in Re Helix Energy Solutions Group, Inc. , 2013 Tex. App. LEXIS 12225 ( 2013 )

Petition for Writ of Mandamus Conditionally Granted in Part and Denied in
Part and Opinion filed September 30, 2013.
In The
Fourteenth Court of Appeals
NO. 14-13-00238-CV
IN RE HELIX ENERGY SOLUTIONS GROUP, INC., OWEN KRATZ,
ANTHONY TRIPODO, BART H. HEIJERMANS, ALISA B. JOHNSON,
GORDON F. AHALT, BERNARD J. DUROC-DANNER, JOHN V. LOVOI,
T. WILLIAM PORTER, III, NANCY K. QUINN, WILLIAM L. TRANSIER,
JAMES A. WATT, Relators
ORIGINAL PROCEEDING
WRIT OF MANDAMUS
270th District Court
Harris County, Texas
Trial Court Cause No. 2012-26160
OPINION
This mandamus proceeding arises out of a shareholder derivative action
involving a Minnesota corporation whose business is based in Texas. The relators
are the corporation and current and former officers and directors who seek
mandamus relief in this court in connection with the trial court’s denial of their
motion to stay, motion to dismiss, special exceptions, and plea to the jurisdiction.
The relators argue they are entitled to mandamus relief because: (1) the real party
in interest, who claims to be a shareholder of the company, failed to allege with
particularity in his petition that the board of directors of the corporation wrongfully
refused his demand; (2) the real party in interest failed to allege in his petition that
he was a shareholder at the time of the transaction of which he complains; (3) the
trial court abused its discretion in denying the relators’ plea to the jurisdiction
because the real party’s failure to plead the two foregoing matters means that he
does not have standing to bring a derivative action, thus depriving the trial court of
subject-matter jurisdiction; and (4) the trial court abused its discretion in denying
the relators’ motion to stay the derivative action in the underlying case in favor of a
first-filed federal derivative action. We find merit in the first two arguments and
conclude that the trial court abused its discretion to the extent it denied the relators’
special exceptions regarding the sufficiency of the real party’s pleading in these
two respects. We conclude that the third and fourth arguments lack merit and deny
the remainder of the relators’ requested mandamus relief.
I. FACTUAL AND PROCEDURAL BACKGROUND
Relator Helix Energy Solutions Group, Inc. (“Helix”) is a Houston-based
energy company incorporated in Minnesota. Relators Owen Kratz, Anthony
2
Tripodo, Bart H. Heijermans, Alisa B. Johnson, Gordon F. Ahalt, Bernard J.
Duroc-Danner, John V. Lovoi, T. William Porter, III, Nancy K. Quinn, William L.
Transier, and James A. Watt (hereinafter collectively “the Individuals”) are current
and former officers and directors of Helix. Real party in interest Mark Lucas has
pleaded that he has been a shareholder of Helix since 2010. Lucas has asserted
outside of his pleadings that he has been a shareholder of Helix since 2006.
The Dodd-Frank Act
The Dodd–Frank Wall Street Reform and Consumer Protection Act, (“Dodd
Frank”), was enacted on July 21, 2010. See Pub. L. No. 111-203, 124 Stat. 1376
(2010). Under Dodd–Frank, at least once every three years, a proxy or consent or
authorization for an annual or other meeting of the shareholders of a publicly-
traded company must include a separate resolution subject to shareholder vote to
approve the compensation of executives. 15 U.S.C. § 78n–1(a). These shareholder
votes are often referred to as “say-on-pay votes.” See Raul v. Rynd, —F.Supp.2d—
,—, 2013 WL 1010290, at *8 (D. Del. Mar. 14, 2013). Dodd–Frank provides that
these say-on-pay votes “shall not be binding” on a company or its board of
directors, and “may not be construed” in any of the following ways: (1) “as
overruling a decision” by the company or its board of directors; (2) “to create or
imply any change to the fiduciary duties” of the company or its board of directors;
(3) “to create or imply any additional fiduciary duties” for the company or its
board of directors; or (4) “to restrict or limit the ability of shareholders to make
proposals for inclusion in proxy materials related to executive compensation.” 15
U.S.C. § 78n–1(c).
