Burns v. Harris et al

Motion to Dismiss for Failure to State a Claim

W.D. Tex.February 27, 2017

IN THE UNITED STATES DISTRICT COURT WESTERN DISTRICT OF TEXAS AUSTIN DIVISION JOSEPH BURNS, Individually and on Behalf of All Others Similarly Situated, Plaintiff, v. JOHN R. HARRIS, et al., Defendants. Civil Action No. 1:16-cv-01073-LY Hon. Lee Yaekel ORAL ARGUMENT REQUESTED DEFENDANTS’ ALEX MERUELO LIVING TRUST, MERUELO INVESTMENT PARTNERS LLC, AND ALEX MERUELO MOTION TO DISMISS THE AMENDED COMPLAINT PURSUANT TO RULE 12(b)(6) Edward D. Altabet, Esq. (pro hac vice pend.) GERARD FOX LAW P.C. 12 East 49th Street, 26th Floor New York, New York 10017 Stacy Allen Kimberly Gdula JACKSON WALKER LLP 100 Congress Avenue Suite 1100 Austin, Texas 78701 Case 1:16-cv-01073-LY Document 42 Filed 02/27/17 Page 1 of 28 i TABLE OF CONTENTS PRELIMINARY STATEMENT .................................................................................................... 1 BACKGROUND ............................................................................................................................ 1 A. A Brief History of Sizmek’s Going Private Transaction .................................................... 1 B. The 2016 Amendments to Delaware’s Appraisal Statute ................................................... 4 ALLEGATIONS IN THE AMENDED COMPLAINT ................................................................. 6 ARGUMENT .................................................................................................................................. 7 I. FEDERAL RULES OF CIVIL PROCEDURE 12(b)(6) and 8(a)(2) ................................. 8 II. FED. R. CIV. P. 9(b) AND THE PSLRA ........................................................................... 9 III. PLAINTIFF FAILS TO STATE A CLAIM AGAINST THE MERUELO PARTIES UNDER SECTION 14(a) AND RULE 14d-9 .................................................................... 9 A. None of the Meruelo Parties’ Statements Constitute Proxy “Solicitations” ........... 9 1. Rule 14a-1(l)(2)(iv)(A) Specifically Exempts Security Holder Communications Like Those Made Here ....................................................... 11 IV. PLAINTIFF CANNOT PLEAD A SECTION 14(e) CLAIM AGAINST THE MERUELO PARTIES ...................................................................................................... 12 A. The Meruelo Parties Have No Duty to Disclose Anything and None of Their Statements Were Misleading .................................................................. 13 B. Plaintiff Does Not – and Cannot – Plead A “Strong Inference” of Scienter ........ 16 C. Plaintiff Fails to Plead Reliance and Loss Causation ........................................... 19 V. A SECOND AMENDMENT TO THE COMPLAINT WOULD BE FUTILE ............... 20 CONCLUSION ............................................................................................................................. 20 Case 1:16-cv-01073-LY Document 42 Filed 02/27/17 Page 2 of 28 ii TABLE OF AUTHORITIES Cases Ashcroft v. Iqbal 556 U.S. 662 (2009) ........................................................................................................ 8, 16, 20 Bell Atlantic Corp. v. Twombly 550 U.S. 544 (2007) .................................................................................................................... 8 Braun v. Eagle Rock Energy Partners, L.P. 2016 WL 7686899 (S.D. Tex. Oct. 21, 2016) .......................................................................... 20 Brody v. Transitional Hosp. Corp. 280 F.3d 997 (9th Cir. 2002) .................................................................................................... 15 Chiarella v. U.S. 445 U.S. 222 (1980) ............................................................................................................ 14, 16 Dura Pharm., Inc. v. Broudo 544 U.S. 336 (2005) .................................................................................................................. 13 Emergent Capital Inv. Mgmt., LLC v. Stonepath Grp. Inc. 343 F.3d 189 (2d Cir. 2003) ..................................................................................................... 19 Ferro v. Blankenship 1995 WL 18236650 (W.D. Tex. Mar. 17, 1995) ...................................................................... 10 Flaherty & Crumrine Preferred Income Fund, Inc. v. TXU Corp. 565 F.3d 200 (5th Cir. 2009) ............................................................................................. passim Gearreald v. Just Care, Inc. 2012 WL 1569818 (Del. Ch. Nov. 1, 2013) ............................................................................. 20 Gorman v. Coogan 2004 WL 60271 (D. Me. Jan. 13, 2004) ................................................................................... 10 Huff Fund Inv. P’ship v. CKx, Inc. 2013 WL 5878807 (Del. Ch. Apr. 30, 2012) ............................................................................ 20 In re Appraisal of Transkaryotic Therapies, Inc. 2007 WL 1378345 (Del. Ch. May 2, 2007) ................................................................................ 4 In re CDnow, Inc. Sec. Litig. 138 F.Supp. 2d 624 (E.D. Pa. 2001) ......................................................................................... 15 In re Digital Island Sec. Litig. 223 F. Supp. 2d 546 (D. Del. 2002), aff’d, 357 F.3d 322 (3d Cir. 2004) ........................... 13, 15 Case 1:16-cv-01073-LY Document 42 Filed 02/27/17 Page 3 of 28 iii In re Enron Corp. Sec., Deriv. & Erisa Litig. 610 F.Supp.2d 600 (S.D. Tex. 2009) .................................................................................. 13, 14 In re NVIDIA Corp. Sec. Litig. 2011 WL 4831192 (N.D. Cal. Oct. 12, 2011), aff’d, 768 F.3d 1046, 1046 (9th Cir. 2014) ..... 18 In re Time Warner Inc. Sec. Litig. 9 F.3d 259 (2d. Cir. 1993) ........................................................................................................ 15 In re XenoPort, Inc. Sec. Litig. 2011 WL 6153134 (N.D. Cal. Dec. 12, 2011) .......................................................................... 18 Jett v. Sunderman 840 F.2d 1487 (9th Cir. 1988) .................................................................................................. 14 Lentell v. Merrill Lynch & Co., Inc. 396 F.3d 161 (2d Cir. 2005) ..................................................................................................... 19 Lobato v. Health Concepts IV, Inc. 606 A.2d 1343 (Del. Ch. 1991) ................................................................................................ 10 Lormand v. U.S. Unwired, Inc. 565 F.3d 228 (5th Cir. 2009) .................................................................................................... 