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Holland v. New Jersey Resources Corporation

United States District Court, Third Circuit

September 5, 2013

Justin HOLLAND, Plaintiff,
v.
NEW JERSEY RESOURCES CORPORATION, et al., Defendants.

OPINION

ANNE E. THOMPSON, District Judge.

This matter has come before the Court upon the motion of New Jersey Resources Corporation ("NJR") and its Board of Directors[1] (the "Board") (collectively, "Defendants") to dismiss the above-captioned matter pursuant to Federal Rule of Civil Procedure 12(b)(1). (Doc. No. 41). Plaintiff Justin Holland ("Plaintiff") has preliminarily opposed and filed a cross-motion to stay the litigation. (Doc. No. 44). The Court has decided the motions based upon the written submissions of the parties and without oral argument pursuant to Federal Rule of Civil Procedure 78(b). For the reasons included herein, the Court will grant Defendants' motion to dismiss and deny Plaintiff's cross-motion to stay the litigation.

BACKGROUND[2]

As this Opinion is issued solely for the benefit of the parties, the factual background of this case is only briefly summarized here.

In December 2012, Plaintiff, an NJR shareholder, filed and subsequently amended a putative class action asserting claims that Defendants had breached their fiduciary duty and violated certain provisions of the Securities Exchange Act of 1934. Specifically, Plaintiff alleged that NJR's 2013 Proxy Statement on Schedule 14A (the "2013 Proxy Statement"), to be presented at the 2013 Annual Meeting of NJR shareholders (the "2013 Annual Meeting"), contained materially false and misleading statements with respect to certain disclosures concerning § 162(m) of the Internal Revenue Code, and the tax deductibility of executive compensation in excess of $1 million. (Doc. No. 6, Amd. Compl., ¶¶ 7, 9). Although the 2013 Proxy Statement implied that NJR could take a tax deduction for certain executive compensation in excess of $1 million, such deduction was precluded by Defendants' failure to secure reapproval of a 2007 Compensation Plan, a prerequisite to deductibility. (Doc. No. 6, Amd. Compl., ¶¶ 4-7).

In Count I of the Amended Complaint, Plaintiff asserted that the Individual Defendants had breached their fiduciary duty to be candid with NJR's shareholders by filing the materially false and misleading 2013 Proxy Statement. In Count II, Plaintiff asserted that the 2013 Proxy Statement contained false and misleading statements in violation of the Securities Exchange Act of 1934 and Rule 14a-9 promulgated thereunder, and that such statements would deprive Plaintiff of his entitlement to cast a fully informed vote if left uncorrected. Finally, with respect to relief, Plaintiff demanded that the Court (1) declare the action to be a class action, certify Plaintiff as Class representative, and certify Plaintiff's counsel as Class counsel; (2) enjoin, preliminarily and permanently, the 2013 Annual Meeting until Defendants either (a) amended the 2013 Proxy Statement to remedy the alleged material misrepresentations and omissions therein or (b) sought shareholder re-approval of the 2007 Compensation Plan at the 2013 Annual Meeting; (3) award Plaintiff the costs of the action, including a reasonable allowance for the fees and expenses of Plaintiff's attorneys and experts; and (4) grant Plaintiff and the other members of the Class such further relief as the Court deemed just and proper. (Doc. No. 6, Amd. Compl.).

Concurrent with the filing of the Amended Complaint, Plaintiff filed a motion to preliminarily enjoin the 2013 Annual Meeting until Defendants either cured the alleged omissions and false and misleading statements in the 2013 Proxy Statement, or added a proposal to the Meeting agenda regarding re-approval of the 2007 Compensation Plan. (Doc. No. 7, ¶ 9).

In January 2013, NJR responded to Plaintiff's Amended Complaint and preliminary injunction motion by preparing a Supplement to the 2013 Proxy Statement (the "Supplemental Proxy Statement"), which explained the Board's intention to seek shareholder re-approval of the 2007 Compensation Plan at the 2013 Annual Meeting. (Doc. No. 16, Att. 2, Marino Cert. in support of Motion to Enforce Settlement, ¶¶ 5-6). Plaintiff's counsel reviewed and approved the Supplemental Proxy Statement, and withdrew Plaintiff's preliminary injunction motion. (Doc. No. 19, Att. 6, Ex. 5, 2, 1/9/13, 11:31 p.m. Holleman email to Marino; Doc. Nos. 12, 13, Letters from Plaintiff's Counsel). Thereafter, the 2007 Compensation Plan was in fact approved by the shareholders at the 2013 Annual Meeting, curing the alleged defect in the 2013 Proxy Statement and giving NJR the option of taking a tax deduction for executive incentive compensation in excess of $1 million. (Doc. No. 42, Att. 2, Marino Cert. in support of Motion to Dismiss, Ex. F). Afterward, Defendants moved to enforce a purported settlement, (Doc. No. 16), which motion was subsequently denied, (Doc. Nos. 38, 39).

On or about July 11, 2013, Defendants filed a motion to dismiss on grounds that the case or controversy had been rendered moot by Defendants' actions, and that, as such, the Court now lacks subject matter jurisdiction over the remaining matter pursuant to Federal Rule of Civil Procedure 12(b)(1). (Doc. No. 41). Plaintiff requested, (Doc. No. 42), and was granted, (Doc. No. 43), an extension of time in which to file a response, moving the deadline for his opposition papers to August 5, 2013.

On August 2, one business day prior to the August 5 deadline, Plaintiff, in conformity with New Jersey Statute 14A:3-6.3, filed a demand letter with the Board on behalf of NJR ("the Demand"), demanding that the Board investigate and remedy breaches of fiduciary duty with respect to NJR and in connection with the facts and circumstances alleged in the Amended Complaint. (Doc. No. 44, Att. 2, Korsinsky Cert., ¶ 4 and Ex. A). The Demand also contains Plaintiff's insistence that the Board adopt and implement corporate governance reforms to prevent the recurrence of the alleged misconduct and harm. Pursuant to New Jersey law, the Board has 90 days in which to respond before Plaintiff may file a derivative action in this Court. N.J.S. 14A:3-6.3.

On August 5, 2013, Plaintiff filed a "preliminary" opposition to Defendants' motion and a cross-motion to stay the litigation until such time as the Demand is fully resolved. (Doc. No. 44). In the event the Court grants the stay, Plaintiff has additionally requested 20 days from the time the stay is lifted either to seek leave to amend Plaintiff's Amended Complaint to add derivative claims on behalf of NJR, or to further respond to Defendants' motion to dismiss. (Doc. No. 44). Defendants have opposed the cross-motion. (Doc. No. 45).

DISCUSSION

In considering the pending motions, the Court will first address Defendants' contention that the present matter is moot, before turning to the question of ...


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