Emc Corp. v. Chevedden

4 F.Supp.3d 330

EMC CORPORATION, Plaintiff,

v.John CHEVEDDEN and James McRitchie, Defendants.

Civil Action No. 14–10233–MLW.

United States District Court, D. Massachusetts.

Signed March 16, 2014.

Ian D. Roffman Nutter, McClennen & Fish, LLP, Boston, MA, for Plaintiff.

MEMORANDUM AND ORDER

WOLF, District Judge.

This memorandum is based upon the transcript of the decision rendered orally on March 7, 2014, allowing Defendants' Motion to Dismiss for Lack of Subject Matter Jurisdiction. This memorandum adds citations, deletes some colloquy, clarifies some language, and represents the court's decision in this matter for purposes of any appeal.

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I. INTRODUCTION

For the reasons explained in detail below, the court finds that the plaintiff, EMC Corporation (“EMC”), lacks standing to bring this case and that there is not an actual case or controversy within the meaning of Article III of the Constitution. Although, as a legal matter, that finding could end the inquiry, the court would, even if EMC had Article III standing, exercise its discretion not to decide EMC's request for a declaratory judgment. The court would also deny EMC's request for a permanent injunction.

This case was filed on January 30, 2014. Plaintiff EMC sued defendants John Chevedden and James McRitchie, who have made a shareholder proposal for inclusion with EMC's proxy materials to be distributed in connection with EMC's annual shareholder meeting on April 30, 2014. EMC claims that it is entitled to exclude the shareholder proposal, which, if adopted, would require that the Chair of the EMC Board be an independent director.

EMC argues that Mr. Chevedden does not own EMC stock, as is required to permit him to file a shareholder proposal. EMC also contends that the proposal contains misleading information in violation of Securities and Exchange Commission (“SEC”) proxy rules. EMC requests a declaratory judgment that it may exclude the proposal or, in the alternative, an injunction against Chevedden and McRitchie to prevent them from asking that the shareholder proposal be included in the proxy materials. On February 14, 2014, in anticipation of the approaching March 14, 2014 date that EMC says is the deadline to complete its proxy materials for the April 30, 2014 shareholder meeting, the court allowed EMC's motion to expedite this matter. See Feb. 14, 2014 Order.

There are now two pending substantive motions. First, EMC has filed a Motion for Summary Judgment or, in the Alternative, A Preliminary Injunction. EMC argues that it has a right to exclude the shareholder proposal because of multiple deficiencies.

Second, the defendants have filed a Motion to Dismiss for Lack of Subject Matter Jurisdiction and for Failure to Join an Indispensable Party. Defendants argue that EMC lacks standing to bring this declaratory judgment action, that there is no private cause of action under SEC Rule 14a–8, and that the action should be dismissed because EMC has failed to include the SEC, an allegedly indispensable party.

The question of jurisdiction must be decided first. If this court lacks subject matter jurisdiction, that is the end of the inquiry.

Important to the analysis of the question of whether there is an actual case or controversy are the undisputed facts that the defendants have each entered into an irrevocable covenant not to sue EMC if their proposal is excluded from its proxy materials and have irrevocably promised not to present their proposal at the shareholder meeting if it is excluded.

II. THE MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JURISDICTION

The court is allowing the defendants' motion to dismiss because the plaintiff has not borne its burden of demonstrating the existence of a “case or controversy,” as required by Article III, to permit a judicial decision on a question. This is an issue of subject matter jurisdiction.

“It is the plaintiff's burden to prove the existence of subject matter jurisdiction.” Aversa v. United States, 99 F.3d 1200, 1209 (1st Cir.1996) (citing Murphy v. United States, 45 F.3d 520, 522 (1st Cir.1995)). Where a court decides a Rule 12(b)(1) motion on the pleadings, it must “construe the Complaint liberally and treat all well-pleaded facts as true, according the plaintiff the benefit of all reasonable inferences.” Murphy, 45 F.3d at 522. However, the court is not “bound to accept as true a legal conclusion couched as a factual allegation.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (quoting Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986)) (internal quotation marks omitted).

