to carry out a concerned shareholder

campaign because ownership of the Notes does not entitle them "to

call a shareholder meeting,               advance resolutions to be put to a

shareholder       vote,     solicit   proxies,      or   vote    on    any     corporate

matters,     including board membership."             Id.     While Defendants may

have purchased the Notes to protect against the risks of the Taseko

shares,    which     they    in    turn    purchased     to    pursue    a     concerned

shareholder campaign, the Notes themselves do not facilitate this.

Consequently, holders of Notes have no authority to participate in

Taseko's governance.

       Second,    Plaintiff argues that Defendants'              stated purpose is

contrary to the purpose evidenced in the documents received in

discovery.       Recon.     Motion    at    5.    According     to    Plaintiff,      the

                                            8
•.

     documents indicate that Defendants acquired the Notes in order to

     hedge against "the investment they made in the common shares, and

     to gain leverage over common shareholders in the bankruptcy process

     in    the    event    [Taseko]       were     to    become      insolvent."        Id.     This

     disclosure      is    critical,       Plaintiff          argues,     because      it     places

     Defendants' interests at odds with the interests of Taseko's other

     shareholders. Id. at 5-6; Injunction Motion at 21-26.

            Defendants      reply     that,      even     assuming       arguendo      that     they

     acquired the Notes         to    "hedge"      against       their investment in the

     Taseko shares, their disclosure is still correct because hedging

     is an investment purpose. Opp'n at 2. Even if Defendants acquired

     the Notes for investment purposes, the Regulation requires them to

     disclose the "purpose or purposes of the acquisition," 17 C.F.R.

     §    240 .13d-101     (emphasis       added).       In   sum,   Defendants        are     still

     required      to     disclose        any    other        purposes        underlying       their

     acquisition, such as those alleged by Plaintiff.

            The Court also agrees with Plaintiff that it did not have a

     chance to properly respond to the adequacy of Defendants'                                 newly

     proffered purpose        in     acquiring          the   Notes.     Thus,    Plaintiff       is

     raising      several     arguments           challenging           the    sufficiency        of

     Defendants' stated purpose in acquiring the Notes that the Court

     did    not   have    before     it          and    which    Plaintiff       did    not     have

                                                   9
sufficient opportunity to raise previously - when it decided the

Motion to Dismiss.

       Accordingly, for the foregoing reasons, Plaintiff's Motion to

Reconsider is granted,           the portion of the Court's prior decision

dismissing Plaintiff's claim regarding disclosure of the purpose

for the acquisition of the Taseko Notes is vacated, and the Motion

to Dismiss Plaintiff's claim regarding disclosure of the purpose

for the acquisition of the Taseko Notes is denied.

       B.     Preliminary Injunction

              1.     Taseko Is Likely to Succeed on the Merits

       As discussed above,           Taseko has made a           credible claim that

Defendants did not fully and accurately disclose their purposes in

acquiring the Taseko Notes. On its face,                    the language of Section

13(d) does not indicate how much detail or specificity is required

in    disclosures.        However,     it     is    clear   in   this    instance     that

Defendants'         explanation        that     the    Notes     were    acquired      for

"investment         purposes"     does        not   sufficiently        communicate     to

investors their intentions. See Decicco v. United Rentals,                          Inc.,

602   F.    Supp.    2d   325,   347     (D. Conn.     2009)     ("The    purpose   of~

Schedule 13D filing is to notify the security issuer and the public

that a person has accumulated a significant position in a company's

[securities], and to disclose that person's intentions.")

       Plaintiff has provided evidence suggesting that Defendants

were motivated in part to purchase the Notes                       to protect their

                                               10
investment in the Taseko shares - specifically to ensure influence

and protection in case of default or bankruptcy. Injunction Motion

at 23-24.       Plaintiff further alleges that the documents describe

how, in the case of bankruptcy, Defendants could potentially make

more money than they would if Taseko remains solvent. Injunction

Motion    at         29-30.       This     information    is   obviously    important     to

investors, as it indicates that Defendants' interests may not be

fully aligned with those of the shareholders.

        While Defendants are                 correct     that a    conflict of    interest

naturally arises by virtue of owning debt and equity at the same

time,     the        potential         conflict    is    significant     enough   to   have

additional implications here. Opp'n at 15. Plaintiff alleges that

Defendants sought a substantial bond position in order to have a

position of influence in case of bankruptcy,                           and to potentially

even profit from bankruptcy. Injunction Motion at 23-24.

