Solak v. Rochford ( 2020 )

2 3 UNITED STATES DISTRICT COURT 4 DISTRICT OF NEVADA 5 * * * 6 JOHN SOLAK, derivatively Case No. 3:19-cv-00410-MMD-WGC on behalf of Ring Energy, Inc., 7 ORDER Plaintiff, 8 v. 9 LLOYD T. ROCHFORD, et al., 10 Defendants. 11 and 12 RING ENERGY, INC., a Nevada Corporation, 13 Nominal Defendant. 14 15 16 I. SUMMARY 17 Plaintiff John Solak brings this derivative action on behalf of Ring Energy, Inc. 18 (“Ring”) against its directors.1 Before the Court is Plaintiff’s motion to reconsider (ECF No. 19 55 (the “Motion”)) the Court’s prior order (ECF No. 53 (“Order”)) dismissing Plaintiff’s first 20 amended complaint (ECF No. 42 ( “FAC”)) for lack of standing under Federal Rules of 21 Civil Procedure 12(b)(1) and 23.1.2 Because the Court is persuaded it clearly erred in 22 dismissing the FAC in its entirety—and as further explained below—the Court will grant 23 the Motion and allow Plaintiff to proceed only to the extent his claims are based on alleged 24 misconduct that occurred after January 22, 2019, when Plaintiff purchased Ring stock. 25 26 1These directors are Lloyd T. Rochford, Kelly Hoffman, David A. Fowler, Stanley M. McCabe, Anthony B. Petrelli, Clayton E. Woodrum, and Regina Roesener (collectively, 27 “Defendants”). (ECF No. 42 at 3.) 28 2Defendants filed a response (ECF No. 56), and Plaintiff filed a reply (ECF No. 57). 2 The Court incorporates by reference the procedural history of this case recited in 3 the background section of the Order, and does not recite it here. (ECF No. 53 at 1-2.) In 4 the Order, the Court dismissed the FAC because it found that Plaintiff lacked standing, as 5 Plaintiff did not own shares of Ring stock at the time of Defendants’ alleged misconduct. 6 (Id. at 3, 5.) More specifically, after rejecting Plaintiff’s attempted reliance on the continuing 7 wrong doctrine,3 the Court dismissed this case because it found that Plaintiff did not have 8 standing to bring his derivative claims at the time he filed his original complaint in July 9 2019. (Id. at 3-5.) The Court continued: 10 As such, the Court must also dismiss Plaintiff’s claims against Roesener— who was appointed to Ring’s board in September 2019—and any claims 11 predicated on Ring’s 2018 proxy statement that it filed in November 2019. See id. Plaintiff cannot rely on his 2019 claims to “retroactively confer 12 standing upon [himself].” 13 (Id. at 5 (citation omitted).) The Court also explained in the Order that it construed 14 Plaintiff’s FAC as alleging misconduct that occurred between 2013 and 2018, which could 15 not give him standing to sue given his other allegation that he did not purchase Ring stock 16 until January 22, 2019. (Id. at 3-4.) 17 III. LEGAL STANDARD 18 A motion to reconsider must set forth “some valid reason why the court should 19 reconsider its prior decision” and set “forth facts or law of a strongly convincing nature to 20 persuade the court to reverse its prior decision.” Frasure v. United States, 256 F. Supp. 21 2d 1180, 1183 (D. Nev. 2003) (citation omitted). Reconsideration is appropriate if this 22 Court “(1) is presented with newly discovered evidence, (2) committed clear error or the 23 initial decision was manifestly unjust, or (3) if there is an intervening change in controlling 24 law.” Sch. Dist. No. 1J v. ACandS, Inc., 5 F.3d 1255, 1263 (9th Cir. 1993) (citation omitted). 25 But “[a] motion for reconsideration is not an avenue to re-litigate the same issues and 26 27 3As Plaintiff continues to press this argument (ECF No. 55 at 4 n.1), the Court notes 28 that it maintains it correctly decided this issue. Thus, this order should not be interpreted as an endorsement of the continuing wrong doctrine. 2 F. Supp. 2d 1280, 1288 (D. Nev. 2005) (citation omitted). 3 IV. DISCUSSION 4 Primarily relying on Northstar Financial Advisors Inc. v. Schwab Investments, 779 5 F.3d 1036, 1044 (9th Cir. 2015), Plaintiff argues the Court clearly erred in dismissing his 6 case because the Court should have assessed whether he had standing based on 7 allegations included for the first time in his FAC, not simply whether he had standing at 8 the time he filed his case. (ECF No. 55 at 2.) Defendants of course counter the Court did 9 not err in dismissing Plaintiff’s case. (ECF No. 56.) However, Plaintiff has persuaded the 10 Court that it erred—in part—in dismissing Plaintiff’s entire case. 11 The Court only erred in part because Plaintiff lacks standing to sue based on 12 alleged misconduct that occurred before he purchased Ring stock—on January 22, 2019.4 13 (ECF No. 53 at 3.) However, upon reviewing Northstar,5 the Court