The opinion of the court was delivered by: Robert P. Patterson, Jr., U.S.D.J.
On March 5, 2007, Feiner Family Trust ("Feiner"), which is a shareholder of Xcelera.com, Inc. ("Xcelera"), filed a two-count complaint. Count I is a derivative claim on behalf of Xcelera against Gustav Vik, Alexander Vik, and Michael Kugler ("Director Defendants") for breach of fiduciary duty. Count II is a purported class action claim against the Director Defendants and VBI Corporation ("VBI") for breach of fiduciary duties owed to all those who currently own Xcelera common stock, or who have sold Xcelera common stock to Gustav Vik and Alexander Vik ("Vik Defendants") during the time of the alleged wrongful conduct.
On April 3, 2007, Xcelera moved for dismissal of the Complaint for: (1) lack of diversity jurisdiction; (2) lack of Article III standing; (3) lack of standing to bring a derivative suit; (4) failure to state a claim for breach of fiduciary duty; and (5) failure to comply with the heightened pleading requirements of Rule 9(b) of the Federal Rules of Civil Procedure. The Director Defendants have joined in Xcelera's motion to dismiss and adopted the positions of Xcelera's motion papers by reference.*fn1 As of the date of oral argument on this motion, July 18, 2007, service had not yet been effected on VBI.
For the foregoing reasons, Defendants' motion is granted in part, and Plaintiff's complaint is dismissed.
I. FACTUAL ALLEGATIONS*fn2
Xcelera is a Cayman Islands corporation "focused on founding, developing, operating and financing technology companies and managing its portfolio of assets." (Compl. ¶ 9.) Xcelera's common stock -- formerly a registered equity with the SEC -- was traded on the American Stock Exchange ("AMEX") from 1986 until December 14, 2004 when it was delisted. (Id. ¶¶ 9, 24.) Subsequently, Xcelera's stock was traded exclusively over-the-counter -- on the "Pink Sheets" -- until November 3, 2006 when the SEC revoked the registration of Xcelera's securities. (Id. ¶ 24.)
Xcelera's major shareholders are VBI Corporation ("VBI"),*fn3 Alexander Vik, and Gustav Vik, owning 61.2%, 9.8% and 5.3%, respectively, of the company's voting securities as of June 30, 2003. (Id. ¶¶ 10-12.) Alexander Vik is Chairman and CEO of Xcelera. (Id. ¶ 11.) Gustav Vik is a Director and the Executive Vice President, Treasurer and Secretary of Xcelera. (Id. ¶ 12.) Defendant Michael Kugler -- not alleged to be a shareholder -- is a Director and the Executive Vice President of Xcelera; and as such, is responsible for managing financial operations and investor relations. (Compl. ¶ 13.) Plaintiff, Feiner Family Trust, is a minority holder of Xcelera common stock. (Id. ¶ 8.)
The Complaint alleges a fraudulent scheme designed by the controlling shareholders of Xcelera -- Alexander M. Vik, Gustav M. Vik, and VBI Corporation -- to purchase Xcelera common stock from minority shareholders at severely depressed prices. (Id. ¶¶ 54-55.) The scheme entailed deliberately depressing Xcelera's common stock price by failing to make required SEC filings or publish any information regarding the company's assets and operations to investors or shareholders. Since Xcelera's securities were registered under section 12 of the Exchange Act, the company was required to file annual financial reports with the SEC pursuant to Rule 13a-1 promulgated under section 13(a) of the Exchange Act. (Id. ¶ 29.) Xcelera's agreement with AMEX similarly required the company to "file certain information, documents and reports with the SEC in order to provide adequate public disclosure regarding its financial and operation results." (Id.)
On August 2004, Xcelera failed to file a report with the SEC for the fiscal year ending January 31, 2004 as required. (Id. ¶ 34.)*fn4 Although Xcelera's website represented that the company intended to file by November, 15, 2004, the filing was never made. (Id. ¶ 37.) As a result, on December 1, 2004, AMEX applied to the SEC to strike Xcelera's common stock from listing and registration on the exchange. (Compl. ¶¶ 43-44.)*fn5 On December 13, 2004, the SEC granted AMEX's application. (Id. ¶ 45.) As a result of Amex's delisting, Xcelera shares were only traded over-the-counter on the "Pink Sheets." (Id. ¶ 46.) Thereafter, Xcelera has failed to file any reports with the SEC since August 2, 2005 when Xcelera disclosed it would not file an annual report for the fiscal year ending January 31, 2005. (Id. 47.)
On August 28, 2006, the SEC temporarily suspended the trading of Xcelera securities due to the company's continuing failures to file periodic reports containing current financial and operation information. (Id. ¶ 48.) On September 27, 2006, the SEC issued an Order Instituting Proceedings to determine whether the registration of Xcelera securities should be suspended or revoked. (Id. ¶ 49.) On October 27, 2006, Xcelera notified the SEC that Xcelera was not contesting the proceedings and had no objection to the revocation of the registration of its securities. (Id. ¶ 50.) As a result of Xcelera's failure to file an answer, the SEC revoked the registration of Xcelera's securities on November 3, 2006. (Id. ¶ 52.) Xcelera's securities are no longer permitted to be traded in the U.S. or elsewhere in the world. (Id. ¶ 53.) The delisting by AMEX and the SEC's revocation of Xcelera securities are alleged to have been designed by the Vik Defendants as part of a scheme to deprive Plaintiff and minority stockholders of knowing the intrinsic value of Xcelera securities, thereby weakening Xcelera's stock for the Defendants' own personal benefit. (Id. ¶ 54.) The alleged scheme involves the direct solicitation of Xcelera's minority shareholders to sell their holdings to Xcelera at artificially low prices. (Id. ¶ 55.) With this knowledge, Defendant Kugler, a Xcelera director, "in contact with Xcelera shareholders is offering to buy and has bought their shares of Common Stock on behalf of Xcelera for between twenty and twenty-five cents per share." (Id. ¶ 55.)*fn6
These "solicitations have failed to disclose any information regarding Xcelera and its subsidiaries and operations, which, once released to the public, could result in significant increases ...