Stender v. Archstone-Smith Operating Trust , 910 F.3d 1107 ( 2018 )

FILED
United States Court of Appeals
PUBLISH Tenth Circuit
UNITED STATES COURT OF APPEALS December 7, 2018
Elisabeth A. Shumaker
FOR THE TENTH CIRCUIT Clerk of Court
_________________________________
STEVEN A. STENDER; INFINITY
CLARK STREET OPERATING,
LLC, on behalf of themselves and
all others similarly situated,
Plaintiffs - Appellants,
and
HAROLD SILVER,
Plaintiff,
v. No. 17-1332
ARCHSTONE-SMITH OPERATING
TRUST; ARCHSTONE-SMITH
TRUST; ERNEST A. GERARDI,
JR.; RUTH ANN M. GILLIS; NED
S. HOLMES; ROBERT P. KOGOD;
JAMES H. POLK, III; JOHN C.
SCHWEITZER; R. SCOT SELLERS;
ROBERT H. SMITH; STEPHEN R.
DEMERITT; CHARLES MUELLER,
JR.; CAROLINE BROWER; MARK
SCHUMACHER; ALFRED G.
NEELY; LEHMAN BROTHERS
HOLDINGS, INC.; TISHMAN
SPEYER DEVELOPMENT
CORPORATION; RIVER
HOLDING, LP; RIVER TRUST
ACQUISITION (MD), LLC; RIVER
ACQUISITION (MD), LP;
ARCHSTONE-SMITH
MULTIFAMILY SERIES I TRUST;
ARCHSTONE, INC.; AVALONBAY
COMMUNITIES, INC.;
ARCHSTONE ENTERPRISE, LP;
ERP OPERATING LIMITED
PARTNERSHIP; EQUITY
RESIDENTIAL,
Defendants - Appellees.
_________________________________
Appeal from the United States District Court
for the District of Colorado
(D.C. No. 1:07-CV-02503-WJM-MJW)
_________________________________
Matthew W.H. Wessler, Gupta Wessler PLLC, Washington, D.C. (Daniel
Townsend, Gupta Wessler PLLC, Washington, D.C., Kenneth A. Wexler
and Kara A. Elgersma, Wexler Wallace LLP, Chicago, Illinois, and Lee
Squitieri, Squitieri & Fearon, LLP, New York, New York, with him on the
briefs), for the Plaintiffs-Appellants.
Jonathan D. Polkes, Weil, Gotshal & Manges LLP, New York, New York
(Caroline Hickey Zalka, Adam B. Banks, and Justin D. D’Aloia, Weil,
Gotshal & Manges LLP, New York, New York, Frederick J, Baumann and
Alex C. Myers, Lewis Roca Rothgerber Christie LLP, Denver, Colorado,
and Leslie A. Eaton, Gregory P. Szewczyk, and J. Matthew Thornton,
Ballard Spahr, LLP, Denver, Colorado, with him on the brief), for the
Defendants-Appellees.
_________________________________
Before BRISCOE, BACHARACH, and CARSON, Circuit Judges.
_________________________________
BACHARACH, Circuit Judge.
_________________________________
This appeal grew out of a battle between the majority and minority
owners of units in an investment vehicle. The majority unitholder wanted
to merge, but this would require the minority to sell their units or convert
them to shares in a newly created entity. The minority unitholders balked
2
because they wanted to retain their original units, but the majority
unitholder approved the merger, terminating the minority’s units in the
process. The termination of these units led the minority to sue.
Resolution of this suit largely turns on a classic issue of contract
interpretation: Did the contract, consisting of a declaration of trust,
empower the majority unitholder to approve a merger that eliminated and
replaced the minority unitholders’ units without providing an opportunity
for a class vote? The district court answered “yes” and granted the
defendants’ motions for summary judgment. We agree with the district
court.
1. The parties create an investment vehicle for interests in real
estate.
The parties created an investment vehicle that comprised an
operating trust to buy and sell interests in real estate. This type of
investment vehicle is called a “real estate investment trust.” To form the
trust, investors contributed property in exchange for units (called “A-1
units”) in an operating trust. These units carried certain rights like steady
distributions and a right of redemption for cash or common stock in the
operating trust.
