The opinion of the court was delivered by: Robert P. Patterson, Jr., U.S.D.J.
This putative class action was brought in state court. Defendants removed the case to federal court and moved for dismissal. Plaintiffs have moved for remand to state court. In view of the prior litigation before this Court, the Defendants' motion is granted, and the Plaintiffs' motion is denied.
On March 5, 2007, Plaintiff Feiner Family Trust filed a two count complaint consisting of a derivate shareholders claim and a putative class action claim ("Complaint 1") in this Court, alleging that Xcelera.com (hereinafter "Xcelera"), VBI Corporation, Alexander Vik, Gustav Vik, and Michael Kugler (collectively, "Defendants") had breached their fiduciary duty to Xcelera's shareholders. VBI Corporation is incorporated in the British Virgin Islands and owned by Alexander Vik, Gustav Vik, and Erik Vik; it owns 61.2% of Xcelera's voting shares. (Complaint 1 ¶ 10.) Alexander Vik is Chairman and CEO of Xcelera, a Cayman Islands corporation; Gustav Vik is a Director of Xcelera, and also the Executive Vice President, Treasurer, and Secretary of Xcelera. (Id. ¶¶ 11-12.) Michael Kugler is a Director and Executive Vice President of Xcelera. (Id. ¶13.) Complaint 1 alleged that VBI and the individual defendants (collectively, "the Vik Defendants") "engaged in a scheme to artificially deflate the trading price of Xcelera's shares by refusing to file with the SEC any periodic reports," and that as a consequence the stock was de-listed from the American Stock Exchange in 2004 and de-registered by the SEC in 2006. (Id. ¶ 29.) Complaint 1 further alleged that the Vik Defendants then solicited the minority shareholders "to sell their holdings at artificially low prices."*fn1 (Id. ¶ 55.)
Defendants filed separate motions to dismiss on April 3, 2007 and May 18, 2007. On September 11, 2007, the Court granted the motions in part and dismissed Complaint 1. Feiner Family Trust v. VBI Corp., No. 07-cv-1914, 2007 WL 2615448 (S.D.N.Y. Sep. 11, 2007). The Court determined that Cayman Islands law applied, and that and that the Plaintiffs did not have standing to bring Count 1 derivatively, and that Count 2 failed to state a direct claim for breach of fiduciary duty under Cayman Islands law. Id. The Court granted Plaintiffs leave to move to file an amended complaint. Id.
On October 9, 2007, Plaintiffs moved to amend the complaint and submitted a proposed complaint ("Complaint 2"). Complaint 2 no longer contained the derivative claims made in Complaint 1. Complaint 2 contained additional information, but the outline of the breach of fiduciary duty and the allegedly fraudulent scheme was the same, namely that Defendants breached their fiduciary duty to minority shareholders by engaging in the same scheme to default on Xcelera's reporting obligation, causing its securities to be first de-listed and later de-registered, and thereafter, that Defendants solicited minority shareholders to sell their stock at artificially low prices.*fn2 (Complaint 2 ¶¶ 26-46.) Complaint 2 added, as a named Plaintiff, Ron Krissel, a "former shareholder of Xcelera" who, after contacting Defendant Kugler, had sold his shares to an entity alleged to be an agent of the Defendants at a price of $.25 per share. (Id. ¶ 7.)
On December 14, 2007, Plaintiffs moved in their reply papers to the October 2007 motion to amend that they be allowed to append a claim under Section 10(b) of the Exchange Act to Complaint 2. They attached a proposed complaint ("Complaint 3") to these reply papers, which included additional counts alleging that Defendants had violated Section 10(b) of the Exchange Act and Rule 10b-5 and that the individual Defendants had violated Section 20(a) of the Exchange Act. (Complaint 3 ¶¶ 49-65.) On December 20, 2007, the Court denied this request without prejudice to Plaintiffs withdrawing their motion for leave to file a revised amended complaint and moving to file a second amended complaint.
On January 2, 2008, Plaintiffs filed a motion to file a second amended complaint and submitted a proposed complaint ("Complaint 4"). Complaint 4 alleges many of the same facts as alleged in Complaints 1 through 3, namely that Defendants engaged in a scheme to defraud by failing to comply with reporting requirements, resulting in the de-listing and de-registering of Xcelera's stock and that Defendants then solicited minority shareholders to sell their shares at prices made artificially low by the de-listing and de-registering.*fn3 Complaint 4 alleged four causes of action: (1) against all Defendants for violations of Section 10(b) of the Exchange Act by engaging in a scheme to defraud shareholders (Complaint 4 ¶¶ 50-59); (2) against Xcelera for violation of Section 20(a) of the Exchange Act (Id. ¶¶ 60-65); (3) against VBI, Alexander Vik, and Gustav Vik for violation of Section 20(a) of the Exchange Act (Id. ¶¶ 66-72); and (4) against Xcelera, Gustav Vik, Alexander Vik, and Kugler for breach of their fiduciary duties. (Id. ¶¶73-78.) The motion was argued on September 11, 2008, and on December 15, 2008, the Court denied the motion for leave to file an amended complaint without leave for further amendment. Feiner Family Trust v. Xcelera.com, Inc., No. 07-cv-1914, 2008 WL 5233605 (S.D.N.Y. Dec. 15, 2008). The Court concluded that Complaint 4 failed to state a claim for which relief could be granted, and thus granting leave to re-plead would be futile. Id.
Plaintiffs appealed this decision to the Second Circuit Court of Appeals. On November 5, 2009, the Second Circuit affirmed the Court's December 15, 2008 decision. Feiner Family Trust v. VBI Corp., 352 Fed.Appx. 461 (2d Cir. 2009). The Court of appeals noted that Complaint 4 "is devoid of particular facts indicated that defendants actively encouraged minority shareholders to sell their stock back to Xcelera." Id. At 463-64.
On March 29, 2010, Plaintiffs filed the instant complaint ("Complaint 5") in the Supreme Court of the State of New York, County of New York. Complaint 5 was brought as a class action, contending that Defendants eliminated "any trading market in Xcelera common stock by failing to make the required filings with the SEC, causing the Company's stocks to be de-registered by the SEC, . . . failing to provide any current information concerning the Company's operations following the de-registration, and causing Xcelera's stock not to be traded on any securities exchange," and then inducing minority shareholders to sell their stock at prices made artificially low as a result of the above scheme to defraud.*fn4 (Complaint 5 ¶2.) Complaint 5 alleged two causes of action:
(1) against Xcelera, Gustav Vik, Alexander Vik, and Kugler for breach of fiduciary duty; and (2) against all Defendants for common law fraud. (Id. ¶¶ 34-46.)
On April 23, 2010, Defendants removed the action to this Court pursuant to 28 U.S.C. §§ 1441, 1446, and 1453 and 15 U.S.C. § 77p(c).
On April 30, 2010, Defendant Kugler moved to dismiss Complaint 5. On May 20, 2010, the remaining Defendants moved to dismiss Complaint 5.
On May 24, 2010, Plaintiffs filed an amended class action complaint ("Complaint 6"). Complaint 6 contains many of the same allegations as Complaint 5, including factual allegations that Xcelera's stock was de-listed in 2004 and de-registered in 2006. (Complaint 6 ¶¶ 22, 28.) Complaint 6 does not make allegations that the de-listing and de-registering were a part of a deliberate scheme. It does, however, include allegations that in 2005, "Defendants embarked on a scheme to freeze out minority shareholders by keeping the good operating news secret and simply refusing to make any new disclosures concerning Xcelera's financial condition or results of operations." (Complaint 6 ¶24.) Later in Complaint 6, however, the scheme is described as pertaining only to events subsequent to the de-registration of Xcelera's stock: "Xcelera's knowing failure to provide investors with current information concerning Xcelera's financial condition and results of operations from 2006 onward has prevented, and continues to prevent, Plaintiffs and other members of the Class from knowing the intrinsic value of Xcelera's stock or realizing any such value in any securities market." (Id. ¶ 31.) Complaint 6 further alleges conclusorily that "Defendants have been soliciting the Company's minority ...