Laborers' Local v. Intersil

868 F. Supp. 2d 838, 2012 U.S. Dist. LEXIS 30289, 2012 WL 762319
CourtDistrict Court, N.D. California
DecidedMarch 7, 2012
DocketCase No. 5:11-CV-04093 EJD
StatusPublished
Cited by5 cases

This text of 868 F. Supp. 2d 838 (Laborers' Local v. Intersil) is published on Counsel Stack Legal Research, covering District Court, N.D. California primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Laborers' Local v. Intersil, 868 F. Supp. 2d 838, 2012 U.S. Dist. LEXIS 30289, 2012 WL 762319 (N.D. Cal. 2012).

Opinion

ORDER GRANTING DEFENDANTS’ MOTIONS TO DISMISS

EDWARD J. DAVILA, District Judge.

I. INTRODUCTION

Presently before the court are two motions filed by Defendants to dismiss Plaintiff Laborers’ Local # 231 Pension Fund’s (“Plaintiff’) complaint. Defendants are David B. Bell, Jonathan A. Kennedy, Susan J. Hardman, Peter R. Oaklander, David M. Loftus, Robert W. Conn, James V. Diller, Gary E. Gist, Mercedes Johnson, Gregory Lang, Jan Peeters, Robert N. Pokelwaldt, James A. Urry, Compensia Inc. (“Compensia”), and Nominal Defendant Intersil Corporation (“Intersil”).

For the reasons discussed below, Defendants’ motions to dismiss will be granted with leave to amend.

II. FACTUAL AND PROCEDURAL BACKGROUND

This is a shareholders’ derivative action suit brought for the benefit of Nominal Defendant Intersil against certain executives and directors of Intersil. According to the complaint, Plaintiff has been a shareholder of Intersil since July 2009. See Complaint, Docket Item No. 1, at ¶ 10. Intersil is a Delaware corporation, headquartered in Milpitas, California, which designs, develops, manufactures and markets high-performance analog and mixed-signal [842]*842integrated circuits. Id. at ¶ 11. Compensia, a citizen of California, is an executive compensation advisory firm that assisted the Intersil Board in connection with the 2010 executive pay. Id. at ¶ 25. Compensia was retained by Intersil “to advise it on competitive market practices and other areas of Named Executive Officer compensation.” Id. at ¶ 36 (quoting 2011 Proxy Statement, at 18). The thirteen individually named defendants are directors and officers of Intersil. Id. at ¶¶ 12-24. Defendant Bell is the CEO, President, and a director of Intersil. Id. at ¶ 12. His pay was increased by 40.6 percent in 2010. Id. Defendant Kennedy is the Chief Financial Officer of Intersil, and his pay was increased by 26.1 percent in 2010. Id. at ¶ 13. Defendant Hardman is Senior Vice President of Intersil and her pay was increased by 38.6 percent. Id. at ¶ 14. Defendant Oaklander is Senior Vice President of Intersil and his pay was increased by 36.7 percent. Id. at ¶ 15. Defendant Loftus is also a Senior Vice President of Intersil and his pay increased by 66.6 percent. Id. at ¶ 16. Defendants Conn, Diller, Gist, Johnson, Lang, Peeters, Pokelwaldt, and Urry were all Intersil directors at the time of the transaction and served either on the company’s Compensation or Audit Committees, which approved the 2010 pay raises. Id. at ¶¶ 17-24.

On March 26, 2011, the Intersil Board recommended shareholder approval of the 2010 executive compensation.1 Id. at ¶ 36. The executive compensation plan raised the compensation of the company’s named executives by an average of 41.7 percent, pursuant to Intersil’s “pay for performance” policy.2 Id. at ¶¶ 12-16, 31, 34. On May 4, 2011, pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), a non-binding shareholder vote was held on executive compensation.3 Id. at ¶ 39. In that vote, 56 percent of voting Intersil shareholders rejected the Board’s 2010 CEO and top executive compensation.4 Id. at ¶¶ 2, 39.

On August 19, 2011, Plaintiff filed this action for breach of fiduciary duty and unjust enrichment on behalf of Intersil by one of its shareholders against several of Intersil’s current executives and Board of Directors, alleging that the 2010 executive compensation approved by the Board of Directors was “excessive, irrational, and unreasonable” and that Intersil has been and continues to be severely injured by the executive pay. Id. at ¶¶ 34, 41. Plaintiff alleges that in 2010, Intersil suffered sub[843]*843stantial financial declines in its net income, which declined by 31.6 percent, and earnings per share, which declined by 34.4 percent. Id. at ¶¶ 32-33. At the same time, the Board approved substantial pay raises for its top executives, under the “pay for performance” program. Id. at ¶¶ 31, 34. Thus, Plaintiff claims that the relationship between executive pay and corporate performance was “tenuous at best.” Id. at ¶ 32.

Plaintiff also asserts a claim for aiding and abetting breach of fiduciary duty against Compensia, an independent compensation consultant. Plaintiff seeks recovery, on behalf of Intersil, and asks for damages, declaratory judgment, equitable and/or injunctive relief, implementation and administration of internal control and systems to prohibit and prevent payment of excessive executive compensation, and costs and fees associated with this action.

Before filing this action, Plaintiff did not make a pre-suit demand on Intersil’s Board. However, Plaintiff alleges that demand would be futile because the entire board “faces a substantial likelihood of liability for breach of loyalty” and the Board’s decision is not entitled to business judgment protection. Id. at ¶ 45.

On October 17, 2011, Nominal Defendant Intersil, including the named individual defendants, and Defendant Compensia each filed a motion to dismiss Plaintiffs complaint. See Docket Item Nos. 19, 20. Additionally, Compensia filed a notice of joinder to Intersil’s motion to dismiss. See Docket Item No. 21. Plaintiff filed its combined opposition to Defendants’ motions on November 21, 2011. See Docket Item No. 22. Defendants filed two reply briefs on December 16, 2011. See Docket Item Nos. 23, 24.

III. JURISDICTION

Federal courts are courts of limited jurisdiction, possessing only that power authorized by Article III of the United States Constitution and statutes enacted by Congress pursuant thereto. See Bender v. Williamsport Area Sch. Dist, 475 U.S. 534, 541, 106 S.Ct. 1326, 89 L.Ed.2d 501 (1986). Plaintiff asserts federal jurisdiction based upon the parties’ diversity of citizenship. Jurisdiction is proper under 28 U.S.C. § 1332(a)(1), as there is complete diversity between Plaintiff and Defendants and the amount in controversy exceeds $75,000. Venue is proper under 28 U.S.C. § 1391(a) because Intersil maintains its executive offices and principal place of business in this District.

IV. LEGAL STANDARD

Under Federal Rule of Civil Procedure 12(b)(6), a complaint may be dismissed if it fails to state a claim upon which relief can be granted. “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, ‘to state a claim to relief that is plausible on its face.’ ” Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (internal citations omitted). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id.

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Bluebook (online)
868 F. Supp. 2d 838, 2012 U.S. Dist. LEXIS 30289, 2012 WL 762319, Counsel Stack Legal Research, https://law.counselstack.com/opinion/laborers-local-v-intersil-cand-2012.