Plumbers Local Union 519 Pension Tr. Fund v. Ergen ( 2022 )


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  •                          IN THE SUPREME COURT OF THE STATE OF NEVADA
    PLUMBERS LOCAL UNION NO. 519                           No. 81704
    PENSION TRUST FUND; AND CITY
    OF STERLING HEIGHTS POLICE AND
    FIRE RETIREMENT SYSTEM,
    DERIVATIVELY ON BEHALF OF
    NOMINAL DEFENDANT DISH
    NETWORK CORPORATION,                                        FILE
    Appellants,
    AUG 04 2022
    vs.
    CHARLES W. ERGEN: JAMES                                  ELIZABETH A. BROWN
    CLERK 0 SU REME COURT
    DEFRANCO; CANTEY M. ERGEN;                             aY
    STEVEN R. GOODBARN; DAVID K.
    MOSKOWITZ; TOM A. ORTOLF; CARL
    E. VOGEL; GEORGE R. BROKAW;
    JOSEPH P. CLAYTON; GARY S.
    HOWARD; DISH NETWORK
    CORPORATION, A NEVADA
    CORPORATION; AND DISH
    NETWORK SPECIAL LITIGATION
    COMMITTEE COUNSEL,
    Respondents.
    ORDER OF AFFIRMANCE
    This is an appeal from a district court order dismissing a
    shareholder derivative action after granting a motion to defer to a special
    litigation committee's determination that the clanns should be dismissed.
    Eighth Judicial District Court, Clark County; Elizabeth Goff Gonzalez,
    Judge.
    Appellants, Plumbers Local Union No. 519 Pension Trust Fund
    and City of Sterling Heights Police and Fire Retirement System, are
    shareholders in nominal appellant DISH Network Corporation.               They
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    instituted a derivative suit on DISH's behalf against certain DISH
    directors, Charles Ergen, James DeFranco, Cantey Ergen, Steven
    Goodbarn, David Moskowitz, Tom Ortolf, Carl Vogel, George Brokaw,
    Joseph Clayton and Gary Howard (the respondent DISH directors), alleging
    that the respondent DISH directors either knew of and sanctioned or
    willfully ignored third-party DISH retailers' violations of the Federal
    Telephone Consumer Protection Act (TCPA) and a 2009 Assurance of
    Voluntary Compliance (AVC) between DISH and the attorneys general of
    46 states. DISH's board of directors formed a Special Litigation Committee
    (SLC), which investigated the respondent DISH directors' conduct, issued a
    report determining that the suit was not in DISH's best interests, and
    moved to terminate it. The district court conducted an evidentiary hearing
    on the limited question of the SLC's qualifications (i.e., whether the SLC
    was independent and conducted a good faith and thorough investigation),
    after which it found that the SLC was qualified and dismissed the derivative
    suit with prejudice based on the SLC's report. This appeal followed.
    Appellants seize on a footnote in the district court's dismissal
    order in which the court suggests that, while it found the SLC qualified
    under a preponderance of the evidence standard, it would not have reached
    that conclusion under a question-of-material-fact standard. Appellants
    note that in In re DISH Network Derivative Litigation, 
    133 Nev. 438
    , 442-
    43, 
    401 P.3d 1081
    , 1087-88 (2017) (hereinafter Jacksonville), this court
    endorsed the New York Court of Appeals' more deferential approach for
    assessing SLC qualifications in Auerbach v. Bennett, 
    393 N.E.2d 994
     (N.Y.
    1979), over that of the Delaware Supreme Court in Zapata Corp. v.
    Maldonado, 
    430 A.2d 779
     (Del. 1981).        Under a traditional Auerbach
    framework, "a reviewing court must scrutinize the record to determine
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    whether a genuine issue of material fact exists as to the committee's
    independence, good faith and procedural fairness."          Hasan v. CleveTrust
    Realty Inv'rs, 
    729 F.2d 372
    , 376 (6th Cir. 1984); see also Will v. Engebretson
    & Co., 
    261 Cal. Rptr. 868
    , 873 (Ct. App. 1989) (collecting cases). But the
    Jacksonville majority did not use a summary judgment standard, to which
    de novo review would apply on appeal. Instead, it endorsed review by the
    district court of the SLC's qualifications and report under a preponderance
    of the evidence standard, and reviewed the district court's determination
    deferentially. 133 Nev. at 444 & n.2, 401 P.3d at 1088 & n.2.
    Jacksonville    has   established   for    itself a "position[]    of
    permanence in this court's jurisprudence." Miller v. Burk, 
    124 Nev. 579
    ,
    597, 
    188 P.3d 1112
    , 1124 (2008).       And the summary footnote in which
    appellants ask us to reconsider the Jacksonville majority's approach in
    favor of that described in the dissent, see 133 Nev. at 453, 401 P.3d at 1094
    (Pickering, J., concurring in part and dissenting in part), does not provide
    sufficient reasoning to break with stare decisis and reconsider our holding
    in Jacksonville. See Miller, 124 Nev. at 597, 
    188 P.3d at 1124
    .
    The district court did not abuse its discretion when, applying a
    preponderance    of   the   evidence   standard,      it   accepted   the   SLC's
    qualifications and report. Two disinterested directors' who are not subject
    to personal liability in the underlying suit, served on the SLC. And the
    SLC's voting structure required that at least one of these disinterested
    directors agree in the outcome; indeed, both disinterested directors stood
    'Respondents appear to concede that at least one SLC member—
    director Brokaw—was interested in the report's outcome. See Hansen
    Plumbing & Heating of Nev., Inc. v. Gilbert Dev. Corp., 
    97 Nev. 642
    , 643,
    
    638 P.2d 76
    , 76 (1981) (treating the failure to file an answering brief as a
    confession of error).
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    behind the SLC report's recommendations.       The disinterested directors'
    sworn statements as to their limited connections with the respondent DISH
    directors and the preeminence of their personal and professional integrity
    likewise weigh against finding structural bias inherent in the SLC. Finally,
    indicia of thoroughness—including the sheer volume of documents reviewed
    and broad scope of the SLC's authorizing charter—support the district
    court's determination that the SLC's process was both in good faith and
    sufficient. See Jacksonville, 133 Nev. at 450, 401 P.3d at 1092.
    For all these reasons we therefore AFFIRM the district court's
    dismissal of the derivative suit. It is so ORDERED.
    Parra guirre
    Hardesty                                   Stiglich
    J.                                       ,
    Cadish                                     Silver
    Pickering   I                              Herndon
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    47 A    , 74,
    cc:   Hon. Elizabeth Goff Gonzalez, District Judge
    Lansford W. Levitt, Settlement Judge
    Robbins Arroyo LLP
    Robbins Geller Rudman & Dowd, LLP/San Diego
    O'Mara Law Firm, P.C.
    Hone Law
    Sugarman & Susskind, P.A.
    Vanoverbke, Michaud & Timmony, P.C.
    Leverty & Associates Law, Chtd.
    Sullivan & Cromwell, LLP/New York
    Young, Conaway, Stargatt & Taylor, LLP
    Greenberg Traurig, LLP/Las Vegas
    Kemp Jones, LLP
    Holland & Hart LLP/Las Vegas
    Eighth District Court Clerk
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