Jeanne Calamore v. Juniper Networks Inc

FILED
NOT FOR PUBLICATION FEB 05 2010
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U .S. C O U R T OF APPE ALS
FOR THE NINTH CIRCUIT
JEANNE M. CALAMORE, No. 08-17052
Plaintiff - Appellant, D.C. No. 5:07-cv-01772-JW
v.
MEMORANDUM *
JUNIPER NETWORKS INC; SCOTT
KRIENS; PRADEEP SINDHU; ROBERT
M. CALDERONI; KENNETH
GOLDMAN; WILLIAM R. HEARST, III;
KENNETH LEVY; FRANK
MARSHALL; STRATTON SCLAVOS;
WILLIAM R. STENSRUD,
Defendants - Appellees.
Appeal from the United States District Court
for the Northern District of California
James Ware, District Judge, Presiding
Argued and Submitted October 7, 2009
San Francisco, California
Before: THOMPSON and THOMAS, Circuit Judges, and ALDRICH, ** District
Judge.
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
**
The Honorable Ann Aldrich, Senior United States District Judge for
the Northern District of Ohio, sitting by designation.
Plaintiff-appellant Calamore appeals the district court’s dismissal of her
amended complaint without leave to amend. Calamore alleged Juniper Networks
Inc. issued a false and misleading proxy solicitation to obtain shareholder approval
for a stock option plan (“2006 Plan”) in violation of § 14(a) of the Securities
Exchange Act and Securities and Exchange Commission Rule 14a-9, in relation to
its descriptions of past stock plans. The district court dismissed the complaint,
concluding that Calamore’s claim was derivative, not direct, under Delaware law
and, thus, could not be brought without a pre-suit demand on Juniper’s board of
directors. Dismissal was with prejudice. We have jurisdiction under 28 U.S.C.
§ 1291, and we AFFIRM.
DISCUSSION
I. Nature of Calamore’s § 14(a) Claim
We review de novo the dismissal of a direct claim on the ground that it
should have been asserted derivatively. Sax v. World Wide Press, Inc., 809 F.2d
610, 613 & n.1 (9th Cir. 1987). The characterization of a claim as direct or
derivative is governed by the law of the state of incorporation. Lapidus v. Hecht,
232 F.3d 679, 682 (9th Cir. 2000). Juniper is a Delaware corporation, and thus,
Delaware law applies.
2
Calamore alleges the proxy solicitation “frustrated the free exercise of
Juniper shareholders’ voting rights.” As explained in New York City Employees’
Retirement System v. Jobs, a claim that shareholders were deprived of the right to a
fully informed vote is direct under state law. No. 08-16488, slip op. (9th Cir.
2009) (applying Delaware case law). Thus, Calamore’s claim is direct.
II. Failure to Plead a Type of Relief that Can Be Granted
Although the district court dismissed Calamore’s claim as derivative, we
may affirm the district court’s holding on any ground supported by the record. Atel
Fin. Corp. v. Quaker Coal Co., 321 F.3d 924, 926 (9th Cir. 2003).
Calamore seeks to void the 2006 shareholder vote, cancel the 2006 Plan and
all awards issued thereunder, and prohibit payment of replacement consideration
for cancelled awards.
Direct proxy disclosure claims, if made promptly, may support equitable
relief such as an order to amend a proxy solicitation and require a re-vote. See In
re J.P. Morgan Chase & Co. S’holder Litig., 906 A.2d 808, 825 (Del. Ch. 2005),
aff’d, 906 A.2d 766 (Del. 2006). However, when “the ‘eggs’ have been
irretrievably ‘scrambled[,]’ . . . there is no possibility of effective equitable relief.”
Id. (referring to a claim’s status one year after a corporate merger). Furthermore,
direct disclosure claims may be dismissed where a shareholder seeks a recovery
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owed to the corporation. J.P. Morgan, 906 A.2d 766, 772-74 (Del. 2006)
(affirming dismissal for failure to state a claim because plaintiffs were “conflating”
their direct claim with relief “flowing from the corporation’s separate and distinct
underlying derivative claim for waste”).
Calamore failed to request a type of relief that can be granted. The only
requested relief that logically and directly addresses her alleged harm is voiding the
vote. Calamore, however, did not file this action until nearly a year after the
complained-of vote, even though, just four days after the vote, Juniper announced
that its stock option practices were under investigation.1 Calamore’s delay allowed
the “eggs” to be “irretrievably scrambled,” especially considering that, by the time
of filing, Juniper had issued millions of options to thousands of employees under
the Plan. Furthermore, even if other remedies “flow naturally” from the avoidance
of the vote, these remedies are unavailable because they impermissibly “conflate”
Calamore’s direct claim with a derivative claim. Calamore requests no remedy that
the court can provide, and thus her claim must be dismissed.
III. Leave to Amend
1
The vote occurred on May 18, 2006. On May 22, Juniper announced the
U.S. Attorney for the Eastern District of New York sought information concerning
Juniper’s granting of stock options. On March 28, 2007, Calamore filed her initial
complaint.
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We review a denial of leave to amend for abuse of discretion. Abagninin v.
AMVAC Chem. Corp., 545 F.3d 733, 737 (9th Cir. 2008). Although district courts
should “freely give leave [to amend] when justice so requires,” where amendment
is futile, leave may be denied. Fed. R. Civ. P. 15(a)(2); Zucco Partners, LLC v.
Digimarc Corp., 552 F.3d 981, 1007 (9th Cir. 2009).
In seeking leave to amend her complaint, Calamore states that she intends to
maintain her action as a direct action, and would revise her complaint to request an
appropriate remedy. Calamore suggests a new vote with a corrected proxy
statement to adopt or confirm the adoption of the 2006 Plan.
A direct proxy disclosure claim cannot be stated where the relief sought is
unlikely to have any effect. In In re Tyson Foods, Inc., the court considered
whether shareholder plaintiffs could seek an order to void a shareholder election of
directors. 919 A.2d 563, 602 & n.113 (Del. Ch. 2007). The court stated that such
equitable relief would be inappropriate because it was highly unlikely that a new
election of board members would have a different result. Id. at 602 n.113. The
board had survived two subsequent elections without allegations of impropriety, so
overturning the elections would have “no real effect, as it is beyond this Court’s
power to insist that new directors travel backwards in time a number of years to
take up their posts.” Id.5
In the present case, Calamore also failed to show that a corrected proxy
solicitation and new vote would likely have any effect on the 2006 Plan. A
corrected proxy solicitation would have no change in language regarding the 2006
Plan. At best, a corrected solicitation would explain that backdating occurred
under prior plans. The backdating, however, is already public knowledge and the
2006 Plan has survived three annual shareholder meetings since its adoption.
Because Calamore’s suggested relief is unlikely to produce a different result,
we affirm the district court’s denial of leave to amend.
AFFIRMED.
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