The operating trust was organized as an entity known as an “umbrella
partnership real estate investment trust.” The umbrella partnership, in turn,
was owned by a “parent trust” called the “Archstone-Smith Trust.” The
3
parent trust contributed cash to the operating trust (the Archstone-Smith
Operating Trust) in exchange for general partnership units.
2. The majority unitholder (Archstone-Smith Trust) pursues a
merger.
Before the 2008 market crash, the Archstone-Smith Trust negotiated
a sale to a partnership between Lehman Brothers and Tishman Speyer
Development Corporation. Under the terms of the sale, the Lehman-
Tishman partnership would create a new entity to merge into the operating
4
trust. The merger would eliminate the A-1 units, and owners of these units
could either sell the units or exchange them for shares in the new entity.
Unhappy with this choice, the A-1 unitholders sued the Archstone-
Smith Trust and others for breaches of contract and fiduciary duties. These
claims turn primarily on whether the declaration of trust unambiguously
allowed the operating trust to merge, which would terminate the A-1 units
without a class vote of A-1 unitholders. The district court concluded that
the operating trust could merge and terminate the A-1 units in the process,
so the court granted summary judgment to the defendants. We agree with
the district court’s conclusion and the grant of summary judgment.
3. We engage in de novo review, applying Maryland’s substantive
law.
To decide the appeal, we must construe the declaration of trust.
Because the district court’s construction of the declaration of trust resulted
in a grant of summary judgment, we engage in de novo review, viewing the
evidence in the light most favorable to the A-1 unitholders. Reid v. Geico
Gen. Ins. Co., 499 F.3d 1163, 1167 (10th Cir. 2007).
The parties agree that Maryland law governs construction of the
declaration of trust. Applying Maryland law to matters of construction, the
district court could grant summary judgment to the defendants only if the
declaration of trust had unambiguously allowed termination of the A-1
units through a merger without a class vote of A-1 unitholders. See Higby
5
Crane Serv., LLC v. Nat. Helium, LLC, 751 F.3d 1157, 1160 (10th Cir.
2014) (“Summary judgment on a contract dispute should be granted if the
contractual language is unambiguous.”).
4. The A-1 unitholders’ contract claim fails as a matter of law
because the declaration of trust unambiguously allowed the
operating trust to merge with another entity and terminate the A-
1 units in the process.
Maryland law provides that
 a real estate investment trust can merge with another entity
unless the declaration of trust prohibits mergers and
 a merger can result in the termination of the trust’s units in the
existing entity.
Md. Code Ann., Corps. & Ass’ns §§ 8–501.1(b), 8–501.1(o)(3). The
resulting issue is whether the declaration of trust prohibited the Archstone-
Smith Trust from terminating the A-1 units in the merger without a class
vote of A-1 unitholders.
The defendants point to §§ 5.3(B) and 9.2(B) of the declaration of
trust; the A-1 unitholders rely on §§ 5.3(A), 12.3, and 12.4. The threshold
procedural question is whether the A-1 unitholders preserved their reliance
on § 5.3(A). We answer “no.”
To avoid forfeiture, the A-1 unitholders had to fairly present the
district court with the substance of their current argument involving
§ 5.3(A). See FDIC v. Kan. Bankers Surety Co., 840 F.3d 1167, 1169–70
(10th Cir. 2016) (holding that an argument about contractual language was
6
forfeited because it had not been fairly presented in response to the motion
for summary judgment). This section provides: “The Trustee [the
Archstone-Smith Trust] may not take any action in contravention of any
express prohibition or limitation of this [declaration of trust] without an
amendment of such provision adopted in accordance with Article 12 hereof
and [Title 8 of the Annotated Code of Maryland, Corporations and
Associations Article].” Appellants’ Rec. Excerpts at 558.
On appeal, the A-1 unitholders present two contentions:
1. Section 5.3(A) prohibited the operating trust from undermining
the attributes of A-1 units without amending the declaration of
trust.
2. Amendment of the declaration of trust required compliance
with §§ 12.3 and 12.4, which would necessitate a vote of A-1
unitholders.
The threshold issue is whether the A-1 unitholders preserved the first
contention by raising it in district court when responding to the
defendants’ motions for summary judgment. The A-1 unitholders argue that
they did preserve the issue, relying on
 a footnote in their summary-judgment brief, and
 two references to § 5.3(A) when listing undisputed facts and
material factual disputes.
We conclude that the A-1 unitholders did not preserve their current
argument involving § 5.3(A).
7
In the footnote citing § 5.3(A), the A-1 unitholders discussed
limitations on the Archstone-Smith Trust’s authority to approve a reverse
merger. In a reverse merger, a publicly traded company acquires a private
entity, which survives the merger. SEC v. Cavanagh, 445 F.3d 105, 108 n.6
(2d Cir. 2006). In district court, the A-1 unitholders relied on the existence
of a reverse merger, arguing that the declaration of trust had not permitted
the operating trust to absorb the Lehman-Tishman partnership’s assets. For
this argument, the parties clashed on the impact of § 5.3(B). In the
footnote, the A-1 unitholders argued that the Archstone-Smith Trust’s
participation in a reverse merger would breach multiple provisions,
including § 5.3(A). But § 5.3(A) is not mentioned again in the A-1
unitholders’ summary-judgment brief.
On appeal, the A-1 unitholders have dropped their challenge to the
Archstone-Smith Trust’s authority to approve a reverse merger. 1 Instead,
the A-1 unitholders have focused on the termination of their units without
a class vote. The unitholders’ reference in the footnote to a reverse merger
has nothing to do with their argument on appeal.
The A-1 unitholders also cite the district court’s Docket No. 592,
page 22, which lists undisputed material facts. But nothing on the cited
page refers to § 5.3(A); the A-1 unitholders apparently meant to cite page
1
In their appeal briefs, the A-1 unitholders never mention the term
“reverse merger.”
8
18. There the A-1 unitholders note: “As an express prohibition or
limitation of the [declaration of trust], Section 5.3B required an
amendment to its terms, as set forth in Section 5.3A, before there could be
any deviation from its terms.” Again, this statement was addressing
whether the trustee could approve a reverse merger, which is not involved
in the appeal.
In addition, the A-1 unitholders point to the district court’s Docket
No. 590, page 14. This page comprises the A-1 unitholders’ response to the
defendants’ statement of undisputed material facts. In this response, the
defendants quote the declaration of trust, which states that the trust could
exercise the powers set forth in § 5.1(A). The A-1 unitholders admitted
this fact, adding that these powers are limited by § 5.3(A), which is quoted
in full. But this discussion does not contain an argument involving breach
of § 5.3(A). Instead, the A-1 unitholders relied solely on §§ 12.3 and 12.4,
arguing that the Archstone-Smith Trust could change the attributes of A-1
units only by amending the declaration of trust through a class vote.
Because the A-1 unitholders did not alert the district court to their
current argument involving § 5.3(A), 2 this argument is forfeited. See
Evanston Ins. Co. v. Law Office of Michael P. Medved, P.C., 890 F.3d
2The district court pointed out that “the only portion of section 5.3 to
which any party has pointed as even arguably applicable to the contract
claims is section 5.3B(ii).” Appellants’ Rec. Excerpts at 23.
9
1195, 1202–03 (10th Cir. 2018) (holding that presentation of an argument
in district court was insufficient to preserve a related, but distinct,
argument made for the first time on appeal). We therefore consider the
remaining provisions invoked by the parties: §§ 5.3(B), 9.2(B), 12.3, and
12.4. 3 Together, these sections governed “termination transactions” and
“amendments.”
Under § 5.3(B) a trustee may carry out a “termination transaction”
under § 9.2(B). Section 9.2(B) then defines a “termination transaction” to
include a merger. For a merger under § 9.2(B), three requirements exist:
1. The merger must be approved by unitholders holding a majority
of the outstanding units.
2. Substantially all of the surviving entity’s assets must consist of
units.
3. Under the merger, holders of the A-1 units must be entitled to
receive the same amount for each unit that is to be received by
the Archstone-Smith Trust’s shareholders.