13 Owens v. Jastro 789 F.3d 529 (5th Cir. 2015) .......................................................................................... 9, 13, 17 Premium of Am., LLC v. Save POA, LLC 2012 WL 4480693 (D. Md. Sept. 27, 2012) ....................................................................... 10, 11 R2 Invs. LDC v. Phillips 401 F.3d 638 (5th Cir. 2005) .............................................................................................. 15, 17 Smallwood v. Pearl Brewing Co. 489 F.2d 579 (5th Cir. 1974) .................................................................................................... 11 Southmark Prime Plus, L.P. v. Falzone 776 F.Supp. 888 (D. Del. 1991) ................................................................................................ 10 Suez Equity Inv’rs, L.P. v. Toronto–Dominion Bank 250 F.3d 87 (2d Cir. 2001) ....................................................................................................... 19 Tellabs, Inc. v. Makor Issuers & Rights, Ltd. 551 U.S. 308 (2007) ............................................................................................................ 17, 18 United Food and Commercial Workers Union, v. Chesapeake Energy Corp. 2013 WL 1336123 (W.D. Ok. Mar. 29, 2013) ......................................................................... 15 Case 1:16-cv-01073-LY Document 42 Filed 02/27/17 Page 4 of 28 iv Varjabedian v. Emulex Corp. 152 F.Supp.3d 1226 (C.D. Cal. 2016) ...................................................................................... 18 Va. Bankshares, Inc. v. Sandberg 501 U.S. 1083 (1991) ................................................................................................................ 10 Zucco Partners, LLC v. Digimarc Corp. 552 F.3d 981 (9th Cir. 2009) .................................................................................................... 18 Statutes 15 U.S.C. § 78n(a)(1) ...................................................................................................................... 9 15 U.S.C. § 78n(e) ........................................................................................................................ 12 15 U.S.C. § 78u-4(b)(1)(B) ............................................................................................................. 9 15 U.S.C. § 78u–4(b)(2) ............................................................................................................... 16 Delaware General Corporations Law § 251(h) ................................................................. 2, 4, 7, 11 Delaware General Corporations Law § 262(a) ............................................................................... 4 Delaware General Corporations Law § 262(d)(2) .................................................................... 4, 16 Delaware General Corporations Law § 262(e) ............................................................................... 4 Delaware General Corporations Law § 262(g) ............................................................................... 5 Private Securities Litigation Reform Act of 1995 ................................................................ 6, 9, 16 Section 14(a) of the Securities Exchange Act of 1934 .......................................................... passim Section 14(e) of the Securities Exchange Act of 1934 .......................................................... passim Rules Federal Rule of Civil Procedure 9(b) .............................................................................................. 9 Federal Rule of Civil Procedure 12(b)(6) ....................................................................................... 1 Regulations 17 C.F.R. § 240.14a-1(1)(2)(iv)(A) .............................................................................................. 12 17 C.F.R. § 240.14a-1(g) .............................................................................................................. 10 17 C.F.R. § 240.14a-1(l)(1)(i)-(iii) ............................................................................................... 11 Case 1:16-cv-01073-LY Document 42 Filed 02/27/17 Page 5 of 28 v 17 C.F.R. § 240.14a-9 ..................................................................................................... 1, 9, 11, 12 Other Authorities Delaware General Assembly House Bill No. 371 .......................................................................... 5 James D. Abrams and Erica L. Cook, Delaware State Bar Association Releases Proposed Amendments to DGCL Governing Appraisal Rights, (April 21, 2016) http://www.americanbar.org/publications/litigation-committees/expert- witnesses/practice/2016/de-state-bar-association-releases-proposed-amendents-dgcl- governing-appraisal-rights.html .................................................................................................. 5 Case 1:16-cv-01073-LY Document 42 Filed 02/27/17 Page 6 of 28 1 PRELIMINARY STATEMENT Plaintiff Joseph Burns seeks to use the federal securities laws to conduct appraisal arbitrage. He seeks to do indirectly in federal court what he can no longer do directly in Delaware’s Chancery Court. Effective August 2016, Delaware amended its corporate appraisal statute to bar strike suits by de minimis shareholders of public companies who would sue, and then settle for a nuisance fee, in connection with merger transactions. Now, in order for an appraisal petition concerning publicly traded shares to be adjudicated by the Chancery Court, a dissenting shareholder must not only meet the stringent statutory standing requirements under Delaware law, but must also demonstrate that the appraisal petition implicates either a substantial ownership interest or a significant pecuniary interest by the holder. The federal securities laws do not exist to facilitate strike suits for appraisal arbitrage. The securities laws exist to protect investors and shareholders like the Alex Meruelo Living Trust, Meruelo Investment Partners LLC, and Alex Meruelo (collectively, the “Meruelo Parties”). Because the Amended Complaint fails to state a claim against the Meruelo Parties for alleged violations of Section 14(a) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) and Securities and Exchange Commission (“SEC”) Rule 14a-9, they hereby move under Fed. R. Civ. P. 12(b)(6) to dismiss the single count against them. BACKGROUND A. A Brief History of Sizmek’s Going Private Transaction This suit arises out of Sizmek Inc.’s (the “Company” or “Sizmek”) going private transaction. Just over three years ago, on February 4, 2014, Sizmek was “spun out” from