        Given        the        evidence    suggesting     Defendants     did   not    fully

disclose their purposes in acquiring the Notes, and the misleading

nature of their disclosure, Plaintiff has shown that it is likely

to succeed on the merits of its claim.

                2.         Taseko Will Suffer Irreparable Harm

        The Court finds that Taseko will suffer irreparable harm in

the     absence            of     a    preliminary       injunction.      "An   uninformed

shareholder           vote        is     often    considered      an   irreparable     harm,

particularly because the raison d'etre of many of the securities

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laws   is    to ensure        that   shareholders make               informed decisions."

Allergan,     Inc.   v.      Valeant Pharm.        Int'l,       Inc.,    No.    SACV 14-1214

DOC(ANx),     2014 WL 5604539, at *16               (C.D. Cal. Nov. 4,               2014); see

also Irving Bank Corp. v. Bank of New York Co., 692 F. Supp. 163,

168-69      (S.D.N.Y.     1988)      ("Forcing      shareholders                       to   make

decisions      without        full   and     accurate          disclosure       of     material

information                   causes    an   irreparable          injury") .        That    said,

noncompliance        with     Section      13(d)     does      not      per    se    result    in

irreparable harm. See Masters v. Avanir Pharm., Inc., 996 F. Supp.

2d 872, 885 (C.D. Cal. 2014)               (rejecting per se rule).

       Defendants       do    not    dispute       that    the       shareholder       vote    on

directors is an important one. Shareholders voting on the basis of

inadequate disclosures may significantly affect who wins several

director positions, and indeed control of the Board of Directors.

Although Plaintiff does not seek money damages,                           should Plaintiff

prevail, sorting out post-vote remedies is likely to be difficult

and further complicated by the fact that control of the Board of

Directors of Taseko--the Plaintiff in this case--may have shifted

to Defendants. See Injunction Motion at 33-34; see also Reply in

Support of Motion to Lift Stay at 3, 14 [Dkt. No. 31).

       Defendants         argue      that      irreparable            injury         does     not

automatically        exist     whenever      there        is    an    alleged        disclosure

violation, but fail to explain why in this instance the injury is

not irreparable. The crux of Defendants'                        arguments are that the

                                             12
necessary information is fully disclosed and therefore there is

"no    danger       of    any   'uninformed        stockholder    vote',"    and    that

Plaintiff has already communicated its conflict of interest theory

to stockholders. Opp'n at 17-18.                  This argument goes to the merits

of    Plaintiff's         claim,   which    the    Court   has    already   found    the

Plaintiff likely to succeed on.

               3.        Balance of Equities and Public Interest

       Defendants have not shown that they will suffer any harm by

issuance       of   this     injunction,     particularly        since   Plaintiff    is

willing to continue with the shareholder vote as scheduled on May

10, 2016,      if Defendants file sufficient Schedule 13D disclosures

by May 6,       2016. Defendants'          reticence in disclosing information

and   failure       to    even disclose      their purchase        (or   intention to

purchase 1 )    of the Notes in their First Schedule 13D also weighs

against them. Any harm suffered by Defendants is outweighed by the

harm Plaintiff will suffer from inadequate disclosures.

       In addition, effective enforcement of the federal securities

laws promotes the public interest. Graphic Sciences, Inc. v. Int'l

Mogul Mines Ltd., 397 F. Supp. 112, 128 (D.D.C. 1974)                       ("The Court

concludes that the public interest demands uniform and exacting

i Item 4 requires the reporting person to describe "any plans or
proposals" they "may have which would relate to or would result
in: (a) The acquisition by any person of additional securities of
the issuer, or the disposition of securities of the issuer."
17 C.F.R. § 240.13d-101.

                                             13
enforcement of the securities laws and that policy encourages a

thorough review of        possible violations         thereof.") .   Defendants'

only response is that Canada has a greater interest than the United

States in remedying any purported disclosure issues. Opp'n at 19.

It    is   not   clear   how   Canada's    interest    diminishes    the   public

interest in disclosure or how denying an injunction would further

the public interest, either here or in Canada.

IV.    Conclusion

       For all of the foregoing reasons,            Plaintiff's Motion for a

Preliminary Injunction is granted. An Order shall accompany this

Memorandum Opinion.

May 5, 2016                                    Gladys Kess]., r
                                               United States District Judge

Copies to: attorneys on record via ECF

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