3
Helix Shareholders’ Say-on-Pay Vote
Helix filed a Form 8-K with the Securities and Exchange Commission on
May 13, 2011, reporting the results of its annual shareholder meeting, including
Helix’s first say-on-pay vote. In this say-on-pay vote regarding the 2010
compensation of Helix executive officers, shareholders cast 27,842,921 votes for
and 59,156,767 votes against this compensation. Accordingly, the shareholders did
not approve the 2010 compensation of Helix’s executive officers.
Federal Derivative Action
A few months after the say-on-pay vote, the City of Sterling Heights Police
& Fire Retirement System (“the Retirement System”) filed a shareholder’s
derivative suit against the Individuals in the United States District Court for the
Southern District of Texas, seeking to assert claims by Helix against the
Individuals for breach of fiduciary duty and unjust enrichment (“the Federal
Action”). In its complaint, filed on July 8, 2011, the Retirement System alleged
that historically the Helix Board has represented to shareholders that it follows a
company-wide pay-for-performance compensation policy. The Retirement System
alleged that in 2010, Helix’s net revenue, gross profits, operating profit, net
earnings, and earnings per share declined from 2009 levels. According to the
Retirement System, the say-on-pay vote of the Helix shareholders is “direct and
probative evidence underscoring the fact that the 2010 executive compensation
was not in the shareholders’ best interests, and therefore a breach of [the duty of]
loyalty.”
4
The Retirement System did not make a pre-suit demand on Helix’s board of
directors that the board assert these claims of Helix against the Individuals.
Instead, the Retirement System alleged that making such a demand would have
been futile. Shortly after the suit was filed, the defendants filed a motion to
dismiss the Federal Action on the grounds that the Retirement System had failed to
plead particularized facts establishing demand futility and had failed to state a
claim upon which relief could be granted. The Retirement System moved for a
voluntary dismissal of its derivative action, but the federal district court denied this
motion. The federal district court heard argument on Helix’s motion to dismiss in
October 2011, but there is no indication in our mandamus record that the federal
court has ruled on the motion.
Lucas’s Demand on the Helix Board of Directors
Lucas sent a letter to the Helix Board of Directors (hereinafter “the Board”)
containing a demand by Lucas under Rule 23.09 of the Minnesota Rules of Civil
Procedure. In this letter, dated September 28, 2011, Lucas demanded that the
Board undertake an independent internal investigation into whether the Individuals
violated Minnesota or federal law. Lucas also demanded that the Board commence
a civil action against the Individuals to recover for the benefit of the Company the
damages allegedly sustained by Helix as a result of the Individuals’ alleged
breaches of their respective fiduciary duties.
Shortly thereafter, on October 7, 2011, Lucas’s counsel received a letter
from relator Porter on behalf of the Board in which Porter acknowledged receipt of
the demand. According to Lucas, the Board has failed to provide any substantive
5
response to the demand, and this non-response is a “functional refusal” of the
demand.
Harris County Derivative Action
Approximately seven months after sending his demand letter to the Board,
Lucas, derivatively on behalf of Helix, brought suit against the Individuals as
defendants and Helix as the nominal defendant in a derivative action in the 270th
District Court of Harris County (“the State Action”). In the State Action, filed on
May 4, 2012, Lucas seeks to assert claims by Helix against the Individuals for
breach of their fiduciary duties and unjust enrichment. In his petition, Lucas
asserts that in 2010, Helix’s net revenue, gross profits, operating profit, net
earnings, and earnings per share declined from 2009 levels. Lucas alleges that
historically the Helix Board has represented to shareholders that it follows a
company-wide pay-for-performance compensation policy. Lucas cites the
shareholders’ say-on-pay vote as evidence that 2010 stock option increases1 were
not in the shareholders’ best interests and that the Board was not paying for
performance. In his live pleadings, Lucas asserts that, in his September 28, 2011
letter, he made demand on the Board under Rule 23.09 of the Minnesota Rules of
Civil Procedure. Lucas alleges that the Board’s failure to provide any substantive
respond to this demand constitutes a “functional refusal” of it.
