Greaves v. McAuley

264 F. Supp. 2d 1078, 2003 U.S. Dist. LEXIS 2319, 2003 WL 21277274
CourtDistrict Court, N.D. Georgia
DecidedFebruary 7, 2003
Docket1:03-cr-00207
StatusPublished
Cited by7 cases

This text of 264 F. Supp. 2d 1078 (Greaves v. McAuley) is published on Counsel Stack Legal Research, covering District Court, N.D. Georgia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Greaves v. McAuley, 264 F. Supp. 2d 1078, 2003 U.S. Dist. LEXIS 2319, 2003 WL 21277274 (N.D. Ga. 2003).

Opinion

ORDER

MARTIN, District Judge.

This action is before the court on Plaintiff John Greaves’ emergency motion for immediate remand to state court [Doc. No. 2-1], or, alternatively, for expedited discovery [Doc. No. 2-2] and the scheduling of a preliminary injunction hearing [Doc. No. 2-3]. Also before the court are sundry unresolved motions filed by the parties while the cause of action was pending in state court [Doc. Nos. 1-1 & 1-2].

I. Factual and Procedural Background

On October 29, 2002, Defendants Equity One, Inc. (“Equity”) and IRT Property Co. («IRT”) announced a plan to merge. Plaintiff John Greaves (“Greaves”), an IRT shareholder, filed this action in Cobb County Superior Court on October 31, *1080 2002, only two days after the merger announcement, challenging the companies’ plan. In Greaves’ original complaint, the shareholder alleges that IRT and the members of IRT’s Board of Directors— Defendants Thomas McAuley (“McAuley”), Thomas D’Arcy, Patrick L. Flinn, Homer B. Gibbs, Jr., Samuel W. Kendrick, and Bruce A. Morrice (collectively, “the individual defendants”) — breached their fiduciary duties to IRT’s public shareholders by agreeing to a merger for inadequate consideration. The original complaint also alleges that Equity aided and abetted IRT’s purported breaches of fiduciary duty.

On December 18, 2002, IRT announced that a shareholder meeting was scheduled for February 12, 2003. At that meeting, the shareholders will vote to accept or reject the proposed merger between IRT and Equity. To comply with federal securities regulations, a joint proxy/registration statement (“Form S-4”) was filed with the Securities and Exchange Commission on December 24, 2002. Subsequently, the Form S-4 was mailed to Equity and IRT shareholders. Upon review of the Form S-4, Greaves filed an amended complaint, including class and derivative claims. Therein, Greaves asserts that the Form S-4 contains material misstatements and omissions. According to Greaves, the material misstatements and omissions concern, inter alia, the consideration IRT’s stockholders will receive under the merger agreement, the prospects for the combined IRT/Equity entity, and the fairness opinions and financial analyses provided for the companies.

In total, Greaves’ amended complaint asserts five state law claims. First, Count I presents a class claim “Against All Individual Defendants for Breach of Fiduciary Duty.” Greaves alleges that the individual defendants “violated fiduciary duties of care, loyalty, candor and independence owed to the public shareholders of IRT.” Next, Counts II, III, and IV assert derivative claims, brought on behalf of IRT, against the individual defendants. These counts include claims for “Corporate Waste,” “Abuse of Control,” and “Breach of Fiduciary Duty.” Finally, Count V asserts a derivative claim on behalf of IRT against Equity and the individual defendants for “Unjust Enrichment.”

Upon receipt of Greaves’ amended complaint, the defendants removed the action to this court. According to the defendants, this court has original jurisdiction over the cause of action pursuant to the Securities Litigation Uniform Standards Act of 1998 (“Uniform Standards Act” or “the Act”), 15 U.S.C. §§ 77p, 78bb(f). 1 Also, the defendants believe that this court has federal question jurisdiction over Greaves’ claims because, although purportedly based on state law, Greaves’ claims involve substantial questions of federal law. Unsurprisingly, Greaves disputes these contentions, arguing that the Uniform Standards Act dictates that the court remand this action to state court. Because this matter involves a complicated and novel statutory issue, the court heard oral argument on February 4, 2003. In light of the arguments presented by the parties, the court now resolves Greaves’ emergency motion to remand [Doc. No. 2-1].

II. The Uniform Standards Act

In 1995, Congress determined that abusive private securities lawsuits were harming the nation’s securities markets. H.R. Conf. Rep. No. 104-369, at 31-32 (1995), *1081 reprinted, in 1995 U.S.C.C.A.N. 679, 730. Importantly, the high cost of defending so-called “strike suits” often forced corporate defendants to settle meritless class actions. 2 Id. Congress responded by passing the Private Securities Litigation Reform Act of 1995 (“Reform Act”), which enacted tougher procedural and substantive standards for private securities suits in federal courts. Among other things, the Reform Act established heightened pleading requirements, an automatic stay of discovery pending motions to dismiss, and a safe harbor for certain forward-looking statements. 15 U.S.C. §§ 78u-4, 77z-l.

However, three years later, Congress determined that class action attorneys were attempting to circumvent the Reform Act’s requirements by filing frivolous securities lawsuits in state court pursuant to state law, rendering virtually all of the Reform Act’s protections inapplicable. Securities Litigation Uniform Standards Act, Pub.L. No. 105-353, §§ 2-3, 112 Stat 3227 (1998). As a response, Congress enacted the Uniform Standards Act. Therein, Congress noted that “a number of securities class action lawsuits have shifted from Federal to State courts,” and that “this shift has prevented [the Reform Act] from fully achieving its objectives.” Id. “[T]o prevent [these] State private securities class action lawsuits ... from being used to frustrate the objectives of the [Reform Act],” Congress found that “it is appropriate to enact national standards for securities class action lawsuits involving nationally traded securities.” Id. at § 2.

To that end, the Uniform Standards Act makes federal court, with limited exceptions, the “sole venue for class actions alleging fraud in the purchase and sale of covered securities.” Behlen v. Merrill Lynch, 311 F.3d 1087, 1091-92 (11th Cir.2002). Congress further mandated that securities fraud class actions would be exclusively governed by federal law. 3 H.R. Conf. Rep. No. 105-803, at 13. Importantly, the Uniform Standards Act “preempts certain state law claims, allows for removal of state actions to federal court, and requires immediate dismissal of ‘covered lawsuits.’ ” Behlen, 311 F.3d at 1092; Riley v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 292 F.3d 1334, 1341 (11th Cir.2002).

A. Removal Under the Uniform Standards Act

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Atkinson v. MORGAN ASSET MANAGEMENT. INC.
664 F. Supp. 2d 898 (W.D. Tennessee, 2009)
Weitman v. Tutor
588 F. Supp. 2d 133 (D. Massachusetts, 2008)
Superior Partners v. Chang
471 F. Supp. 2d 750 (S.D. Texas, 2007)
In Re Lord Abbett Mutual Funds Fee Litigation
463 F. Supp. 2d 505 (D. New Jersey, 2006)
Sofonia v. Principal Life Insurance
378 F. Supp. 2d 1124 (S.D. Iowa, 2005)
Cape Ann Investors LLC v. Lepone
296 F. Supp. 2d 4 (D. Massachusetts, 2003)

Cite This Page — Counsel Stack

Bluebook (online)
264 F. Supp. 2d 1078, 2003 U.S. Dist. LEXIS 2319, 2003 WL 21277274, Counsel Stack Legal Research, https://law.counselstack.com/opinion/greaves-v-mcauley-gand-2003.