Quantum Technology Partners Ii v. Altman Browning and Company , 436 F. App'x 792 ( 2011 )

FILED
NOT FOR PUBLICATION JUN 07 2011
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U .S. C O U R T OF APPE ALS
FOR THE NINTH CIRCUIT
QUANTUM TECHNOLOGY No. 10-35162
PARTNERS II, L.P., a Delaware limited
partnership, D.C. No. 3:08-cv-00376-BR
Plaintiff - Appellant,
MEMORANDUM *
v.
ALTMAN BROWNING AND
COMPANY, an Oregon corporation;
BAKER GROUP LLP; KAY E.
ALTMAN, an individual; MICHAEL J.
BAKER, an individual; DAVID M.
BROWNING, an individual; DOES, 1
through 20; APEX DRIVE
LABORATORIES, INC., nominal
defendant, a Delaware corporation,
Defendants - Appellees.
Appeal from the United States District Court
for the District of Oregon
Anna J. Brown, District Judge, Presiding
Argued and Submitted May 3, 2011
Portland, Oregon
Before: KOZINSKI, Chief Judge, TASHIMA and IKUTA, Circuit Judges.
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
page 2
1. There is complete diversity between the parties. See Johnson v. Columbia
Props. Anchorage, LP, 437 F.3d 894, 899 (9th Cir. 2006).
2. While the bylaws of a Delaware corporation “are a contract between the
corporation and its stockholders,” Kidsco Inc. v. Dinsmore, 674 A.2d 483, 492
(Del. 1995), Quantum didn’t cite any authority holding that shareholders can sue
each other for breach of such bylaws. We conclude they cannot.
3. Quantum didn’t allege facts showing that the representations about
Altman Browning & Company (ABCo)’s capabilities were false or misleading
when Browning and Baker made them to Dickman. See Yourish v. Cal. Amplifier,
191 F.3d 983, 993 (9th Cir. 1999). The falsity of the statements can’t be inferred
from ABCo’s failure to meet the milestones in the agreement with Apex. See
Commc’ns Grp., Inc. v. GTE Mobilnet of Or., 871 P.2d 502, 504 (Or. Ct. App.
1994); see also In re GlenFed, Inc. Sec. Litig., 42 F.3d 1541, 1548–49 (9th Cir.
1994) (en banc).
4. Dickman’s email to Apex’s largest shareholder, which predicted that
Quantum’s suit would make “Apex’s and possibly [the shareholder’s] fund raising
somewhat radioactive,” causing Apex not to “survive[]” for very long, is strong
page 3
evidence that Quantum’s interests diverged from those of Apex’s other
shareholders. See Emerald Partners v. Berlin, 564 A.2d 670, 673–74 (Del. Ch.
1989). The district court didn’t abuse its discretion in finding that Quantum wasn’t
an adequate shareholder representative. See Fed. R. Civ. P. 23.1.
5. Quantum can’t claim demand futility because it made demand on Apex’s
board of directors. See Spiegel v. Buntrock, 571 A.2d 767, 775 (Del. 1990).
Apex’s Special Investigation Committee (SIC), which had “sole authority” to
investigate Quantum’s allegations, concluded that the “ultimate outcome” of the
challenged board actions “was fair to [Apex],” and that “the diversion of resources
to pursue litigation . . . would surely cripple [Apex].” (Emphasis added.) This
conclusion isn’t subject to judicial review, id. at 778, and Quantum hasn’t alleged
facts indicating that the SIC’s investigation was deficient, see Grimes v. DSC
Commc’ns Corp., 724 A.2d 561, 565 (Del. Ch. 1998); see also Levine v. Smith, 591
A.2d 194, 214 (Del. 1991), overruled on other grounds by Brehm v. Eisner, 746
A.2d 244, 253–54 (Del. 2000).
AFFIRMED.