a company called Digital Generation, Inc. when Digital Generation merged with another company. (Request for Judicial Notice (“RJN”) Ex. B. at 11). On Friday, February 7, 2014, Sizmek’s Case 1:16-cv-01073-LY Document 42 Filed 02/27/17 Page 7 of 28 2 shares began trading on the NASDAQ Global Select Market. (Id.). The closing price on the first reported trading day – Monday February 10, 2014 – was $10.37. (RJN Ex. D). On August 2, 2016 – the day before Sizmek announced the merger at issue in this case – Sizmek’s share price closed at $2.66, representing a 74.3% drop from when the stock first started trading roughly 30 months before in February 2014. (RJN Ex. D). On August 3, 2016, Sizmek announced that it had entered into an Agreement and Plan of Merger (the “Merger Agreement”) with two affiliates of private equity firm Vector Capital: Solomon Holding, LLC and Solomon Merger Subsidiary, Inc. (collectively, “Vector” or the “Acquirer”). (See RJN Ex. B at 21). The Merger Agreement contemplated a so-called “two-step merger” pursuant to Section 251(h) of the Delaware General Corporations Law (“DGCL”). (RJN Ex. B at 1). In the first step, Vector would initiate a tender offer for outstanding shares at $3.90 per share (the “Tender Offer Price”). (Id.). In the second step, assuming Vector was able to acquire a majority of the shares in the tender offer, the merger would be governed by and effectuated pursuant to DGCL § 251(h) “without a vote of the stock holders of the Company, and subject to the terms and conditions contained in the Merger Agreement.” (Id.). Thus, in the event that Vector acquired a majority of outstanding shares in the tender offer, shareholders that had neither tendered nor perfected their state law appraisal rights would have their shares “cancelled and converted into the right to receive an amount in cash equal to the Offer Price” of $3.90 per share. (Id. at 1-2). The Tender Offer Price represented a significant premium over where the stock had been trading. (RJN Ex. B at 23). The Tender Offer Price represented a 41.8% premium compared with the August 1, 2016 closing price. (Id.). And the $3.90/share represented a 65.4% premium Case 1:16-cv-01073-LY Document 42 Filed 02/27/17 Page 8 of 28 3 and a 54.3% premium over the “trailing 30-trading day” and “trailing 90-trading day volume weighted price as of August 1, 2016,” respectively. (Id.). As detailed in Sizmek’s Schedule 14D-9, Sizmek and Vector engaged in months of good faith, arm’s-length negotiations over the purchase price. (RJN Ex. B at 12-21). Sizmek engaged JP Morgan as its financial advisor and, in April 2016, JP Morgan contacted “26 strategic companies and ten financial sponsors (including Vector) regarding their interest in receiving non-public information regarding Sizmek” in connection with a possible acquisition. (Id. at 15). Only six parties requested information, and only four signed confidentiality agreements. (Id.). “Of the four, only three attended a management presentation, including Vector. All of the other parties expressed no interest, and none of these parties expressed any in-bound interest after the Company announced the Merger Agreement with Vector on August 3, 2016.” (Id.). As of August 3, 2016, the Meruelo Parties owned roughly four million shares of Sizmek. (RJN Ex. A). On August 11, 2016, the Meruelo Parties filed a pre-commencement Schedule 14D-9, which attached and incorporated a press release expressing their opposition to the tender offer. (Id.). Item 4(a) of the pre-commencement 14D-9 – titled “Recommendation of the Filing Persons” – stated that: The Filing Persons recommend that stockholders of the Company (i) not tender their Shares in the Offer and (ii) if the Offer is successful, seek appraisal of their shares pursuant to Section 262 of the DGCL. (Id.). Item 4(b) of their 14D-9 – titled “Reasons for the Recommendation” – explained that: “The Filing Persons believe the anticipated $3.90 Offer Price is grossly inadequate and significantly undervalues the Shares.” (Id.). Item 4(c) – titled “Intent to Tender” – stated that: “The Filing Persons do not intend to tender any of their Shares in the Offer.” (Id.). Case 1:16-cv-01073-LY Document 42 Filed 02/27/17 Page 9 of 28 4 Eighteen days later, on August 29, 2016, Sizmek filed its Schedule 14D-9 and Vector filed Schedule TO commencing the tender offer. (RJN Ex. B at 1). The tender offer ended roughly a month later, on September 26, 2016, at midnight, New York City time. (RJN Ex. C at 2). On September 27, 2016, the Company filed an 8-K stating that “17,166,475 Shares” had been “validly tendered and not withdrawn pursuant to the [tender] Offer” and that the amount of shares tendered constituted “a majority of the outstanding shares.” (Id.). The Company further stated that “[f]ollowing consummation of the [tender] Offer, all conditions to the Merger set forth in the Merger Agreement were satisfied, and on September 27, 2016, [Vector] completed its acquisition of the Company by consummating the Merger without a meeting of the stockholders of the Company in accordance with Section 251(h) of” the DGCL. (Id.). B. The 2016 Amendments to Delaware’s Appraisal Statute Under Delaware’s corporate appraisal statute, a minority shareholder who dissents with respect to a merger or acquisition governed by DGCL § 251(h) may seek an appraisal of their shares if the shareholder: (i) “continuously holds such shares through the effective date of the merger or consolidation”; (ii) “neither voted in favor of the merger or consolidation nor consented thereto in writing pursuant to § 228”; (iii) properly perfects his appraisal rights under DGCL § 262(d)(2), within the time provided for therein, by making a “demand in writing from the surviving or resulting corporation [for] the appraisal of such holder's shares”; and (iv) duly files an appraisal petition with the Chancery Court within 120 days of the date of the merger. See DGCL §§ 262(a), (d)(2), and (e). Prior to the 2016 amendments to the appraisal statute, the above four conditions were the only requirements for pursuing an appraisal petition. Following a 2007 decision by the Chancery Court, see In re Appraisal of Transkaryotic Therapies, Inc., 2007 WL 1378345 (Del. Ch. May 2, 2007), Delaware experienced a spike in Case 1:16-cv-01073-LY Document 42 Filed 02/27/17 Page 10 of 28 5 appraisal strike suits. In response to these strike suits, on March 16, 2016, the Corporate Council of the Corporation Law Section of the Delaware State Bar Association promulgated proposed legislation that would create de minimis exclusions that effectively precluded inconsequential minority shareholders of public companies from proceeding with an