United States District Court, S.D. New York
ANDREW E. ROTH, Plaintiff,
SCOPIA CAPITAL MANAGEMENT LP; SCOPIA MANAGEMENT, INC.; SCOPIA CAPITAL GP LLC; MATTHEW SIROVICH; JEREMY MINDICH; SCOPIA WINDMILL FUND LP; SCOPIA PX LLC; SCOPIA PX INTERNATIONAL MASTER FUND LP; SCOPIA LB LLC; SCOPIA PARTNERS LLC; SCOPIA LB INTERNATIONAL MASTER FUND LP; SCOPIA INTERNATIONAL MASTER FUND LP; SCOPIA LONG LLC; SCOPIA LONG INTERNATIONAL MASTER FUND LP; SCOPIA LONG QP LLC; AND SMA, Defendants, SPIRIT AEROSYSTEMS HOLDINGS, INC., Nominal Defendant.
MEMORANDUM OPINION AND ORDER
LAURATAYLORSWAIN, United States District Judge
Andrew E. Roth brings this action pursuant to Section 16(b)
of the Securities Exchange Act of 1934, 15 U.S.C. §
78p(b) (“Section 16(b)”), on behalf of nominal
defendant Spirit Aerosystems Holdings, Inc.
(“Spirit”), seeking disgorgement of so-called
“short-swing” profits by Defendants Scopia
Capital Management LP; Matthew Sirovich; Jeremy Mindich;
Scopia Management, Inc.; Scopia Capital GP LLC; Scopia
Windmill Fund LP; Scopia Long LLC; Scopia LB LLC; Scopia PX
LLC; Scopia Partners LLC; Scopia Long QP LLC; Scopia
International Master Fund LP; Scopia PX International Master
Fund LP; Scopia LB International Master Fund LP; Scopia Long
International Master Fund LP; and the “SMA”
(collectively, “Defendants”). Defendants now move
pursuant to Federal Rules of Civil Procedure 12(b)(1) and
12(b)(6) to dismiss the complaint for lack of subject-matter
jurisdiction and failure to state a claim upon which relief
can be granted, respectively.
Court has subject-matter jurisdiction of this action pursuant
to 15 U.S.C. § 78aa. The Court has considered thoroughly
the parties' submissions. For the reasons that follow,
Defendants' motion is denied.
following recitation of facts is drawn from the Complaint
(Docket Entry No. 1, Complaint (“Compl.”)), the
well-pleaded factual content of which is taken as true for
purposes of this motion to dismiss, and, as to issues
pertinent to the Rule 12(b)(1) motion, from exhibits
submitted by Plaintiff. See Kamen v. Am. Tel. & Tel.
Co., 791 F.2d 1006, 1011 (2d Cir. 1986).
September 2014 and June 2015, while Defendants were
beneficial owners of more than 10% of Spirit's common
stock, Defendants purchased and sold Spirit shares, realizing
a profit Plaintiff alleges was approximately $10 million.
(Compl. ¶¶ 18-19.) On May 13, 2016, after the
alleged short-swing transaction had concluded, Plaintiff
purchased Spirit stock. (Docket Entry No. 26, Decl. of Joshua
S. Broitman, Ex. 1). On the same day, Plaintiff requested
that Spirit file suit against Defendants pursuant to Section
16(b) to recover their profits garnered through the
short-swing transaction. (Compl. ¶ 24.) Spirit did not
initiate such an action. (Id.) More than 60 days
after requesting that Spirit sue Defendants for violating
Section 16(b), Plaintiff filed this complaint in August 2016,
seeking disgorgement. (Compl. p. 7.) See 15 U.S.C.
§ 78p(b) (establishing request requirement and waiting
period before which a security holder may bring suit pursuant
to Section 16(b)).
move to dismiss Plaintiff's complaint pursuant to Rule
12(b)(1) for lack of subject matter jurisdiction.
Specifically, Defendants maintain that Plaintiff cannot
demonstrate an injury in fact that is sufficiently traceable
to Defendants' conduct to satisfy the case-or-controversy
requirement of Article III of the Constitution.
resolving a Rule 12(b)(1) motion to dismiss an action for
lack of standing, the Court adopts the “Rule 12(b)(6)
standard, construing the complaint in plaintiff's favor
and accepting as true all material factual allegations
contained therein.” Donoghue v. Bulldog Inv. Gen.
