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Maloney v. Forterra Inc.

United States District Court, N.D. Texas, Dallas Division

July 30, 2019

NANCY G. MALONEY, Plaintiff,
v.
FORTERRA INC., JEFFREY K. BRADLEY, W. MATTHEW BROWN, LORI M. BROWNE, WILLIAM KERFIN, KYLE S. VOLLUZ, KEVIN BARNER, ROBERT CORCORAN, SAMUEL D. LOUGHLIN, CLIENT MCDONNOUGH, JOHN MCPHERSON, CHRIS MEYER, JACQUES SARRAZIN, CHADWICK S. SUSS, and GRANT WILBECK, Defendants.

          MEMORANDUM OPINION AND ORDER

          Sam A. Lindsay United States District Judge

         Before the court are Defendants' Motion to Dismiss for Forum Non Conveniens, Failure to Make a Pre-Suit Demand Pursuant to Rule 23.1, and Failure to State a Claim Pursuant to Rule 12(b)(6) (Doc. 19), filed November 16, 2018; Plaintiff's Opposition to Defendants' Motion to Dismiss for Forum Non Conveniens, Failure to Make a Pre-Suit Demand Pursuant to Rule 23.1, and Failure to State a Claim Pursuant to Rule 12(b)(6) (Doc. 24), filed January 22, 2019; Defendants' Reply in Support of Motion to Dismiss for Forum Non Conveniens, Failure to Make a Pre-Suit Demand Pursuant to Rule 23.1, and Failure to State a Claim Pursuant to Rule 12(b)(6) (Doc. 28), filed March 8, 2019; Defendant William Kerfin's Motion to Dismiss and Brief in Support (Doc. 22), filed November 16, 2018; Plaintiff's Opposition to Defendant William Kerfin's Motion to Dismiss (Doc. 25), filed January 22, 2019; Defendant William Kerfin's Reply Brief in Support of the Motion to Dismiss (Doc. 29), filed March 8, 2019; Plaintiff's Notice of Recent Authority in Support of Plaintiff's Opposition to Defendant William Kerfin's Motion to Dismiss (Doc. 30), filed April 9, 2019; and Defendant William Kerfin's Response to Notice of Recent Authority in Support of Plaintiff's Opposition to Defendant William Kerfin's Motion to Dismiss (Doc. 31), filed April 15, 2019.

         After careful consideration of the motions, briefs, pleadings, and applicable authority, the court grants Defendants' Motion to Dismiss for Forum Non Conveniens (Doc. 19); denies as moot Defendants' Motion to Dismiss for Failure to Make a Pre-Suit Demand Pursuant to Rule 23.1 and Failure to State a Claim Pursuant to Rule 12(b)(6) (Doc. 19); grants Defendant William Kerfin's Motion to Dismiss (Doc. 22) in so far as it joins and incorporates Defendants' Motion to Dismiss for Forum Non Conveniens but denies as moot the motion to the extent it moves for dismissal on the basis of other procedural grounds; and dismisses without prejudice this action.

         I. Factual and Procedural Background

         On July 31, 2018, Nancy G. Maloney (“Plaintiff” or “Maloney”) filed this shareholder derivative complaint (the “Complaint”) against Forterra, Inc. (“Forterra”), members of its board of directors, and current and former directors and senior executives (collectively, “Defendants”), asserting claims for breach of fiduciary duties, constructive fraud, corporate waste, and unjust enrichment. The Complaint alleges that this action:

arises out of a scheme and wrongful course of business that took place between March 2017 and August 2017 whereby defendants caused Forterra to materially overstate its publicly reported financial results in violation of Generally Accepted Accounting Principles; make other materially false and misleading statements and omissions; facilitate the false financial reporting by operating without effective internal controls; file false and misleading statements with the SEC [United States Securities and Exchange Commission]; and permit certain of its current and former executives to profit from this misconduct by pegging the payment of their cash bonuses to falsely reporting otherwise unattainable quarterly and annual financial targets.

Pl.'s Compl., Doc. 1 at 2, ¶ 1.

         On March 8, 2019, Defendants, excluding Defendant William Kerfin (“Kerfin”), filed the Motion to Dismiss, seeking dismissal on three grounds: (1) forum non conveniens, (2) failure to make a pre-suit demand pursuant to Federal Rule of Civil Procedure 23.1, and (3) failure to state a claim upon which relief can be granted pursuant to Federal Rule of Civil Procedure 12(b)(6). Defendant Kerfin separately filed a motion to dismiss that set forth two grounds: (1) failure to meet the pleading requirements of Federal Rules of Civil Procedure 9(b), 8(a), and 12(b)(6), and (2) failure to set forth the standing requirements to bring a shareholder derivative action. Defendant Kerfin's motion additionally states that he “joins and incorporates in full the other Defendants' Motion to Dismiss, ” as “[t]he same arguments made therein apply equally well to Kerfin's defense: Forterra's Amended and Restated Certificate of Incorporation requires that this dispute be heard in Delaware Court of Chancery and Plaintiff has failed to adequately plead demand futility.” Kerfin's Mot. to Dismiss, Doc. 22 at 3.

         For the reasons set forth herein, the court determines that Defendants' and Kerfin's Motions to Dismiss should be granted based on the doctrine of forum non conveniens. The court, accordingly, will not address the other grounds for dismissal raised in Defendants' and Kerfin's motions.

         Defendants argue that Forterra's Amended and Restated Certificate of Incorporation, filed October 7, 2016, includes a forum-selection clause that requires Maloney to bring this action in a Delaware state court. Defs.' Mot. to Dismiss, Doc. 19 at 11-15. Defendants argue that, pursuant to the forum-selection clause and the Supreme Court's holding in Atlantic Marine Construction Company v. United States District Court for Western District of Texas, 571 U.S. 49 (2013), this case requires adjudication in a Delaware state court and should be dismissed based on forum non conveniens. Id.

         In response, Maloney argues that Defendants erroneously seek dismissal and that the proper procedural mechanism to enforce the forum-selection clause is through the transfer provision set forth in 28 U.S.C. § 1404(a). Pl.'s Opp'n, Doc. 24 at 13. Maloney argues that her choice of forum should be given deference and that the § 1404(a) factors militate against a transfer. Id. at 14, 16. She also argues that the forum-selection clause is non-mandatory by its own terms, and notes that Defendants, in a separate federal securities class action pending in the Northern District of Texas, [1] argued that venue was proper in this district with respect to that case.[2]

         The forum-selection clause in Section 13.1 of Article XIII of the Amended and Restated Certificate of Incorporation states in part:

Section 13.1 Forum. Unless the Corporation consents in writing to the selection of an alternative forum, to the fullest extent permitted by law, and subject to applicable jurisdictional requirements, the sole and exclusive forum for any stockholder (including any beneficial owner) to bring internal corporate claims (as defined below) shall be a state court located within the State of Delaware (or, if no state court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware). For purposes of this Article XIII, “internal corporate claims” means claims, including claims in the right of the Corporation: (a) that are based upon a violation of a duty by a current ...

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