appraisal suit. Delaware enacted the proposed legislation, which became effective August 1, 2016. Under the amendment, the Chancery Court is now required to dismiss a perfected appraisal petition “unless: (1) the total number of shares entitled to appraisal exceeds 1% of the outstanding shares of the class or series eligible for appraisal; or (2) the value of the consideration provided in the merger or consolidation for such total of shares exceeds $1 million.” See DGCL § 262(g). As the Delaware House of Representatives explained in the synopsis to the bill: “The amendment to Section 262(g) limits the availability of a judicial determination and award of fair value where the corporation’s shares had been traded on a national securities exchange. In that circumstance appraisal rights are essentially precluded unless the dispute with regard to valuation is substantial and involves little risk that the petition for appraisal will be used to achieve a settlement because of the nuisance value of discovery and other burdens of litigation.”1 In other words, “[t]he rationale underlying the de minimis limitation is to preclude shareholders that have minimal holdings from demanding appraisal where the respondent may be willing to settle simply to avoid the costs associated with litigation, including discovery, retaining valuation experts and other burdens.”2 Thus, the 2016 appraisal statute amendments reflect the same 1 See http://media.dsba.org/sections/Corporation/PDFs/HB%20371.pdf – Synopsis, at pp. 18, § 10, last visited Feb. 19, 2017. 2 See http://www.americanbar.org/publications/litigation-committees/expert- witnesses/practice/2016/de-state-bar-association-releases-proposed-amendents-dgcl-governing- appraisal-rights.html, last visited Feb. 19, 2017. Case 1:16-cv-01073-LY Document 42 Filed 02/27/17 Page 11 of 28 6 concern that informed the passage of the Private Securities Litigation Reform Act of 1995 (the “PSLRA”): curtailing frivolous strike suits. This suit is nothing but an appraisal strike suit dressed up as a securities law violation. At the heart of Plaintiff’s complaint is the erroneous idea that a legislative change by Delaware curtailing his appraisal rights somehow gives rise to a duty of disclosure by the Meruelo Parties under the federal securities laws. The Meruelo Parties, minority shareholders, have no duty whatsoever to disclose their present intentions – as they existed on August 11, 2016, prior to the commencement of the tender offer – about whether, when, and how they might perfect and pursue their state law appraisal rights in the event that Vector acquired a majority of the outstanding shares in the tender offer. ALLEGATIONS IN THE AMENDED COMPLAINT The Amended Complaint alleges that Alex Meruelo beneficially holds, on behalf of the Meruelo Living Trust and Meruelo Investment Partners LLC, 13.8% of the outstanding shares of Sizmek. (AC ¶ 36). According to the Amended Complaint, “Meruelo violated” the securities laws “by causing a materially incomplete and misleading Recommendation Statement (the “Meruelo Recommendation Statement”), to be filed with the SEC.” (AC ¶ 2). The Amended Complaint alleges that the statements in the Meruelo Parties Schedule 14D-9 on August 11, 2016 – recommending that “stockholders of the Company (i) not tender their Shares in the Offer and (ii) if the Offer is successful, seek appraisal of their Shares pursuant to Section 262 of the DGCL” – is misleading because “Meruelo has not stated whether he intends to seek appraisal himself.” (AC ¶ 36). According to the Amended Complaint, “[t]his is critical to ensure Meruelo’s recommendation is not materially false or misleading.” (Id.). If Meruelo “files for appraisal,” then de minimis shareholders will know they can piggy-back on Meruelo’s appraisal Case 1:16-cv-01073-LY Document 42 Filed 02/27/17 Page 12 of 28 7 suit. (Id.). But if “Meruelo is uncertain of whether he intends to seek appraisal” or does not intend to seek appraisal, then his present intentions must be disclosed so that other “stockholders … can determine whether to seek appraisal for themselves.” (Id.). The barebones and conclusory pleading consists of nothing more than “unadorned, the- defendant-unlawfully-harmed-me accusations.” Plaintiff has no right under federal or Delaware law to invade the deliberative investment process of another stockholder. And the Meruelo Parties have no obligation to disclose their thinking about whether or if they will perfect and ultimately pursue their appraisal rights. For the reasons set forth below, the Meruelo Parties respectfully request that the Court dismiss the Amended Complaint with prejudice. ARGUMENT The Amended Complaint not only fails to state a claim against the Meruelo Parties, it labors under a confusion about the securities laws. Section 14(a) of the Exchange Act – which Plaintiff has pled – governs proxy solicitations. But there were no proxy “solicitations” made here. The transaction at issue here was a successful, third-party, two-step merger under DGCL § 251(h). No proxy solicitations were necessary to effectuate the merger because no shareholder vote was required under DGCL §251(h) to consummate the merger. Under the terms of the Merger Agreement, if Vector, the tender offeror, acquired a simple majority of all outstanding shares in the tender offer (the first step), then – according to Delaware law – the second step was a fait accompli because the tender offeror would, as the majority shareholder, have the lawful power to vote its own shares at any shareholder meeting in dispositive support of the merger. Thus, the transaction at issue here is not governed by the proxy solicitation rules, but by Section 14(e) of the Exchange Act and Regulations 14D and 14E promulgated thereunder governing tender offers. The shareholders here did not elect or nominate proxies to vote their Case 1:16-cv-01073-LY Document 42 Filed 02/27/17 Page 13 of 28 8 shares at a shareholders’ meeting. They either tendered or refused to tender their shares at the open market bid of $3.90/share between August 29 and September 26, 2016. Thus, Section 14(a) and Section 14(e) regulate very different conduct. A successfully solicited proxy creates a fiduciary relationship between the solicitor and the solicitee. A tender offer, by contrast, involves each shareholder deciding to tender or not tender their shares in the open market. As such, in a tender offer, no fiduciary relationship between shareholders is ever requested or comes into being. Because the Meruelo Parties owe no duty of disclosure to the Plaintiff or any other shareholder, the Amended Complaint should be dismissed. I. FEDERAL RULES OF CIVIL PROCEDURE 12(b)(6) and 8(a)(2) “To survive a Rule 12(b)(6) motion, the plaintiff must plead enough facts to state a claim to relief that is plausible on its face.” Flaherty & Crumrine Preferred Income Fund, Inc. v. TXU Corp., 565 F.3d 200, 206 (5th Cir. 2009) (quotation marks, citations omitted). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). “Where a complaint pleads facts that are ‘merely consistent with’ a defendant’s liability, it ‘stops short of the line between possibility and plausibility of ‘entitlement to relief.’” Id. (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 557 (2007)). “[T]he pleading standard Rule 8 announces does not require ‘detailed factual allegations,’ but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Id. at 678 (quoting Twombly, 550 U.S. at 555). “A pleading that offers ‘labels and conclusions’ or ‘a formulaic recitation of the elements of a cause of action will not do.’” Id. (quoting Twombly, 550 U.S. at 555). “Nor does a complaint suffice if it tenders ‘naked assertion[s]’ devoid of ‘further factual enhancement.’” Id. (quoting Twombly, 550 U.S. at 557). Case 1:16-cv-01073-LY Document 42 Filed 02/27/17 Page 14 of 28 9 II. FED. R. CIV. P. 9(b) AND THE PSLRA Rule 9(b) requires a plaintiff alleging fraud to “state with particularity the circumstances constituting the fraud ….” Fed. R. Civ. P. 9(b). The Fifth Circuit “interprets Rule 9(b) strictly, requiring the plaintiff to specify the statements contended to be fraudulent, identify the speaker, state when and where the statements were made, and explain why the statements were fraudulent.” Flaherty, 565 F.3d at 207. The PSLRA, which applies to private securities class actions, underscores the requirements of Rule 9(b). Under the PSLRA, where a plaintiff alleges that the defendant “omitted to state a material fact”: the complaint shall specify each statement alleged to have been misleading, the reason or reasons why the statement is misleading, and, if an allegation regarding the statement or omission is made on information and belief, the complaint shall state with particularity all facts on which that belief is formed. See 15 U.S.C. § 78u-4(b)(1)(B). “At a minimum, the PSLRA pleading standard incorporates the ‘who, what, when, where, and how’ requirement of Rule 9(b).” Owens v. Jastro, 789 F.3d 529, 535 (5th Cir. 2015). (Scienter and loss causation are discussed, infra, §§ IV.B & IV.C). III. PLAINTIFF FAILS TO STATE A CLAIM AGAINST THE MERUELO PARTIES UNDER SECTION 14(a) AND RULE 14d-9 A. None of the Meruelo Parties’ Statements Constitute Proxy “Solicitations” Section 14(a) makes it unlawful to “solicit any proxy or consent or authorization in respect of any security” that is “in contravention of” the rules and regulations promulgated by the SEC. See 15 U.S.C. § 78n(a)(1) (emphasis added). Rule 14a-9 prohibits any “solicitation” that is “made by means of any proxy statement, form of proxy, notice of meeting or other communication,” and which contains false or materially misleading statements. See 17 C.F.R. § 240.14a-9 (emphasis added). Because “Section 14(a) prohibits the solicitation of shareholder proxies in violation of the Case 1:16-cv-01073-LY Document 42 Filed 02/27/17 Page 15 of 28 10 rules of the SEC,” “[i]n order to state a claim under Section 14(a) and Rule 14a-9, [a plaintiff] must at least allege that the defendants actually solicited proxies.” Ferro v. Blankenship, 1995 WL 18236650, *3 (W.D. Tex. Mar. 17, 1995) (italics in original; citing Va. Bankshares, Inc. v. Sandberg, 501 U.S. 1083, 1086–87 (1991)); see also Southmark Prime Plus, L.P. v. Falzone, 776 F.Supp. 888, 900 (D. Del. 1991) (defendants who were not then soliciting proxies were not subject to Section 14(a)). What is a proxy? And what is a proxy solicitation? “A proxy is the power or authority to act for another person.” Gorman v. Coogan, 2004 WL 60271, n.23 (D. Me. Jan. 13, 2004) (citation omitted); see also 17 C.F.R. § 240.14a-1(g) (“‘proxy” means “every proxy, consent or authorization within the meaning of Section 14(a) of the Act.”); Premium of Am., LLC v. Save POA, LLC, 2012 WL 4480693, n.7 (D. Md. Sept. 27, 2012) (quoting Black’s Law Dictionary 1346 (9th ed.2009)) (“‘Proxy’ is defined as: (1) ‘One who is authorized to act as a substitute for another; esp., in corporate law, a person who is authorized to vote another’s stock shares’; (2) ‘[t]he grant of authority by which a person is so authorized’; or (3) ‘[t]he document granting this authority.’”). “The paper writing which we call a proxy is nothing more than evidence of a relationship. It is not the relationship. It simply testifies that A has constituted B his agent to act for him in a vicarious capacity.” Lobato v. Health Concepts IV, Inc., 606 A.2d 1343, 1347 (Del. Ch. 1991). Rule 14a-1(l)(1) defines the terms “solicit” and “solicitation” to include: (i) Any request for a proxy whether or not accompanied by or included in a form of proxy[;] (ii) Any request to execute or not to execute, or to revoke, a proxy; or (iii) The furnishing of a form of proxy or other communication to security holders under circumstances Case 1:16-cv-01073-LY Document 42 Filed 02/27/17 Page 16 of 28 11 reasonably calculated to result in the procurement, withholding or revocation of a proxy. 17 C.F.R. § 240.14a-1(l)(1)(i)-(iii) (emphasis added). Thus, a “‘proxy solicitation’ is ‘[a] request that a corporate shareholder authorize another person to cast the shareholder’s vote at a corporate meeting.’” See Premium America, 2012 WL 4480693 at n.7. Here, there simply are no allegations that the Meruelo Parties solicited shareholder proxies – nor could there be. There simply are no statements contained in the Meruelo Parties’ 14D-9 or their press release that are or purport to be proxy solicitations. (See RJN Ex. B). There was no “request for a proxy,” no “request to execute, not execute or to revoke, a proxy,” nor was anything purporting to be “form of proxy” furnished. See, e.g., Smallwood v. Pearl Brewing Co., 489 F.2d 579, 600 (5th Cir. 1974) (letter to shareholders from company’s officer advising them that the Board had approved a merger “was not a ‘request for a proxy’ or a ‘request to execute or not execute, or to revoke a proxy’”).3 Thus, the count against the Meruelo Parties, alleging a violation of Section 14(a)/ Rule 14a-9, should be dismissed with prejudice on this basis alone. 1. Rule 14a-1(l)(2)(iv)(A) Specifically Exempts Security Holder Communications Like Those Made Here Additionally, the Meruelo Parties – as shareholders of Sizmek – are expressly permitted under the proxy rules to make the kind of communications they made here. Rule 14a- 1(l)(2)(iv)(A) exempts from the ambit of the terms “solicit” and “solicitation”: (iv) A communication by a security holder who does not otherwise engage in a proxy solicitation (other than a solicitation exempt under § 240.14a-2) stating how the security holder intends to vote and the reasons therefor, provided that the 3 Indeed, proxy solicitations would have made no sense here because the two-step merger was carried out pursuant to DGCL § 251(h) – which does not require a shareholder vote if the acquirer secures a sufficient amount of shares in the tender offer to provide it with dispositive majority power to vote in favor of the corporate action it seeks to effectuate. Case 1:16-cv-01073-LY Document 42 Filed 02/27/17 Page 17 of 28 12 communication: (A) Is made by means of speeches in public forums, press releases, published or broadcast opinions, statements, or advertisements appearing in a broadcast media, or newspaper, magazine or other bona fide publication disseminated on a regular basis * * * * 17 C.F.R. § 240.14a-1(1)(2)(iv)(A) (emphasis added). This exemption applies to the Meruelo Parties’ communications. At the time of the communications, the Meruelo Parties were “security holder[s]” of Sizmek. Their press release and Schedule 14D-9 stated how the Meruelo Parties “intend[] to vote and the reasons therefor.” The Meruelo Parties stated that “do not intend to tender any of their Shares in the Offer” because they “believe the anticipated $3.90 Offer price is grossly inadequate and significantly undervalues the Shares.” (RJN Ex. B). Such communications are expressly exempted from the ambit and reach of Rule 14a-9. For this reason, the count against the Meruelo Parties should be dismissed. IV. PLAINTIFF CANNOT PLEAD A SECTION 14(e) CLAIM AGAINST THE MERUELO PARTIES Section 14(e) of the Exchange Act regulates tender offers. See 15 U.S.C. § 78n(e). Even if Plaintiff had pled Section 14(e), he would still fail to state a claim. Section 14(e) provides: It shall be unlawful for any person to make any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, * * * in connection with any tender offer or request or invitation for tenders, or any solicitation of security holders in opposition to or in favor of any such offer, request, or invitation. The Fifth Circuit has stated that the “elements of a claim under Section 14(e), which applies to tender offers, are identical to the Section 10(b)/Rule 10b-5 elements.” Flaherty, 565 F.3d at 207. Thus, in order to plead a violation of Section 14(e) a plaintiff must allege: Case 1:16-cv-01073-LY Document 42 Filed 02/27/17 Page 18 of 28 13 (1) a material misrepresentation (or omission), (2) scienter, i.e., a wrongful state of mind, (3) a connection with [a tender offer]4, (4) reliance, often referred to in cases involving public securities markets (fraud-on-the-market cases) as ‘transaction causation’; (5) economic loss; and (6) ‘loss causation,’ i.e., a causal connection between the material misrepresentation and the loss. Owens v. Jastrow, 789 F.3d 529, 535 (5th Cir. 2015) (citing Lormand v. U.S. Unwired, Inc., 565 F.3d 228, 238–39 (5th Cir. 2009) (quoting Dura Pharm., Inc. v. Broudo, 544 U.S. 336, 341-42 (2005)). Plaintiff fails to state claim under Section 14(e) because Plaintiff fails to plead: (1) a materially misleading omission; (2) a strong inference of scienter; and (3) reliance and loss causation. A. The Meruelo Parties Have No Duty to Disclose Anything and None of Their Statements Were Misleading Plaintiff fails to plead a materially misleading omission by the Meruelo Parties. “It is axiomatic that there is no securities fraud without a duty to disclose.” In re Digital Island Sec. Litig., 223 F. Supp. 2d 546, 552 (D. Del. 2002), aff’d, 357 F.3d 322 (3d Cir. 2004) (citation omitted). As a general matter, a minority shareholder of a public company owes no duty of disclosure to any other shareholder concerning his deliberations about his investment. “The Supreme Court has held that the parties to an impersonal market transaction owe no duty [of] disclosure to one another absent a fiduciary or agency relationship, prior dealings, or circumstances such that one party has placed trust and confidence in the other.” In re Enron Corp. Sec., Deriv. & Erisa Litig., 610 F.Supp.2d 600, 645-46 (S.D. Tex. 2009) (quoting Jett v. 4 In stating that the elements of a Section 14(e) claim and a Section 10(b)/Rule 10b-5 claim are “identical,” it seems unlikely that the Fifth Circuit meant that the “in connection with” element of both claims is the same. Under Section 10(b)/Rule 10b-5, conduct must be “in connection with the purchase or sale of any security,” whereas under Section 14(e), conduct must be “in connection with any tender offer ….” Case 1:16-cv-01073-LY Document 42 Filed 02/27/17 Page 19 of 28 14 Sunderman, 840 F.2d 1487, 1492-93 (9th Cir. 1988), discussing Chiarella v. U.S., 445 U.S. 222, 232 (1980)). “[T]he duty to disclose arises when one party has information that the other party is entitled to know because of a fiduciary or other similar relation of trust and confidence between them.” Chiarella, 445 U.S. at 228 (emphasis added). In other words, “[a] duty arises from the relationship between parties” – “not merely from one’s ability to acquire information because of his position in the market.” Id. at 231 n.14 (emphasis added). The “Supreme Court made clear that a mere disparity in information does not justify a duty to disclose.” In re Enron, 610 F.Supp.2d at 647 (citing Chiarella, 445 U.S. at 235) (a duty to disclose “does not arise from the mere possession of nonpublic market information.”). Indeed, “neither the Congress nor the Commission ever has adopted a parity-of-information rule.” Chiarella, 445 U.S. at 233. Accordingly, a minority shareholder “has no duty to a prospective seller” in connection with a tender offer because he is not a fiduciary of other shareholders and, therefore, has “no obligation to reveal material facts.” Cf. id. at 229. Here, the Amended Complaint simply alleges that Burns would like to know the private deliberations of a fellow shareholder concerning whether that other shareholder plans to exercise his state law appraisal rights because such information would be useful to Burns in determining whether he can either piggy-back on an appraisal petition filed by the Meruelo Parties or “determine whether to seek appraisal for” himself. (AC ¶ 36). But the Meruelo Parties owe no duty of disclosure to the Plaintiff concerning their present intent to perfect or pursue their state law appraisal rights in the event that Vector acquires a majority of outstanding shares in the tender offer. The Meruelo Parties have no fiduciary relationship or other relationship of trust and confidence with the Plaintiff that obligates them to disclose anything to the Plaintiff. Case 1:16-cv-01073-LY Document 42 Filed 02/27/17 Page 20 of 28 15 While information concerning the Meruelo Parties investment decision making process might be useful for the Plaintiff, “[a] defendant ‘is not required to disclose a fact merely because a reasonable investor would like to know that fact.’” In re Digital at 552 (quoting In re CDnow, Inc. Sec. Litig., 138 F.Supp. 2d 624, 633 (E.D. Pa. 2001)) (emphasis added). Indeed, “a fact may be material, but if there is no duty to disclose it, then there is no liability for failing to do so.” United Food and Commercial Workers Union, v. Chesapeake Energy Corp., 2013 WL 1336123, at *9 (W.D. Ok. Mar. 29, 2013) (quoting In re CDNow, 138 F.Supp. 2d at 636 n.12) (emphasis added); In re Time Warner Inc. Sec. Litig., 9 F.3d 259, 267 (2d. Cir. 1993) (“an omission is actionable under the securities law only when the [defendant] is subject to a duty to disclose the omitted fact.”). Moreover, there simply is nothing misleading about the Meruelo Parties’ statements. Section 14(e) “prohibit[s] only misleading and untrue statements, not statements that are incomplete.” Brody v. Transitional Hosp. Corp., 280 F.3d 997, 1006 (9th Cir. 2002) (italics in original). Thus, a “plaintiff must plead not only why the statement at issue is incomplete but why that incompleteness makes the statement misleading or untrue.” R2 Invs. LDC v. Phillips, 401 F.3d 638, 642 (5th Cir. 2005) (emphasis added); Brody, 280 F.3d at 1006 (“To be actionable under the securities laws, an omission must be misleading; in other words it must affirmatively create an impression of a state of affairs that differs in a material way from the one that actually exists.”). Here, Plaintiff does not – and cannot – explain why the alleged omission rendered the Meruelo Parties’ statements misleading. All Plaintiff alleges is that because of the alleged omission, other “stockholders” with de minimis positions “will not know whether their appraisal action will be dismissed, making it more difficult to arrange for counsel prior to the time Case 1:16-cv-01073-LY Document 42 Filed 02/27/17 Page 21 of 28 16 required for them to demand appraisal.” (AC ¶ 6; see also AC ¶ 35: “absent disclosure” stockholders “are required to obtain counsel and demand appraisal before … [they know] whether their appraisal action will be dismissed”). These allegations are wholly insufficient to plead a misleading omission. Indeed, they are nothing more than “unadorned, the-defendant- unlawfully-harmed-me accusations.” Iqbal, 556 U.S. at 678. The Meruelo Parties’ expressed disapproval of the tender offer, stated why they disapproved, and took the position that in the event the tender off was successful, shareholders should “seek appraisal of their shares pursuant to Section 262 of the DGCL.” Nothing precluded the Plaintiff from making an appraisal demand on the Company. Doing so is very simple under Delaware law: “demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such holder’s shares.” DGCL § 262(d)(2). Again, while knowing about the Meruelo Parties internal deliberations might have been useful to Plaintiff, under Chiarella, Plaintiff simply has no right or entitlement to that information because he does not have, nor could he allege, a fiduciary or other similar relationship of trust between himself and the Meruelo Parties. In short, the Meruelo Parties owed no duty to the Plaintiff and nothing they said was misleading in any way. B. Plaintiff Does Not – and Cannot – Plead A “Strong Inference” of Scienter Section 14(e) claims are subject to the PSLRA’s heightened scienter pleading requirements. Flaherty, 565 F.3d at 207. The PSLRA requires that a plaintiff, for “each act or omission alleged” to be false or misleading, “state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind.” Id. (quoting 15 U.S.C. § 78u–4(b)(2)). “Under the PSLRA, the court considers whether all the facts and circumstances, taken together, give rise to a strong inference of scienter.” Id (citations omitted). Case 1:16-cv-01073-LY Document 42 Filed 02/27/17 Page 22 of 28 17 “Scienter, in the context of securities fraud, is defined as ‘an intent to deceive, manipulate, or defraud or that severe recklessness in which the danger of misleading buyers or sellers is either known to the defendant or is so obvious that the defendant must have been aware of it.’” Id. (quoting R2 Invs. LDC v. Phillips, 401 F.3d 638, 643 (5th Cir. 2005)). “Severe recklessness is limited to those highly unreasonable omissions or misrepresentations that involve not merely simple or even inexcusable negligence, but an extreme departure from the standards of ordinary care.” Id. (citation omitted). In Tellabs, the Supreme Court clarified the standard for pleading a “strong inference” of scienter. See Tellabs, Inc. v. Makor Issuers & Rights, Ltd., 551 U.S. 308, 323 & 324 (2007). The Fifth Circuit has interpreted Tellabs as requiring a “three step approach” in connection with a review of scienter allegations: First, the allegations must, as in federal pleadings generally, be taken as true. Second, courts may consider documents incorporated in the complaint by reference and matters subject to judicial notice. The facts must be evaluated collectively, not in isolation, to determine whether a strong inference of scienter has been pled. Third, a court must take into account plausible inferences opposing as well as supporting a strong inference of scienter. The inference of scienter must ultimately be “cogent and compelling,” not merely “reasonable” or “permissible.” Flaherty, 565 F.3d at 207–08 (quoting Ind. Elec. Workers' Pension Trust Fund IBEW v. Shaw Grp., Inc., 537 F.3d 527, 533 (5th Cir. 2008)) (citing Tellabs, 551 U.S. at 322–24) (underscores added). Under Tellabs, “[a] complaint will survive only if the inference of scienter is ‘at least as compelling as any opposing inference once could draw from the facts alleged.’” Owens v. Jastro, 789 F3d 529, 536 (5th Cir. 2015) (quoting Tellabs, 551 U.S. at 324). In addition, “omissions and ambiguities count against inferring scienter, for plaintiffs must ‘state with particularity facts giving rise to a strong inference that the defendant acted with Case 1:16-cv-01073-LY Document 42 Filed 02/27/17 Page 23 of 28 18 the required state of mind.’” Tellabs, 551 U.S. at 325. “[T]o successfully plead scienter based on an omission, a ‘plaintiff must plead a highly unreasonable omission, involving not merely simple, or even inexcusable negligence, but an extreme departure from the standards of ordinary care, ... which presents a danger of misleading buyers or sellers that is either known to the