United States District Court, N.D. New York
CLIFFORD P. BEEDE, SHERRY E. HALLIGAN, EILEEN MOTTL, and CATHERINE G. WEEKS, Plaintiffs,
STIEFEL LABORATORIES, INC., CHARLES W. STIEFEL, BRENT D. STIEFEL, TODD STIEFEL, STEPHEN KARASICK, MICHAEL CORNELIUS and MATT S. PATTULLO, Defendants.
MATTHEW J. GRIESEMER, ESQ., PAUL M. FREEMAN, ESQ., LELA M. GRAY, ESQ., FREEMAN, HOWARD LAW FIRM, Hudson, New York, Attorneys for Plaintiffs.
DAVID A. COULSON, ESQ., HILARIE BASS, ESQ., GREENBERG, TRAURIG LAW FIRM, Miami, Florida, Attorneys for Defendants.
TODD D. WOZNIAK, ESQ., GREENBERG, TRAURIG LAW FIRM, Atlanta, Georgia, Attorneys for Defendants.
BETH L. KAUFMAN, ESQ., PAULETTE J. MORGAN, ESQ., SCHOEMAN, UPDIKE LAW FIRM, New York, New York, Attorneys for Defendants.
MEMORANDUM-DECISION AND ORDER
MAE A. D'AGOSTINO, District Judge.
On January 13, 2013, Plaintiffs commenced this federal question action alleging securities fraud, breach of fiduciary duty and violations of the Employee Retirement Income Security Act of 1974 ("ERISA"). Currently before the Court is Defendants' motion to dismiss the complaint for lack of subject matter jurisdiction and failure to state a claim, brought pursuant to Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure.
Plaintiffs Clifford P. Beede, Sherry E. Halligan, Eileen Mottl and Catherine G. Weeks (collectively "Plaintiffs") are each individuals residing within the State of New York. See Dkt. No. 1 at ¶¶ 7-10. Defendant Stiefel Laboratories, Inc. ("Steifel Labs") is a Delaware corporation with its principal place of business in the State of North Carolina. See id. at ¶ 11. In 2009, Stiefel Labs was purchased by GlaxoSmithKline, PLC ("GSK") and is now a wholly-owned subsidiary of GSK. See id. at ¶ 13. Defendants Charles W. Stiefel ("Charles Stiefel"), Brent D. Stiefel ("Brent Stiefel") and Todd Stiefel were shareholders of Stiefel Labs and members of its Board of Directors, and reside in the States of North Carolina, Washington and North Carolina, respectively. See id. at ¶¶ 14-17. Defendant Stephen Karasick was Senior Vice President of People & Technology at Stiefel Labs and resides in the State of Georgia. See id. at ¶ 18. Defendants Michael Cornelius ("Cornelius") and Matt S. Pattullo ("Pattullo") were Vice President/Chief Financial Officer and Vice President of Human Resources, respectively, and reside in the State of Florida. See id. at ¶¶ 19, 20.
B. The ESOP
Plaintiffs were all employed by Stiefel Labs and worked at its facility in Oakhill, New York. See id. at ¶¶ 7-10, 12. During Plaintiffs' employment, Stiefel Labs maintained the Stiefel Laboratories, Inc. Employees' Stock Bonus Plan-Trust (the "ESOP"), a defined benefit contribution plan under ERISA. See id. at ¶ 24. The ESOP was controlled and managed by a Committee, a Trustee and a Plan Administrator, each of which was appointed by Stiefel Labs' Board of Directors. See id. at ¶ 25. Defendants Charles Stiefel, Pattullo, Karasick and Cornelius acted as members of the Committee, and Defendants Charles Stiefel and Karasick acted as Trustee. See id. at ¶¶ 28-30.
Qualifying Stiefel Labs' employees, including Plaintiffs, were allocated shares of Stiefel Labs' stock on an annual basis. See id. at ¶¶ 31, 32. Prior to November 2008, employees were not able to freely sell their stock in Stiefel Labs, except in the case of retirement, death or termination. In such cases, Stiefel Labs had the option of buying back the employee's stock at the shares' current fair market value. See id. at ¶¶ 33-34.
Stiefel Labs engaged the firm of Bogush & Grady to perform annual valuations of Stiefel Labs for the purpose of determining the current fair market value of its stock (the "Bogush Valuations"). See id. at ¶ 38. Plaintiffs allege that the Bogush Valuations were improper in several respects and routinely undervalued Stiefel Labs, and that Defendants knew or should have known that the stock was being undervalued. See id. at ¶¶ 39-49. The Bogush Valuation for March 31, 2008 valued ...