agrees with Plaintiff he 14 has standing to sue for alleged misconduct described in his FAC that occurred after he 15 purchased Ring stock—specifically, his allegations “that Roesener was appointed to 16 Ring’s board in September 2019 and that Ring filed a misleading proxy statement for 2018 17 in November 2019.”6 (Id. at 2.) Northstar explains that a lack of subject-matter jurisdiction 18 should be treated like any other defect for purposes of defining the proper scope of 19 supplemental pleading, and thus permits plaintiffs to cure standing defects through an 20 amended complaint under Fed. R. Civ. P. 15(d). See 779 F.3d at 1043-44. Northstar 21 22 23 4And on this point the Court agrees with Defendants, who make this argument 24 throughout their response to Plaintiff’s Motion. (ECF No. 56.) Plaintiff cannot pursue any claims based on alleged misconduct that occurred before January 22, 2019, because he 25 lacks standing to do so. 26 5Plaintiff did not rely on Northstar in opposing Defendants’ motion to dismiss his FAC. (ECF No. 51.) 27 6Similarly, the Court will permit Plaintiff to pursue his claims for prospective relief to 28 the extent that relief is tailored to remedying alleged misconduct that occurred after he became a Ring shareholder. (ECF No. 55 at 3 (stating Plaintiff seeks prospective relief).) 2 in his FAC, not his original complaint. 3 Unlike his original complaint, Plaintiff’s FAC states that he purchased Ring stock 4 on January 22, 2019 (ECF No. 42 at 3),7 and includes allegations of misconduct based on 5 events that occurred later in 2019 (see id. at 5, 9-10, 13). As noted, Northstar compels the 6 Court to permit Plaintiff to proceed on his claims based on these events. And incidentally, 7 this additional allegation of the specific date Plaintiff purchased Ring stock also suggests 8 he had standing to sue at the time he filed this case in July 2019, which is after he had 9 purchased Ring stock. (ECF No. 1.) In sum, the Court is convinced it erred, but only as to 10 alleged misconduct postdating Plaintiff’s purchase of Ring stock. 11 The Court also finds Defendants’ attempts to distinguish the cases Plaintiff relies 12 on in his Motion unpersuasive. (ECF No. 56 at 4-5.) In gist, Defendants argue Plaintiff’s 13 cases proffered in his Motion are distinguishable because they all address “events 14 occurring after a plaintiff has filed an initial complaint which specifically relate to plaintiff’s 15 standing or confer standing on the plaintiff[,]” not simply a pleading error on Plaintiff’s part,8 16 which is what happened here. (Id. (emphasis omitted).) But Northstar counsels the Court 17 to be flexible, elevate substance over form, and allow Plaintiff to cure pleading defects 18 through supplemental pleadings. See 779 F.3d at 1044-46. Allowing Plaintiff to proceed 19 on his claims to the extent they are based on misconduct that postdates his purchase of 20 Ring stock better heeds that counsel, instead of having this “case turn on the technical 21 distinction between a new complaint and a supplemental pleading[.]” Id. at 1047. 22 23 24 7Despite this more specific allegation, Plaintiff also continues to allege that he “was a shareholder of Ring during the time of the wrongdoing complained of herein, has 25 continuously been a shareholder since that time, and is currently a Ring shareholder.” (ECF No. 42 at 11.) That allegation is clearly irreconcilable with his allegation that he 26 purchased Ring stock in January 2019, because much of the other misconduct alleged in the FAC spanned from 2013-2018. (See generally id.) 27 8This is because it appears Plaintiff could have alleged the specific date he 28 purchased Ring stock all along, and targeted his other allegations at events that postdated his stock purchase. 2 V. CONCLUSION 3 The Court notes that the parties made several arguments and cited to several cases 4 not discussed above. The Court has reviewed these arguments and cases and determines 5 that they do not warrant discussion as they do not affect the outcome of the Motion before 6 the Court. 7 It is therefore ordered that Plaintiff’s motion for reconsideration (ECF No. 55) is 8 granted in part. Plaintiff may proceed on the claims in his FAC only to the extent his claims 9 are based on alleged misconduct that occurred after January 22, 2019, when Plaintiff 10 purchased Ring stock. It is otherwise denied. 11 It is further ordered that the Court’s judgment (ECF No. 54) dismissing this case is 12 vacated. 13 DATED THIS 18th Day of December 2020. 14 15 16 MIRANDA M. DU CHIEF UNITED STATES DISTRICT JUDGE 17 18 19 20 21 22 23 24 25 26 27 28