P'ship, 696 F.3d 170, 173 (2d Cir. 2010). When it
comes to standing, “in essence the question . . . is
whether the litigant is entitled to have the court decide the
merits of the dispute” by invoking its jurisdiction.
Crist v. Commission on Presidential Debates, 262
F.3d 193, 194 (2d Cir. 2001). To demonstrate constitutional
standing, a plaintiff must have (1) suffered an injury in
fact, (2) that is fairly traceable to the challenged conduct
of the defendant, and (3) that is likely to be redressed by a
favorable judicial decision. Spokeo, Inc. v. Robins,
136 S.Ct. 1540, 1547 (2016). The plaintiff, as the party
invoking federal jurisdiction, bears the burden of
establishing these elements. Lujan v. Defenders of
Wildlife, 504 U.S. 555, 561 (1992).
16(b) of the Securities Exchange Act of 1934 imposes a
general rule of strict liability on owners of more than 10%
of a corporation's listed stock for any profits realized
from the purchase and sale, or sale and purchase, of such
stock occurring within a 6-month period. These statutorily
defined ‘insiders' are liable to the issuer of the
stock for their short-swing profits, and are subject to suit
‘instituted by the issuer, or by the owner of any
security of the issuer in the name and [on] behalf of the
issuer.'” Gollust v. Mendell, 501 U.S.
115, 116-17 (1991) (internal modifications omitted).
16(b) embodies a congressional determination “that the
‘only method . . . effective to curb the evils of
insider trading was a flat rule taking the profits out of a
class of transactions in which the possibility of abuse was
believed to be intolerably great.'” Bulldog
Inv., 696 F.3d at 174, quoting Reliance Elec. Co. v.
Emerson Elec. Co., 404 U.S. 418, 422 (1972). The statute
does not confer enforcement authority on the Securities and
Exchange Commission. Rather, Congress authorized “two
categories of private persons to sue for relief: (1)
‘the issuer' of the security traded in violation of
§ 16(b); or (2) ‘the owner of any
security of the issuer in the name and in behalf of the
issuer, '” subject to a requirement of a prior
demand on the issuer. Id.; see 78 U.S.C.
§ 78p(b). The statute grants “enforcement standing
of considerable breadth, ” looking to parties with a
“private-profit motive” to carry out the
enforcement function. See Gollust, 501 U.S. at 122,
undisputed that Plaintiff has statutory standing to bring a
suit against Defendants under Section 16(b), as Plaintiff is
a Spirit shareholder and Defendants do not dispute that the
Complaint adequately states a Section 16(b)
claim. (Docket Entry Nos. 20, 25, 27.)
ironically, Defendants complain that Plaintiff has
only a profit motive in bringing this lawsuit - that
he did not suffer any injury on account of the short-swing
trading because he purchased his shares long after the
trading had concluded. Invoking the Supreme Court's
recent decision on individual standing in Spokeo, Inc. v.
Robins, 136 S.Ct. 1540 (2016), Defendants argue that
Plaintiff lacks constitutional standing because he cannot
demonstrate that he, as an individual, suffered a concrete
and particularized injury by reason of the trading because he
was not a shareholder at the time of the trading.
plaintiff in Spokeo sued an online credit reporting
agency under the Fair Credit Reporting Act of 1970 (FCRA),
claiming that, as a result of the company's breach of a
statutory obligation to “'follow reasonable
procedures to assure maximum possible accuracy of'
consumer reports, ” it had disseminated incorrect
information about him. Spokeo, 136 S.Ct. at 1544-45.
On appeal of a Ninth Circuit decision holding that the
Spokeo plaintiff had constitutional standing to
bring his claim although he could not point to any injury
other than the alleged violation of the statutory obligation,
the Supreme Court reviewed the requisites of constitutional
standing. Starting with the “fundamental”
principle that the judiciary's role is cabined by
“the constitutional limitation of federal-court
jurisdiction to actual cases or ...