Opinion
Case No. 3:11-cv-30018-MAP
08-05-2011
ART BUNDY and DWIGHT M. NANCE, Derivatively on Behalf of Nominal Defendant SMITH & WESSON HOLDING CORPORATION, Plaintiff, v. MICHAEL F. GOLDEN, JOHN A. KELLY, BARRY M. MONHEIT, ROBERT L. SCOTT, JEFFREY D. BUCHANAN, JOHN B. FURMAN, COLTON R. MELBY, MITCHELL A. SALTZ, AND I. MARIE WADECKI, Defendants, and SMITH & WESSON HOLDING CORPORATION, Nominal Defendant1
CROSS-MOTION TO DEFENDANTS' MOTION TO DISMISS THE VERIFIED
SHAREHOLDER COMPLAINT
I. INTRODUCTION
Plaintiffs Art Bundy and Dwight M. Nance ("Plaintiffs") respectfully move the Court to stay the proceeding in the above-captioned action (the "Bundy Action"), including the briefing and determination of any dismissal motions, until the outcome of the pending appeal in the related securities class action entitled In re Smith & Wesson Holding Corp. Sec. Litig., No. 07-cv-30238-MAP ("Securities Class Action"), in the United States Court of Appeals for the First Circuit. As Defendants themselves admit in their Motion to Dismiss the Verified Shareholder Derivative Complaint, there are substantial common issues of fact between the Securities Class Action and the Bundy Action. Accordingly, the interests of judicial efficiency and economy are best served by the Court in staying the Bundy Action, as the decision by the First Circuit will have a substantial impact on the claims asserted in the Bundy Action. For the foregoing reasons, Plaintiffs request that this Court exercise its broad discretion to stay the Bundy Action pending the appeal in the Securities Class Action.
Counsel for Plaintiffs met and conferred with counsel for Defendants on August 5, 2011. Counsel for Defendants did not consent to this motion.
II. BACKGROUND FACTS
This is a shareholder derivative action brought by the Plaintiffs, shareholders of Smith & Wesson Corporation ("S&W" or the "Company"), for the benefit of nominal defendant S&W against current and former officers and directors of the Company seeking to remedy defendants' breaches of fiduciary duties and other violations of law in connection with the issuance of false and misleading statements concerning the Company's earnings and business prospects for fiscal year 2008.
On May 28, 2009 and June 5, 2009, Plaintiff Art Bundy and Plaintiff Dwight M. Nance, respectively, made demands on the Board to commence an action against certain directors and executive officers of S&W. ¶¶ 67-68. On July 6, 2009, counsel for S&W wrote a letter to counsel for Plaintiffs in which S&W's counsel stated that the Company had formed a Special Litigation Committee ("SLC") of the Board to investigate the Demands. ¶ 69.
Unless otherwise noted, all references to "¶__" herein refer to such paragraphs of Plaintiffs' Verified Shareholder Complaint filed January 24, 2011.
On October 15, 2009, Plaintiff Nance filed his complaint in this Court, Case No. 09-cv-30177-MAP. That same day, Plaintiff Bundy also filed his complaint in this court, Case No. 09-cv-30174-MAP. On December 15, 2009, this Court consolidated the two actions under Case No. 09-cv-30174-MAP, and on January 29, 2010, the Plaintiffs filed a consolidated complaint. ¶ 70.
On March 31, 2010, Defendants filed a Motion to Dismiss on the basis that, among other things, the complaints were prematurely filed such that the SLC did not have sufficient time to complete its investigation. Defendants' Motion to Dismiss was opposed by the Plaintiffs. On October 20, 2010, the Court granted Defendants' Motion to Dismiss on the grounds of prematurity; however, the Court held that should the SLC "reject Plaintiffs' demands...Plaintiffs will have the option to file a new action...." ¶71.
From October 2010 to December 2010, counsel for Plaintiffs sent letters to counsel for the SLC seeking information regarding the SLC, including the status of the investigation and when the SLC expected to complete its investigation. ¶¶ 72-75, 84. On December 15, 2010, counsel for the SLC wrote a letter to Plaintiffs' counsel refusing Plaintiffs' Demands. ¶ 85.
On January 24, 2011, Plaintiffs filed their complaint in this Court on the basis that the members of the SLC are not independent and that the SLC's investigation was neither reasonable nor in good faith.
On March 25, 2011, this Court entered an order granting Defendants' Motion for Summary Judgment and denying Plaintiffs' Cross Motion for Partial Summary Judgment in the Securities Class Action. On April 21, 2011, plaintiffs in the Securities Class Action filed a Notice of Appeal to the United States Court of Appeals for the First Circuit of the judgment entered on March 25, 2011.