The Motions in the State Action
1
The Individuals assert that the compensation to which Lucas refers is a “stock grant” rather than
a “stock option grant.” In adjudicating this original proceeding, we need not and do not
determine which characterization is correct.
6
Helix and the Individuals (hereinafter “the Helix Parties”) filed a “Motion to
Stay, Motion to Dismiss, Special Exceptions, and Plea to the Jurisdiction” in which
they asserted that the State Action should be stayed in favor of the first-filed
Federal Action. In the alterative, the Helix Parties asserted a motion to dismiss,
special exceptions, and a plea to the jurisdiction based upon Lucas’s failure to
allege in his pleadings particularized facts showing that the Board wrongfully
refused his demand. The Helix Parties also asserted special exceptions and a plea
to the jurisdiction based upon Lucas’s failure to allege in his petition that he was a
shareholder of Helix at the time of the transaction of which he complains. The
Helix Parties argued that, based upon these pleading defects, Lucas lacks standing
to assert the derivative claims and therefore the trial court lacks subject-matter
jurisdiction over these claims. The trial court denied the Helix Parties’ “Motion to
Stay, Motion to Dismiss, Special Exceptions, and Plea to the Jurisdiction.”
In their mandamus petition, the Helix Parties ask this court to compel the
respondent, the Honorable Brent Gamble, presiding judge of the 270th District
Court of Harris County, to (1) vacate his order denying the relators’ motion to stay,
motion to dismiss, special exceptions, and plea to the jurisdiction, and (2) grant
their motion to stay, motion to dismiss, special exceptions, or their plea to the
jurisdiction. The Helix Parties argue they are entitled to mandamus relief because:
(1) Lucas failed to allege with particularity in his petition that the Board
wrongfully refused his demand; (2) Lucas failed to allege in his petition that he
was a shareholder at the time of the transaction of which he complains; (3) the trial
court abused its discretion in denying the Helix Parties’ plea to the jurisdiction
7
because the real party’s failure to plead the two foregoing matters means that he
does not have standing to bring a derivative action, thus depriving the trial court of
subject-matter jurisdiction; and (4) the trial court abused its discretion in denying
the relators’ motion to stay the State Action in favor of the first-filed Federal
Action.
II. MANDAMUS STANDARD
To be entitled to mandamus relief a relator generally must show that the trial
court abused its discretion and that there is no adequate remedy at law, such as by
appeal. In re Prudential Ins. Co., 148 S.W.3d 124, 135–36 (Tex. 2004) (orig.
proceeding). On mandamus review of factual issues, a trial court will be held to
have abused its discretion only if the party requesting mandamus relief establishes
that the trial court could have reached but one decision (and not the decision it
made). See Johnson v. Fourth Court of Appeals, 700 S.W.2d 916, 917 (Tex.
1985). Mandamus review of issues of law is not deferential. A trial court abuses
its discretion if it clearly fails to analyze the law correctly or apply the law to the
facts. In re Cerberus Capital Mgmt., 164 S.W.3d 379, 382 (Tex. 2005).
III. ANALYSIS
A. Did the trial court abuse its discretion in denying the Helix Parties’
motion to stay the State Action in favor of the Federal Action?
In their second issue, the Helix Parties assert that the trial court abused its
discretion in failing to stay the State Action in favor of the first-filed Federal
Action. When an action is pending in a federal court or in a court of another state,
the trial court in the later-filed case should consider whether that case should be
8
stayed under the doctrine of comity. See In re Old American County Mut. Fire Ins.
Co., No. 03-12-00588-CV, 2012 WL 6699052, at *2 (Tex. App.—Austin Dec. 20,
2012, orig. proceeding) (mem. op.); In re BP Oil Supply Co., 317 S.W.3d 915,
918–19 (Tex. App.—Houston [14th Dist.] 2010, orig. proceeding). When a matter
is first filed in federal court, the general rule is that Texas state courts stay the
later-filed proceeding pending adjudication of the first suit. See In re AutoNation,
Inc., 228 S.W.3d 663, 670 (Tex. 2007) (orig. proceeding); In re Old American
County Mut. Fire Ins. Co., 2012 WL 6699052, at *2. If the later action is stayed, it
remains pending until the judgment in the first-filed action becomes final. See In
re BP Oil Supply Co., 317 S.W.3d at 919.