defendant or is so obvious that the actor must have been aware of it.’” Varjabedian v. Emulex Corp., 152 F.Supp.3d 1226, 1236 (C.D. Cal. 2016) (quoting Zucco Partners, LLC v. Digimarc Corp., 552 F.3d 981, 991 (9th Cir. 2009) (emphasis added). “This standard is extremely difficult to meet, because even clear misconduct does not always raise a strong inference of scienter.” Id. (citing In re NVIDIA Corp. Sec. Litig., 2011 WL 4831192, at *8 (N.D. Cal. Oct. 12, 2011), aff’d, 768 F.3d 1046, 1046 (9th Cir. 2014)) (emphasis added) (finding no strong inference of scienter even when a company knew of a significant product defect and failed to disclose it to investors, since “[s]uch behavior, at worst, reflects recklessness in the ordinary sense of the word”); see also In re XenoPort, Inc. Sec. Litig., 2011 WL 6153134, at *4, 6 (N.D. Cal. Dec. 12, 2011) (holding that although a plaintiff successfully pleaded that the defendant misled investors by failing to disclose important differences between two drugs, a “strong inference of scienter” was not warranted because the failure was not a “highly unreasonable omission”). Plaintiff does not – and cannot – plead a strong inference of scienter. Indeed, he pleads no scienter allegations at all. Even if the Meruelo Parties are boot-strapped into a fiduciary relationship with Plaintiff, their not disclosing their present intentions as of August 11, 2016, as to whether they would pursue their state law appraisal rights upon the happening of a future contingent event – i.e. Vector acquires a majority of outstanding shares – hardly rises to the level of “an extreme departure from the standards of ordinary care.” Case 1:16-cv-01073-LY Document 42 Filed 02/27/17 Page 24 of 28 19 C. Plaintiff Fails to Plead Reliance and Loss Causation The Amended Complaint fails to plead reliance or loss causation, both of which “a securities fraud-plaintiff must prove.” Lentell v. Merrill Lynch & Co., Inc., 396 F.3d 161, 172 (2d Cir. 2005). The Amended Complaint alleges in wholly conclusory fashion that “[a]s a direct result of the dissemination of the false and/or misleading Meruelo Recommendation Statement, Meruelo used to obtain shareholder dissent of the merger, Plaintiff and the Class have suffered damages and actual economic losses (i.e. the difference between the value of the Merger Consideration Sizmek shareholders received and the true value of their units at the time of the Merger) …” (AC ¶ 73). This is insufficient – even under Rule 8(a)(2) – to plead reliance and loss causation. Reliance, also called transaction causation, refers to the “causal link between the defendant’s misconduct and the plaintiff’s decision to buy or sell securities.” Emergent Capital Inv. Mgmt., LLC v. Stonepath Grp. Inc., 343 F.3d 189, 197 (2d Cir.2003). Here, there are no allegations – nor could there be – of reliance because the Meruelo Parties opposed and disapproved of the very tender offer that Plaintiff alleges was infected with fraud. Plaintiff also fails to plead loss causation. For loss causation, Plaintiff must demonstrate that the loss complained of was foreseeable and that it was caused by the materialization of the concealed risk. Lentell, 396 F.3d at 173 (“Put another way, a misstatement or omission is the ‘proximate cause’ of an investment loss if the risk that caused the loss was within the zone of risk concealed by the misrepresentations and omissions alleged by a disappointed investor.”). To prove loss causation, the plaintiff must show “that the subject of the fraudulent statement or omission was the cause of the actual loss suffered.” Suez Equity Inv’rs, L.P. v. Toronto– Dominion Bank, 250 F.3d 87, 95 (2d Cir. 2001). Case 1:16-cv-01073-LY Document 42 Filed 02/27/17 Page 25 of 28 20 Plaintiff pleads no facts that even suggest that an appraisal would result in a higher price per share then the Tender Offer Price. Plaintiff proffers nothing but naked conjecture and speculation that a “fair value” determination would be higher than the actual Tender Offer Price. But as Sizmek’s Schedule 14D-9 pointed out, an appraisal action might result in a “fair value” determination that was “greater than, less than or the same as the Offer Price.” (RJN Ex. C at 35). See also Huff Fund Inv. P’ship v. CKx, Inc., 2013 WL 5878807 (Del. Ch. Apr. 30, 2012) (holding that “fair value” was equivalent to the actual purchase price); Gearreald v. Just Care, Inc., 2012 WL 1569818 (Del. Ch. Nov. 1, 2013) (holding that the fair value was less than the total amount paid by the buyer to the seller). It is entirely possible that a non-de minimis perfected appraisal petition would result in a fair value determination by the Chancery Court that was equal to or lesser that the Tender Offer Price. The mere possibility that an appraisal could result in a higher price fails to push the Amended Complaint from the possible to the plausible. See Iqbal, 556 U.S. at 678. V. A SECOND AMENDMENT TO THE COMPLAINT WOULD BE FUTILE While leave to amend should be “freely” given, where an amendment to the complaint would be futile, leave to amend may be denied. Braun v. Eagle Rock Energy Partners, L.P., No. CV H-15-1470, 2016 WL 7686899, at *8 (S.D. Tex. Oct. 21, 2016). Here, because Plaintiff can neither plead a Section 14(a) nor a Section 14(e) claim against the Meruelo Parties, leave to amend should be denied and the Amended Complaint dismissed with prejudice. CONCLUSION For the foregoing reasons, the Meruelo Parties respectfully request that Count 4 of the Amended Complaint be dismissed with prejudice and leave to amend be denied. Case 1:16-cv-01073-LY Document 42 Filed 02/27/17 Page 26 of 28 21 Dated: February 27, 2017 Respectfully submitted, By: /s/ Edward D. Altabet Edward D. Altabet, Esq. (pro hac vice pend.) Gerard Fox Law P.C. 12 East 49th Street, 26th Fl. New York, New York 10017 Tel.: 646.690.4973 ealtabet@gerardfoxlaw.com -and- Stacy Allen, Esq. Kimberly Gdula, Esq. Jackson Walker LLP 100 Congress Avenue Suite 1100 Austin, Texas 78701 Tel.: (512) 236-2090 Fax.: (512) 391-2102 stacyallen@jw.com kgdula@jw.com Attorneys for Alex Meruelo Living Trust, Meruelo Investment Partners LLC, and Alex Meruelo Case 1:16-cv-01073-LY Document 42 Filed 02/27/17 Page 27 of 28 22 CERTIFICATE OF SERVICE I hereby certify that on this 27th day of February, 2017, a true and correct copy of this Motion To Dismiss the Amended Complaint Pursuant To Rule 12(b)(6) has been sent by electronic mail through ECF filing in accordance with the Federal Rules of Civil Procedure and the local rules for the Western District of Texas to each attorney of record. /s/ Edward D. Altabet Edward D. Altabet Case 1:16-cv-01073-LY Document 42 Filed 02/27/17 Page 28 of 28