On July 22, 2011, Defendants filed a Motion to Dismiss the Bundy Action. Notably, in seeking dismissal of the Bundy Action, Defendants concede that the Securities Class Action and the Bundy Action involve substantial common issues of fact. See, e.g., Memo. In Support of Defs. Mot. to Dismiss the Verified Shareholder Complaint at 2, July 22, 2011, ECF 26 ("Plaintiffs' allegations are rendered without basis by this Court's recent Memorandum and Order granting Defendants' Motion for Summary Judgment as to all Defendants in the Securities Class Action filed with this Court. In that action, this Court found that the very same allegations as here were insufficient to sustain causes of action asserted against any of the Defendants"); id. at 17 ("Plaintiffs' Demands are a regurgitation of the claims asserted in the Securities Class"); id. at 29 ("The underlying facts [of the Bundy Action and the Securities Class Action] — which are the focus of the investigation ~ are the same no matter the legal theories or purportedly injured parties.").
III. ARGUMENT
It is well established that the Court has inherent authority to control its docket and the pace of proceedings before it in the interest of justice and judicial economy. See, e.g., Taunton Gardens Co. v. Hills, 557 F.2d 877, 879 (1st Cir. 1977) (a district court has "inherent discretionary power to control its own docket"); City of Bangor v. Citizens Commc'n Co., 532 F.3d 70, 99 (1st Cir. 2008) ("A district court enjoys inherent power to 'control the disposition of the causes on its docket with economy of time and effort for itself, for counsel, and for litigants.'") (citing Landis v. N. Am. Co., 299 U.S. 248, 254 (1936)). The First Circuit has repeatedly affirmed stays when the claims of the parties would be affected or resolved by a separate proceeding. See Lummus Co. v. Commonwealth Oil Refining Co., 280 F.2d 915 (1st Cir. 1960) (issuing a stay because if "all the issues between the parties are...disposed of...this suit can eventually be dismissed"). Courts have also stayed proceedings when an appeal in another case would determine or affect the asserted claims. See, e.g., KK Motors. Inc. v. Brunswick Corp., No. 98-2307 (JRT/RLE), 1999 U.S. Dist. LEXIS 6068 at **6-7 (D. Minn. Feb. 23, 1999) (staying proceedings pending outcome of appeal in another case where ruling could be "determinative of the scope of the issues in this case").
Here, Plaintiffs request that the Court stay the proceedings, including the briefing and determination of Defendants' Motion to Dismiss, until the First Circuit issues its decision on the pending appeal of the Securities Class Action because the appellate decision will have a material impact on the claims asserted in the Bundy Action. The Securities Class Action alleges similar operative facts as those at issue in the Bundy Action. This Court's valuable, finite resources can be conserved by waiting for the First Court's decision in the Securities Class Action appeal. There is a substantial likelihood that the First Court's decision will obviate the need for the Court to review the extensive papers, declarations and so forth in connection with the parties briefing Defendants' Motion to Dismiss. Simply put, requiring the Court to wade through the Defendants' Motion to Dismiss at this time is neither prudent nor efficient.
Moreover, a stay will not prejudice Defendants because they will not be subject to any additional costs or burdens but rather will be saved the potentially substantial costs and burdens of proceeding with the litigation of the Bundy Action. The Court plainly has discretion to stay the proceedings in the Bundy Action, and should do so in the interests of justice and judicial efficiency and economy.
IV. CONCLUSION
For the foregoing reasons, the Court should stay the proceeding in the Bundy Action, including the briefing and determination of any dismissal motions, until the outcome of the pending appeal in the Securities Class Action.
Respectfully submitted,
DOHERTY, WALLACE,
PILLSBURY & MURPHY P.C.
Robert L. Leonard
1414 Main Street
Springfield, MA 01144-1900
Telephone: (413) 733-31 11
Facsimile: (413) 734-3910
Liaison Counsel for Plaintiffs
KESSLER TOPAZ
MELTZER & CHECK, LLP
Eric L. Zagar
Ligaya T. Hernandez
280 King of Prussia Road
Radnor, PA 19087
Telephone: (610) 667-7706
Facsimile: (267) 948-2512
Counsel for Plaintiffs
CERTIFICATE OF SERVICE
I hereby certify that this document filed through the ECF system will be sent electronically to the registered participants as identified on the Notice of Electronic Filing (NEF) and paper copies will be sent to those indicated as non-registered participants, by mail, on August 5,2011.
Robert L. Leonard