A resolution of whether the trial court abused its discretion in declining to
stay the State Action demands a close inspection of the two pending actions. See
id. To obtain a stay of the later action, as a general rule, it is necessary that the two
suits involve the same claims, concern the same subject matter, involve the same
issues, and seek the same relief. See id. One test to determine whether the claims
are identical is to ascertain whether the parties could obtain all the relief in the
prior suit that they would be entitled to receive in the subsequent action. See id.
Additional factors include, but are not limited to, (1) which action was filed first;
(2) whether the parties are the same in both actions; and (3) the effect of a
judgment in the later action on any order or judgment entered in the prior action.
Id.
9
The Federal Action was filed first. The two shareholder derivative suits
involve the same defendants and similar claims against these defendants based
upon the 2010 compensation of Helix executives. But, the plaintiff in each action
is different. The Retirement System is the only plaintiff in the Federal Action, and
Lucas is the only plaintiff in the State Action. The Helix Parties assert that this
difference is not important because each plaintiff seeks to assert claims that belong
to Helix by means of a derivative action, and therefore Helix really should be
considered the plaintiff in both cases. We disagree.
In a derivative action, the plaintiff essentially brings two claims: “one
against the directors for failing to sue; the second based upon the right belonging to
the corporation.” In re UnitedHealth Group Inc. Shareholder Derivative Litigation,
754 N.W.2d 544, 550 (Minn. 2008). Though the goal of each derivative action is
to assert claims of Helix against the Individuals, in each action a different alleged
shareholder is making a different argument against the directors. To be able to
assert derivative claims belonging to Helix, the Retirement System must
demonstrate that demand on the Board would have been futile.2 See Connolly v.
Gasmire, 257 S.W.3d 831, 840 (Tex. App.—Dallas 2008, no pet.) (applying
Delaware law). Unlike the Retirement System, Lucas waived the right to assert
that demand on the Board would have been futile by making demand on the Board.
See Scattered Corp. v. Chicago Stock Exchange, Inc., 701 A.2d 70, 74 (Del. 1997),
disapproved on other grounds by, Brehm v. Eisner, 746 A.2d 244, 253 (Del. 2000).
2
As explained below, we conclude that Minnesota courts would follow Delaware law in this
area, and therefore we analyze the demand issues under Delaware law.
10
Thus, in the Federal Action, the main basis for the Helix Parties’ motion to
dismiss is that the Retirement System allegedly failed to plead sufficient facts to
show that demand on the Board by the Retirement System would have been futile.
But, there is no issue in the State Action as to whether a demand on the Board by
Lucas would have been futile. As discussed in more detail below, for Lucas to be
able to assert derivative claims belonging to Helix, Lucas must plead with
particularity facts that create a reasonable doubt that the Board reasonably and in
good faith conducted its investigation of the claims set forth in his demand. See
Scattered Corp., 701 A.2d at 73.
If the district court in the Federal Action dismisses the claims based only on
the Helix Parties’ demand-futility argument, then no issue relating to the State
Action will be determined. Moreover, the district court in the Federal Action is not
in a position to adjudicate whether, in the State Action, Lucas has pleaded with
particularity facts that create a reasonable doubt that the Board conducted its
investigation of the claims set forth in his demand reasonably and in good faith. In
sum, even though each plaintiff seeks to assert claims belonging to Helix, the
plaintiff in the Federal Action is different from the plaintiff in the State Action, and
the issues for the courts to decide are different. The two actions do not involve the
same claims and the same issues.
After a close inspection of the two pending actions under the applicable
legal standard, we conclude that the trial court did not abuse its discretion by
denying the Helix Parties’ motion to stay. See In re Old American County Mut.
Fire Ins. Co., 2012 WL 6699052, at *2; Ashton Grove, L.C. v. Jackson Walker,
11
L.L.P., 366 S.W.3d 790, 794–96 (Tex. App.—Dallas 2012, no pet.). Accordingly,
we overrule the Helix Parties’ second issue.
B. Did the trial court abuse its discretion by denying the Helix Parties’
special exceptions based upon Lucas’s failure to plead
particularized allegations regarding the Board’s alleged wrongful
refusal of his demand?
Under their first issue, the Helix Parties argue that they are entitled to
mandamus relief because Lucas failed to plead particularized allegations showing
that the Board wrongfully refused his demand. Because Helix is a Minnesota
corporation, Minnesota law governs the issue of the sufficiency of Lucas’s
pleadings regarding his demand on the Board. See Tex. Bus. Orgs. Code Ann. §§
21.559, 21.562 (West 2013). Therefore, Rule 23.09 of the Minnesota Rules of
Civil Procedure for District Courts applies in the State Action. See id. This rule,
entitled “Derivative Actions by Shareholders or Members,” provides in pertinent
part, as follows:
In a derivative action brought by one or more shareholders . . . to
enforce a right of a corporation . . . , the corporation . . . having failed
to enforce a right which may properly be asserted by it, the complaint
shall allege that the plaintiff was a shareholder . . . at the time of the
transaction of which the plaintiff complains or that the plaintiff’s
share . . . thereafter devolved on the plaintiff by operation of law. The
complaint shall also allege with particularity the efforts, if any, made
by the plaintiff to obtain the desired action from the directors or
comparable authority and, if necessary, from the shareholders or
members, and the reasons for the plaintiff’s failure to obtain the action
or for not making the effort.
12
Minn. R. Civ. P. 23.09 (West 2013). Research has not revealed, and the parties
have not cited, any Minnesota state court decision addressing what level of
pleading this rule requires of a derivative-action plaintiff regarding demand on the
corporation’s board of directors. Today, this Texas court must decide this
Minnesota issue of first impression.
Shareholder derivative actions are relatively rare in Minnesota, and
Minnesota courts often look to the decisions of Delaware courts for guidance in
this area. See In re Xcel Energy, 222 F.R.D. 603, 606 (D. Minn. 2004). We note
that the pertinent text of the Minnesota rule is substantially similar to the text of
Delaware Chancery Court Rule 23.1(a). Compare Minn. R. Civ. P. 23.09, with
Del. Ct. Ch. R. 23.1(a) (West 2013). We conclude that Minnesota courts would
follow Delaware law in this area, and therefore we analyze these issues under
Delaware law.3 See id.
Under the circumstances of this case, for Lucas’s lawsuit to go forward,
Delaware law requires that Lucas plead with particularity facts showing that the
Board wrongfully refused his demand. See Scattered Corp., 701 A.2d at 73.
Courts determine whether Lucas’s demand was wrongfully refused by reviewing
the Board’s actions under traditional business-judgment rule standards, which call
for the examination of the Board’s disinterest and independence and the good faith
and reasonableness of its investigation. See id. By making a demand, Lucas
tacitly conceded the disinterest and independence of the Board; therefore, in this
3
Both the Helix Parties and Lucas argue that Minnesota courts would follow Delaware law in
this area.
13
context, the only issues to be decided are the good faith and reasonableness of the
Board’s investigation of the claims articulated in Lucas’s demand. See id. Lucas
has the burden to plead particularized facts that create a reasonable doubt whether
the Board conducted its investigation of the claims set forth in his demand
reasonably and in good faith. See id. Though Minnesota law (which we conclude
would follow Delaware law) supplies the substantive standards for the sufficiency
of Lucas’s pleadings, Texas law supplies the procedure to address any
insufficiency in these pleadings. See Connolly, 257 S.W.3d at 839. Under Texas
procedural law, the proper method for addressing the alleged insufficiency of
Lucas’s pleadings regarding his demand is by special exceptions, which the Helix
Parties asserted in the trial court. See id.
In his live petition, Lucas makes the following allegations regarding his
demand:
15. In light of the events described above, on September 28,
2011, [Lucas] issued a demand (the “Demand”) pursuant to Minn. R.