Importantly for the instant case, “when a motion to dismiss for lack of subject matter jurisdiction under Fed.R.Civ.P. 12(b)(1) involves factual questions ... the court must determine whether the relevant facts, which would determine the court's jurisdiction, also implicate elements of the plaintiff's cause of action.” Torres–Negrón v. J & N Records, LLC, 504 F.3d 151, 162–63 (1st Cir.2007). “[I]f the facts relevant to the jurisdictional inquiry are not intertwined with the merits of the plaintiff's claim, ... ‘the trial court is free to weigh the evidence and satisfy itself as to the existence of its power to hear the case.’ ” Id. at 163 (quoting Lawrence v. Dunbar, 919 F.2d 1525, 1529 (11th Cir.1990)). Here, because the facts relevant to the jurisdictional inquiry are distinct from those relevant to the merits of the plaintiff's claim, the court may consider, and is considering, evidence in addition to the allegations.

The requirement that a plaintiff have standing emanates from Article III of the Constitution, which grants courts jurisdiction only over “Cases” and “Controversies.” As the Supreme Court has explained:

In its constitutional dimension, standing imports justiciability: whether the plaintiff has made out a “case or controversy” between himself and the defendant within the meaning of Art. III. This is the threshold question in every federal case, determining the power of the court to entertain the suit.

Warth v. Seldin, 422 U.S. 490, 498, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975) (emphasis added). This fundamental standing requirement has been applied by the Supreme Court both to actions for declaratory judgments, see, e.g., MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 128 n. 8, 127 S.Ct. 764, 166 L.Ed.2d 604 (2007), and to actions for injunctive relief, see City of Los Angeles v. Lyons, 461 U.S. 95, 110, 103 S.Ct. 1660, 75 L.Ed.2d 675 (1983). Furthermore, when a plaintiff requests more than one remedy, it bears the burden to show standing “for each type of relief sought.” Summers v. Earth Island Inst., 555 U.S. 488, 493, 129 S.Ct. 1142, 173 L.Ed.2d 1 (2009) (citing Lyons, 461 U.S. at 105, 103 S.Ct. 1660).

Although the application of the standing doctrine to injunctive relief is relatively straightforward, its application to actions for declaratory judgments deserves some discussion in light of recent Supreme Court rulings. When courts assess whether a “case or controversy” exists in a declaratory judgment action, they do not always discuss standing. As Professors Wright and Miller explain, “[b]ecause 28 U.S.C. § 2201 explicitly requires ‘a case of actual controversy,’ declaratory judgment cases are frequently written in terms that look directly for a case or controversy, without pausing to employ more specific categories of justiciability.” 13 Wright, Miller & Cooper, Fed. Prac. & Proc. § 3529 n. 30 (3d ed. 2013); see also In re Columbia Univ. Patent Litig., 343 F.Supp.2d 35, 43 (D.Mass.2004) (Wolf, J.) (“The requirement of actual controversy encompasses concepts such as ripeness, standing, and the prohibition against advisory judicial rulings ....” (quoting BP Chems. Ltd. v. Union Carbide Corp., 4 F.3d 975, 977 (Fed.Cir.1993) (internal quotation marks omitted))). Here, the defendants have framed their argument in terms of standing and the court finds that this is the proper framework for analysis.

The Declaratory Judgment Act provides that:

In a case of actual controversy within its jurisdiction ... any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such a declaration, whether or not further relief is or could be sought. Any such declaration shall have the force and effect of a final judgment or decree and shall be reviewable as such.

28 U.S.C. § 2201(a). The Supreme Court has explained that “the phrase ‘case of actual controversy’ in the Act refers to the type of ‘Cases' and ‘Controversies' that are justiciable under Article III” of the Constitution. MedImmune, 549 U.S. at 126, 127 S.Ct. 764 (citing Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 240, 57 S.Ct. 461, 81 L.Ed. 617 (1937)).

Defining the boundaries of the Declaratory Judgment Act jurisdiction, however, has proven challenging. In its most recent in-depth treatment of the justiciability of cases brought under the Declaratory Judgment Act, the Supreme Court noted:

[Our cases] do not draw the brightest of lines between those declaratory-judgment actions that satisfy the case-or-controversy requirement and those that do not. Our decisions have required that the dispute be “definite and concrete, touching the legal relations of parties having adverse legal interests”; and that it be “real and substantial” and “admi[t] of specific relief through a decree of a conclusive character, as distinguished from an opinion advising what the law would be upon a hypothetical state of facts.” [Aetna, 300 U.S.] at 240–41, 57 S.Ct. 461. In Maryland Casualty Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273, 61 S.Ct. 510, 85 L.Ed. 826 (1941), we summarized as follows: “Basically, the question in each case is whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality...