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SCHAFFER EX REL. LASERSIGHT INC. v. CC INVESTMENTS

September 29, 2000

BARBARA SCHAFFER, DERIVATIVELY ON BEHALF OF LASERSIGHT INCORPORATED, PLAINTIFF,
V.
CC INVESTMENTS, LDC, CASTLE CREEK PARTNERS, LLC, SOCIETE GENERALE, SHEPHERD INVESTMENTS INTERNATIONAL, LTD., STARK INTERNATIONAL, BRIAN J. STARK, MICHAEL A. ROTH, AND LASERSIGHT INCORPORATED, DEFENDANTS.



The opinion of the court was delivered by: Marrero, District Judge.

DECISION AND ORDER

Plaintiff Barbara Schaffer ("Schaffer") brings this action under Section 16(b) of the Securities Exchange Act of 1934 (the "Act") for disgorgement of short-swing profits allegedly obtained by defendants acting as a group in violation of that section of the Act. Three motions for dismissal pursuant to Federal Rule of Civil Procedure 12(b)(6) are presently before the Court.

Defendants CC Investments, LDC ("CCI") and Castle Creek Partners, LLC ("CCP") have argued that CCI was not, either individually or as member of a group, the beneficial owner of more than 10% of Lasersight's equity securities and that CCI is therefore not liable under Section 16(b). Defendant Societe Generale ("SG") has argued that it was not a member of any group and that certain restrictions on its ability to convert and sell shares to which it agreed preclude Section 16(b) liability. Defendants Shepherd Investments International, Ltd. ("SII"), Stark International ("SI"), Brian Stark ("Stark") and Michael Roth ("Roth") (collectively, the "Stark Defendants") have argued, among other things, that they were not beneficial owners of more than 10% of Lasersight's stock. For the reasons set forth below, the Court grants the motions to dismiss in their entirety, but grants Schaffer leave to replead.

BACKGROUND

Schaffer is a New York resident and an owner of the common stock of Lasersight Incorporated ("Lasersight" of the "Company"). Lasersight, a nominal defendant, is a Delaware corporation with its principal place of business in St. Louis, Missouri.

Defendants are CCI, a limited liability company organized under the laws of the Cayman Islands engaged in the business of trading in securities; CCP, an American limited liability company acting as CCI's investment manager; SG, a division of Societe Generale Securities Corporation engaged in trading securities; SII, a corporation organized under the laws of the British Virgin Islands that trades securities; SI, a Bermuda corporation trading securities; and Stark and Roth, investment fund managers who control the investment decisions of SII and SI.

Schaffer alleges that these seven defendants constitute a group (the "Group") and that SII and SI constitute a separate group (the "SI Group") for purposes of determining liability under Rule 16a-1(a)(1) and Sections 16(b) and 13(d)(3) of the Act; that the Group, the SI Group and CCI individually were greater than 10% beneficial owners of Lasersight's common stock; and that the Group, the SI Group and CCI engaged in certain transactions over a six month period, garnering short-swing profits in the amount of at least $7,091,975.00, all of which are disgorgeable to Lasersight under Section 16(b).

DISCUSSION

I. STANDARD OF REVIEW

In considering a Rule 12(b)(6) motion, the Court must accept Liner's factual allegations as true and draw all reasonable inferences in his favor. See Hamilton Chapter of Alpha Delta Phi, Inc. v. Hamilton College, 128 F.3d 59 (2d Cir. 1997). It is the Court's task to assess the legal sufficiency of the complaint and not to judge the credibility of the pleadings or to assess the weight of any evidence offered in support of the action. See Cooper v. Parsky, 140 F.3d 433 (2d Cir. 1998). A claim may not be dismissed "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Morris v. Local 819, Int'l Bhd. of Teamsters, 169 F.3d 782, 784 (2d Cir. 1999) (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)).

As Schaffer notes, "the only issue before the Court is whether or not the complaint states a set of facts under which defendants can be liable to disgorge their profits under Section 16(b) of the Securities Exchange Act of 1934." Plaintiff's Memorandum in Opposition, dated Dec. 1, 1999, at 7-8. See Transcript from Oral Argument, dated June 2, 2000 ("Tr."), at 54-55.

II. CONVERSION CAPS

The Corrected Certificate of Designations, Preferences, ...


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