Civ. P. 23.09 on the Board to undertake an independent internal
investigation into [the Individuals’] violations of Minnesota and/or
federal law, and to commence a civil action against each of the
[Individuals] to recover for the benefit of [Helix] the amount of
damages sustained by [Helix] as a result of their breaches of fiduciary
duties. A true and correct copy of the Demand is attached hereto as
Exhibit “A.”
16. On October 7, 2011, [Lucas’s] counsel received a letter
from defendant T. William Porter, III (“Porter”), acknowledging the
receipt of the Demand. It has now been nearly seven months since the
Board received the Demand, however, and in that time the Board has
14
failed to provide any substantive response to the Demand. The
Board’s non-response is a functional refusal of the Demand.
17. Clearly, the Board’s failure to properly respond to the
Demand is improper under Minnesota law, and demonstrates the
Board’s lack of diligence and good faith. The Board has ignored the
Demand, and accordingly, this derivative action should be allowed to
proceed.4
In his petition, Lucas alleges that he made demand on the Board on
September 28, 2011, and he includes this demand in his petition. Lucas alleges
that nine days later, his counsel received a letter from defendant Porter
acknowledging receipt of the demand. Beyond this allegation, Lucas does not
plead particular facts regarding the Board’s response to his demand. Lucas does
make conclusory statements that (1) in the seven months since the Board received
his demand, the Board has failed to provide any substantive response to the
demand; (2) the Board’s non-response is a functional refusal of the demand; (3)
clearly, the Board’s failure to properly respond is improper under Minnesota law,
and demonstrates the Board’s lack of diligence and good faith; and (4) the Board
has ignored the demand, and therefore Lucas’s derivative action should be allowed
to proceed. But, such conclusory statements do not satisfy Lucas’s burden to plead
particular facts. See Scattered Corp., 701 A.2d at 75. We conclude that, in his
petition, Lucas has not satisfied his burden to plead particularized facts that create
a reasonable doubt whether the Board conducted its investigation of the claims set
forth in his demand reasonably and in good faith. See id. at 75–77; Grimes v.
4
Lucas repeats substantially similar allegations regarding his demand in two different parts of
his petition.
15
Donald, 673 A.2d 1207, 1220 (Del. 1996), disapproved on other grounds by
Brehm v. Eisner, 746 A.2d 244, 253 (Del. 2000). Therefore, the trial court abused
its discretion by denying the Helix Parties’ special exceptions challenging Lucas’s
petition in this regard. See In re Brick, 351 S.W.3d 601, 607 (Tex. App.—Dallas
2011, orig. proceeding); In re Denbury Res., Inc., No.05-09-01206-CV, 2009 WL
4263850, at *1–2 (Tex. App.—Dallas Dec. 1, 2009, orig. proceeding) (mem. op.);
Connolly, 257 S.W.3d at 848.
The Helix Parties assert they have no adequate remedy at law. To determine
if a party has an adequate remedy at law, we ask whether the benefits of mandamus
review outweigh the detriments, and if they do, we make a practical and prudential
determination as to whether the remedy at law is adequate. In re Prudential Ins.
Co. of Am., 148 S.W.3d 124, 136 (Tex. 2004) (orig. proceeding). Derivative
actions impinge on the managerial freedom of directors. Grimes, 673 A.2d at
1215. The demand requirement recognizes the importance of the fundamental
precept that directors manage the business and affairs of the corporation. Id. Thus,
the requirement that Lucas plead particularized facts that create a reasonable doubt
whether the Board conducted its investigation of the claims set forth in his demand
reasonably and in good faith is an important one. See Scattered Corp., 701 A.2d at
73–75; Grimes, 673 A.2d at 1215–17. Under Delaware law, a plaintiff in a
derivative suit is not entitled to discovery to assist compliance with the
particularized pleading requirement regarding demand on the board of directors.
See Scattered Corp., 701 A.2d at 77. A plaintiff’s ability to assert derivative claims
must be determined on the basis of the well-pleaded allegations of the plaintiff’s
16
petition. See id. A trial court abuses its discretion if it orders derivative-action
defendants to respond to discovery over their objection that discovery is premature
because the plaintiff has not yet satisfied the heightened pleading requirement
regarding demand on the board of directors. See In re Crown Castle Int’l Corp.,
247 S.W.3d 349, 354–55 (Tex. App.—Houston [14th Dist.] 2008, orig.
proceeding). We conclude that the benefits of mandamus review outweigh the
detriments, and our practical and prudential determination is that the Helix Parties
have no adequate remedy at law.5 See In re Brick, 351 S.W.3d at 607; In re
Denbury Res., Inc., 2009 WL 4263850, at *1–2; In re Crown Castle Int’l Corp.,
247 S.W.3d at 355.
For the foregoing reasons, we sustain the first and third issues to the extent
that the Helix Parties assert the trial court abused its discretion by denying their
special exceptions challenging the sufficiency of the allegations in Lucas’s petition
regarding the Board’s action in response to Lucas’s demand6 and to the extent that
5
Lucas cites Hooks v. Fourth Court of Appeals for the proposition that “[a]bsent extraordinary
circumstances not present here, a denial of a motion to dismiss or a plea in abatement is a ruling
incident to the ordinary trial process which will not be corrected by mandamus, but by the legal
remedy of the ordinary appellate process.” 808 S.W.2d 56, 59 (Tex. 1991). Presuming for the
sake of argument that this statement of law is still valid after the Supreme Court of Texas’s
opinion in In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 136 (Tex. 2004) (orig. proceeding),
we conclude the case is not on point because we are addressing special exceptions rather than a
motion to dismiss or plea in abatement.
6
The Helix Parties also assert that the trial court abused its discretion by denying their motion to
dismiss based upon the deficiencies in Lucas’s pleading, but under Texas procedural law, the
proper remedy for this deficiency is to sustain the Helix Parties’ special exceptions and give
Lucas an opportunity to amend his pleadings before dismissing the case. See In re Brick, 351
S.W.3d at 607–08; In re Denbury Res., Inc., 2009 WL 4263850, at *1–2; Connolly, 257 S.W.3d
17
the Helix Parties assert there is no adequate remedy at law regarding this error. See
In re Brick, 351 S.W.3d at 607; In re Denbury Res., Inc., 2009 WL 4263850, at
*1–2; Scattered Corp., 701 A.2d at 76–77; Grimes, 673 A.2d at 1220.
C. Did the trial court abuse its discretion by denying the Helix Parties’
special exceptions based upon Lucas’s failure to plead he was a Helix
shareholder at the time of the transaction of which he complains?
Under Rule 23.09 of the Minnesota Rules of Civil Procedure for District
Courts, Lucas must allege in his petition that Lucas “was a shareholder . . . at the
time of the transaction of which [Lucas] complains or that [Lucas’s] share . . .
thereafter devolved on [Lucas] by operation of law.” Minn. R. Civ. P. 23.09.
Under their first issue, the Helix Parties also argue that they are entitled to
mandamus relief because Lucas failed to satisfy this pleading requirement.
Lucas asserts that he satisfied this requirement by pleading that he “is a
shareholder of Helix and has been continuously throughout the Relevant Period.”
The “Relevant Period” is a term defined in Lucas’s petition to mean “from 2010 to
the present.” Thus, Lucas has pleaded that he continuously has been a Helix
shareholder from 2010 to the present.7 But, the conduct about which Lucas
complains is not limited to conduct during the “Relevant Period.” In some parts of
at 839. Therefore, the trial court abused its discretion in overruling these special exceptions.
Nonetheless, at this juncture, we cannot conclude the trial court abused its discretion by denying
the Helix Parties’ motion to dismiss. See In re Brick, 351 S.W.3d at 607–08; In re Denbury Res.,
Inc., 2009 WL 4263850, at *1–2;Connolly, 257 S.W.3d at 839.
7
Outside of his pleadings, Lucas has asserted that he has been a shareholder of Helix since 2006.
But these allegations are not part of Lucas’s pleadings.
18
Lucas’s petition, he limits the time frame of the Individuals’ allegedly actionable
conduct to the “Relevant Period,” but in other parts of the petition, the time frame
is not so limited. Notably, the Helix Parties assert that some of the 2010
compensation of which Lucas complains was approved by Helix’s Compensation
Committee in 2009. Consequently, though Lucas has pleaded that he has been a
Helix shareholder since 2010, the derivative claims that he seeks to assert are not
limited to this time frame.
For these reasons, we conclude that Lucas has not alleged that he was a
Helix shareholder at the time of the transactions or conduct of which he complains
or that Lucas’s Helix shares thereafter devolved on him by operation of law.
Accordingly, the trial court abused its discretion by denying the Helix Parties’
special exceptions challenging Lucas’s petition regarding this pleading
requirement.8 See In re Brick, 351 S.W.3d at 607; In re Denbury Res., Inc., 2009
WL 4263850, at *1–2; Connolly, 257 S.W.3d at 848. We also conclude that the
benefits of mandamus review outweigh the detriments, and our practical and
prudential determination is that the Helix Parties have no adequate remedy at law.
8
The Helix Parties also assert that the trial court abused its discretion in denying the their plea to
the jurisdiction because the insufficiency of Lucas’s pleading means that he does not have
standing to bring a derivative action, thus depriving the trial court of subject-matter jurisdiction.
But, as discussed above, the trial court should have sustained the Helix Parties’ special
exceptions and given Lucas an opportunity to amend his pleadings to satisfy these requirements.
See In re Brick, 351 S.W.3d at 607–08; In re Denbury Res., Inc., 2009 WL 4263850, at *1–2;
Connolly, 257 S.W.3d at 839. Thus, at this juncture, the trial court did not err by denying the
Helix Parties’ pleas to the jurisdiction. See In re Brick, 351 S.W.3d at 607–08; In re Denbury
Res., Inc., 2009 WL 4263850, at *1–2; Connolly, 257 S.W.3d at 839.
19
See In re Brick, 351 S.W.3d at 607; In re Denbury Res., Inc., 2009 WL 4263850, at
*1–2; In re Crown Castle Int’l Corp., 247 S.W.3d at 355. Accordingly, we sustain
the Helix Parties’ first and third issues to the extent that they assert the trial court
abused its discretion by denying their special exceptions challenging the
sufficiency of the allegations in Lucas’s petition regarding the share-ownership
pleading requirement and to the extent that the Helix Parties assert there is no
adequate remedy at law regarding this error. See In re Brick, 351 S.W.3d at 607;
In re Denbury Res., Inc., 2009 WL 4263850, at *1–2. Having addressed all of the
arguments briefed by the Helix Parties in their mandamus petition, we overrule the
remainder of their first and third issues.
IV. CONCLUSION
After a close inspection of the two pending actions under the applicable
legal standard, we conclude that the trial court did not abuse its discretion by
denying the Helix Parties’ motion to stay the State Action in favor of the first-filed
Federal Action. The trial court did abuse its discretion, however, by denying the
Helix Parties’ special exceptions challenging Lucas’s failure to satisfy his burden
to plead particularized facts that create a reasonable doubt whether the Board
conducted its investigation of the claims set forth in his demand reasonably and in
good faith. The trial court also abused its discretion by denying the Helix Parties’
special exceptions challenging Lucas’s failure to plead that he was a Helix
shareholder at the time of the transactions or conduct of which he complains or that
Lucas’s Helix shares thereafter devolved on him by operation of law. Finally, we
conclude there is no adequate remedy at law and that the Helix Parties are entitled
20
to mandamus relief regarding these errors. Accordingly, we conditionally grant a
writ of mandamus ordering the respondent (1) to vacate his order of February 25,
2013 to the extent that order denied the Helix Parties’ special exceptions regarding
the two pleading deficiencies discussed above, (2) to grant the Helix Parties’
special exceptions regarding these pleading deficiencies, and (3) to give Lucas an
opportunity to amend his pleadings to cure these deficiencies. We deny the
remainder of the requested mandamus relief. We are confident that the respondent
will take these actions. The writ will issue only if the respondent fails to do so.
/s/ Kem Thompson Frost
Chief Justice
Panel consists of Chief Justice Frost and Justices Brown and Busby. (Brown, J.,
dissenting).
21