These requirements were satisfied. The Archstone-Smith Trust voted for
the merger, and this vote accounted for roughly 89% of the outstanding
units in the operating trust. And substantially all of the surviving entity’s
assets consisted of units. In addition, each A-1 unitholder had a right to the
same amount per unit that would become available to the Archstone-Smith
3
We express no opinion on whether the outcome might have been
different if the A-1 unitholders had preserved their current argument
involving § 5.3(A).
10
Trust’s shareholders. As a result, the declaration of trust unambiguously
allowed the Archstone-Smith Trust to approve the merger. 4
The A-1 unitholders insist that the Archstone-Smith Trust failed to
comply with §§ 12.3 and 12.4, which govern amendments. To address this
argument, we are guided by the Delaware courts, which Maryland courts
regard as persuasive on matters of corporate law. See Oliveira v.
Sugarman, 152 A.3d 728, 736 n.4 (Md. 2017) (“This Court frequently
looks to Delaware courts for guidance on issues of corporate law.”). And
the Delaware Supreme Court states that “[w]hen a certificate . . . grants
only the right to vote on an amendment, . . . the preferred [unitholders]
have no class vote in a merger.” Elliott Assocs., L.P. v. Avatex Corp., 715
A.2d 843, 855 (Del. 1998). This pronouncement would be “highly
persuasive” to the Maryland Supreme Court. See Kramer v. Liberty Prop.
Trust, 968 A.2d 120, 134 (Md. 2009) (treating Delaware courts’
interpretation of a Delaware corporate statute as “highly persuasive” on the
proper interpretation of a similar Maryland corporate statute because
Delaware courts have expertise on corporate law). 5
4
Both sides point to extrinsic evidence of the parties’ intent. But
extrinsic evidence cannot alter the meaning of unambiguous provisions in
the declaration of trust. See Calomiris v. Woods, 727 A.2d 358, 361–62
(Md. 1999).
5
The Delaware legislature has codified this principle. See Warner
Commc’ns Inc. v. Chris-Craft Indus., Inc., 583 A.2d 962, 969–70 (Del.
Ch.) (discussing Del. Code Ann. tit. 8, § 251(c)), aff’d, 567 A.2d 419 (Del.
11
Given this highly persuasive pronouncement, Maryland law would
not entitle the A-1 unitholders to a class vote on the merger. Without a
class vote of A-1 unitholders, the Archstone-Smith Trust had enough units
to approve the merger, which resulted in termination of the A-1 units.
The A-1 unitholders point out that they were entitled to a class vote
on amendments, but nothing was amended until after the merger and the
termination of A-1 units. As a result, the absence of a class vote did not
constitute a breach of the declaration of trust. Given the absence of a
breach, the district court properly granted summary judgment to the
defendants on the contract claim.
5. The defendants did not breach their fiduciary duties.
The A-1 unitholders sued the Archstone-Smith Trust and others not
only for breaching the contract but also for breaching fiduciary duties. The
district court rejected the claim for breach of fiduciary duties, reasoning
that
 the A-1 unitholders’ reasonable expectations were measured by
their contractual rights and
 the Archstone-Smith Trust did not violate any of the A-1
unitholders’ contractual rights.
1989). Similarly, the Maryland legislature has not given preferred
shareholders the right to a class vote for approval of a merger. Compare
Del. Code Ann. tit. 8, § 251(c) (requiring a vote by the majority of the
outstanding stock), with Md. Code Ann., Corps. & Ass’ns §§ 3–105, 2–507
(requiring mergers to be approved in compliance with the procedures in
Title 2 of the Maryland corporate statute, which specifies that each share is
entitled to one vote “regardless of class”).
12
On appeal, the A-1 unitholders contend that termination of their units was
oppressive and unfair. We reject these contentions because the Archstone-
Smith Trust complied with the declaration of trust, the A-1 unitholders are
judicially estopped on their new theory of oppression, and they forfeited
their new theory of unfairness.
Under Maryland law, a majority unitholder engages in oppression by
frustrating a minority unitholder’s reasonable expectations upon
committing capital to the enterprise. Edenbaum v. Schwarcz-Osztreicherne,
885 A.2d 365, 378 (Md. Spec. App. 2007). On appeal, the A-1 unitholders
contend that their reasonable expectations were not met. This theory is
based partly on the declaration of trust and partly beyond it.
For the expectations embodied in the declaration of trust, we have
already concluded that the Archstone-Smith Trust complied with its
contractual obligations, which precludes liability for breaching a fiduciary
duty arising from the declaration of trust. On appeal, however, the A-1
unitholders also argue that their reasonable expectations had surpassed the
express provisions in the declaration of trust. For this part of the claim, the
district court properly applied judicial estoppel.
Judicial estoppel is an equitable doctrine designed to “protect the
integrity of the judicial process” by preventing parties from changing their
legal positions in the same case based on the “the exigencies of the
13
moment.” New Hampshire v. Maine, 532 U.S. 742, 749–50 (2001). In
deciding whether to find judicial estoppel, the court can consider
 whether a party is now asserting a position that is “‘clearly
inconsistent’” with its prior position,
 whether that party successfully convinced a court to accept the
earlier position, and
 whether it would be unfair to allow that party to change its
position.
Queen v. TA Operating, LLC, 734 F.3d 1081, 1087 (10th Cir. 2013)
(quoting Eastman v. Union Pac. R.R. Co., 493 F.3d 1151, 1156 (10th Cir.
2007)).
When reviewing a finding of judicial estoppel, we apply the abuse-
of-discretion standard. Id. at 1086. The district court could abuse its
discretion only by clearly erring in its judgment, making an impermissible
choice, or acting in a way that was arbitrary, capricious, whimsical, or
manifestly unreasonable. Id.
The issue of judicial estoppel stemmed from the row in district court
over class certification. Early in the battle, the court granted class
certification on the A-1 unitholders’ claims for breach of fiduciary duties.
This grant of class certification led the defendants to move for
reconsideration, arguing that the claims would require an inquiry into each
unitholder’s expectations. The A-1 unitholders disagreed, denying that the
14
claims would require individualized consideration of their expectations,
arguing:
Under Maryland law, reasonable expectations are embodied in
contracts to which shareholders are parties. The reasonable
expectations of Plaintiffs and the Class were thus memorialized
in the Declaration of Trust . . . and any other agreements
defining the relationships of the parties. Subjective concerns
are irrelevant to the inquiry . . . .
Appellants’ Rec. Excerpts at 260; see also id. at 261 (“Plaintiffs’
reasonable expectations were memorialized in the [Declaration of
Trust].”); id. at 262 (“The determination of Archstone-Smith Trust’s
liability at trial will therefore consider the Defendants’ conduct—not how
any individual Class member was affected by it—in relation to the
expectations embodied in the [Declaration of Trust].” (emphasis omitted));
id. at 263 (“Plaintiffs here will prove the Archstone Defendants’ liability
through their uniform course of conduct intending to defeat the reasonable
expectations contained in the single overarching document—the
[Declaration of Trust].”).
The district court relied partly on this argument in denying the
defendants’ motion to reconsider. In denying the motion, the court
reasoned that the majority of A-1 unitholders would derive their
expectations “mostly, perhaps entirely, from the Declaration of Trust and
its connected agreements.” Appellee’s Supp. Rec. Excerpts at 120. Thus,
the A-1 unitholders obtained a favorable ruling by tying their reasonable
15
expectations to the declaration of trust. Given this ruling, the district court
applied judicial estoppel to prevent the A-1 unitholders from arguing that
their reasonable expectations could exceed the promises in the declaration
of trust.
In our view, the district court acted within the bounds of its
discretion. The A-1 unitholders obtained denial of the motion to reconsider
class certification by treating the declaration of trust as the benchmark for
the A-1 unitholders’ reasonable expectations. Given the denial of this
motion, the district court could reasonably reject the A-1 unitholders’
effort to back-track when opposing summary judgment. 6 The district court
thus acted within its discretion in applying judicial estoppel.
In their reply brief, the A-1 unitholders also suggest that the
defendants breached their fiduciary duties by violating standards of “‘fair
dealing’” or “‘fair play.’” Appellants’ Reply Br. at 24 (quoting Edenbaum
v. Schwarcz-Osztreicherne, 885 A.2d 365, 378 (Md. Ct. Spec. App. 2005)).
But the A-1 unitholders had not made this argument in district court when
6
After the ruling, the defendants sought an interlocutory appeal over
the issue of class certification. Objecting to interlocutory review, the A-1
unitholders again tried to confine the defendants’ fiduciary duties to
obligations arising in the declaration of trust. See Plaintiffs’ Opp. to Mot.
for Leave to File Reply at 3–5, Archstone-Smith Trust v. Stender, No. 15-
707 (10th Cir. Dec. 14, 2015). We declined to entertain an interlocutory
appeal, just as the A-1 unitholders had urged. So the A-1 units again
obtained a favorable decision by confining the Archstone-Smith Trust’s
fiduciary duties to the reasonable expectations memorialized in the
declaration of trust.
16
objecting to summary judgment. Thus, the A-1 unitholders forfeited their
new suggestion of unfairness as a basis for liability as a fiduciary. See
Evanston Ins. Co. v. Law Office of Michael P. Medved, P.C., 890 F.3d
1195, 1202–03 (10th Cir. 2018); see also pp. 9–10, above.
* * *
In district court, the A-1 unitholders tied their reasonable
expectations to the declaration of trust. As discussed above, however, the
Archstone-Smith Trust had complied with the declaration of trust. So the
district court correctly granted summary judgment to the defendants on the
claims involving breaches of fiduciary duties stemming from the
declaration of trust.
The district court also acted within its discretion in applying judicial
estoppel to prevent the A-1 unitholders from basing their reasonable
expectations on sources outside the declaration of trust.
Finally, the A-1 unitholders forfeited their new theory of unfairness.
6. The A-1 unitholders abandoned their remaining claims.
In district court, the A-1 unitholders also claimed unjust enrichment,
tortious interference with contract, civil conspiracy, and aiding-and-
abetting a breach of fiduciary duty. These claims have been abandoned.
In their opening brief, the A-1 unitholders mention their claims for
tortious interference and aiding-and-abetting only in footnotes, stating that
17
 reversal on the contract claim would require reversal on the
claims for tortious interference and
 reversal on the claim for breach of fiduciary duty would require
reversal on the aiding-and-abetting claims.
These conclusory assertions in footnotes do not adequately present us with
an argument on these claims, so we consider them abandoned. See Verlo v.
Martinez, 820 F.3d 1113, 1127 (10th Cir. 2016) (“A party’s offhand
reference to an issue in a footnote, without citation to legal authority or
reasoned argument, is insufficient to present the issue for our
consideration.”).
And the A-1 unitholders never mention their claims for unjust
enrichment and civil conspiracy. As a result, these claims are also
considered abandoned. See Coleman v. B-G Maint. Mgmt., of Colo., Inc.,
108 F.3d 1199, 1205 (10th Cir. 1997).
7. Conclusion
The overarching issue involves the Archstone-Smith Trust’s authority
to approve the merger without amending the declaration of trust. This
declaration was governed by Maryland law, which allows a real estate
investment trust to merge and, in the process, terminate preferred units like
the A-1 units. Given this authority under Maryland law, the declaration of
trust expressly allowed the Archstone-Smith Trust to unilaterally approve
the merger, which resulted in termination of the A-1 units as a matter of
law.
18
The A-1 unitholders’ sole preserved argument on the contract claim
involves provisions requiring a class vote of A-1 unitholders to amend the
declaration of trust. But a merger would not trigger the contractual
provisions governing amendments. So the Archstone-Smith Trust could
approve the merger, which resulted in termination of the A-1 units without
a need to amend the declaration of trust.
It’s true that the declaration of trust was amended after the merger.
But by then, there were no longer any A-1 units, so there were no longer
any A-1 unitholders. The district court was therefore right to conclude as a
matter of law that the Archstone-Smith Trust had not breached any
contractual duties. This conclusion entitled the defendants to summary
judgment on the contract claim.
Given the absence of a contractual breach, the defendants were also
entitled to summary judgment on the claims for breach of fiduciary duty.
In district court, the A-1 unitholders tied their reasonable expectations to
the declaration of trust, which had not been breached. As a result, the
district court properly applied judicial estoppel to the A-1 unitholders’ new
effort to base their reasonable expectations on sources outside the
declaration of trust. And the A-1 unitholders forfeited their new theory of
unfairness.
We therefore affirm.
19