Stockman-Sann Ex Rel. Quiksilver, Inc. v. McKnight ( 2015 )

FILED
NOT FOR PUBLICATION JUN 19 2015
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
PATRICIA STOCKMAN-SANN, No. 13-55892
Derivatively on Behalf of Quiksilver, Inc.,
D.C. No. 8:12-cv-01882-AG-JPR
Plaintiff - Appellant,
v. MEMORANDUM*
ROBERT B. MCKNIGHT, Jr.; et al.,
Defendants - Appellees.
Appeal from the United States District Court
for the Central District of California
Andrew J. Guilford, District Judge, Presiding
Argued and Submitted May 6, 2015
Pasadena, California
Before: NOONAN, WARDLAW, and MURGUIA, Circuit Judges.
Patricia Stockman-Sann appeals the district court’s order dismissing her
shareholder derivative suit against Quiksilver, Inc., and the individual members of
Quiksilver’s Board of Directors. Stockman-Sann contends the district court erred
by finding her failure to make a pre-suit demand on the Board, as required by Rule
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
23.1(b) of the Federal Rules of Civil Procedure, was not excused on the basis of
demand futility. The district court found demand was not excused for Stockman-
Sann’s challenge to the Quiksilver Compensation Committee’s 2011 grant to
Robert B. McKnight, Jr., of 1.2 million Reserve Stock Units (“RSUs”) allegedly in
violation of Quiksilver’s incentive compensation plan (“2000 Plan”). The district
court found demand was not excused for Stockman-Sann’s claims that the Board
impermissibly amended the 2000 Plan (“2012 Amendment”) without ratification
by the Quiksilver stockholders and distributed a proxy containing false or
misleading information (“2012 Proxy”). We dismiss this appeal for lack of
jurisdiction.
Federal courts lack jurisdiction “[i]f an event occurs during the pendency of
the appeal that renders the case moot.” Ctr. for Biological Diversity v. Lohn, 511
F.3d 960, 963 (9th Cir. 2007). “A case becomes moot when there no longer exists
‘a present controversy as to which effective relief can be granted.’” United States
v. Able Time, Inc., 545 F.3d 824, 828 (9th Cir. 2008) (quoting Vill. of Gambell v.
Babbitt, 999 F.2d 403, 406 (9th Cir. 1993)).
Stockman-Sann’s claims arising from the RSU award to McKnight are moot
because McKnight returned all 1.2 million challenged RSU awards in 2012.
Stockman-Sann conceded such claims were moot before the district court. The
2
Compensation Committee then granted McKnight a new award of 1.2 million
RSUs, which Stockman-Sann alleges exceeded the limit under the 2000 Plan by
400,000 units. McKnight filed a Form 4 with the Securities and Exchange
Commission on January 22, 2013, in which he stated he had returned 400,000
RSUs. Stockman-Sann does not dispute that McKnight returned the 400,000 units.
Because it is not disputed that McKnight returned all of the RSUs awarded
allegedly in violation of the 2000 Plan, no further relief can be fashioned.
Stockman-Sann’s claims arising from the 2012 Amendment are moot.
Stockman-Sann argues the Board of Directors impermissibly adopted the 2012
Amendment without stockholder approval. The 2012 Amendment allowed the
Board to make unlimited RSU awards provided the awards were not classified as
tax exempt under 26 U.S.C. § 162(m). Stockman-Sann maintains the new incentive
compensation plan adopted in 2013 (“2013 Plan”) left the allegedly impermissible
2012 Amendment in place. However, the Quiksilver stockholders approved the
2013 Plan. Even if the Board’s adoption of the 2012 Amendment were ultra vires,
any awards made under the 2013 Plan have been made with stockholder approval.
This issue is therefore moot.
Stockman-Sann’s claims arising from the 2012 Proxy are moot. Stockman-
Sann argues the 2012 Proxy contained false and misleading information. The
3
purpose of the Proxy was to solicit authority to vote on Quiksilver stockholders’
behalf at the 2012 Stockholders’ Meeting, at which the only question to be voted
on was the reelection of the Quiksilver Board. Since the 2012 board election,
Quiksilver has held Board elections annually. Stockman-Sann’s challenge to the
validity of the 2012 election based on an allegedly false proxy statement is moot.
Lee v. Schmidt-Wenzel, 766 F.2d 1387, 1389-90 (9th Cir. 1985) (subsequent board
elections render a challenge to the validity of an earlier election moot “because
even a favorable decision by the district court would not have entitled the appellees
to relief”).
In her briefs to this court and at oral argument, Stockman-Sann argued the
district court could fashion a wide variety of relief. However, Stockman-Sann
failed to identify any specific harm such relief could remedy.
DISMISSED AS MOOT.
4