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Federal District Court Finds that Plaintiff did not Adequately Plea ‘Shareholder Ground’ under the Securities Exchange Act

31 Oct 2011
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By Lewis Tesser, Partner, and Timothy Nolen, Associate

A recent opinion from the United State District Court for the Southern District of New York considered whether a plaintiff adequately pled the existence of a “shareholder group” under the Securities Exchange Act. The case concerned issues of pleadings, business litigation, securities litigation and federal practice.

The case, Chechele v. Scheetz, 2011 U.S. Dist. LEXIS 97489 (S.D.N.Y. August 30, 2011), involved a shareholder who filed suit against a defendant CEO, alleging short-swing trading in breach of the defendant’s fiduciary duty. The plaintiff alleged that she was a member of a “shareholder group” which owned more than 10% of the corporation’s stock and that the “shareholder group” arose out of a series of express or implied agreements. Judge Sullivan, however, rejected this argument, noting that the plaintiff’s pleadings did not contain enough factual matter to suggest that an agreement was actually made to support the creation of a “shareholder group.” Therefore, having failed to meet the “shareholder group” standard, the Court dismissed the suit.

At Tesser, Ryan & Rochman, our attorneys’ experience with business and corporate law allows us to identify issues of standing and advice our clients of the most effective way to proceed.

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About Post Author

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Lewis Tesser is a senior partner in the New York law firm of Tesser, Ryan & Rochman, LLP, concentrating his practice in litigation and mediation, representing licensed professionals and professional practices, administrative law and commercial law. Lew Tesser is Vice-President of the New York County Lawyers’ Association and Director of its Ethics Institute. Prior to private practice, Mr. Tesser was an Assistant United States Attorney in the Eastern District of New York. In that capacity, he represented various agencies of the United States government in litigation in the United States District Court and United States Court of Appeals. Mr. Tesser also served as a Judge Advocate in the United States Army where he prosecuted and defended criminal cases and was the chief legal advisor to the Commanding General of the U.S. Army War College, Carlisle, Pennsylvania. He also has served as an Arbitrator for the American Arbitration Association, New York City Civil Court, a Judge for the Environmental Control Board of the City of New York and a lecturer for various Bar Associations and New York area law schools. Mr. Tesser, who was admitted to practice in 1971, is a 1970 Honors graduate from the National Law Center, George Washington University, a Masters graduate from the Wharton Business School, University of Pennsylvania (l974) and a graduate of the Harvard Law School Program of Instruction for Lawyers. He is a past President of Congregation Sons of Israel, Nyack, NY. Publications and Speaking Engagements Editor-In-Chief, “The New York Rules of Professional Conduct Annotated”, Oxford University Press, New York, 2010. A complete list of Mr. Tesser’s speaking engagements and publications is available if you would like to learn more about Mr. Tesser’s work. Representative Cases In Re Zhang, 376 Fed. Appx. 104 (2d Cir. 2010) Continental Casualty Co. v. JBS Construct. Mgmt., 2010 U.S. Dist. LEXIS 85467 (S.D.N.Y. 2010)

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Tesser, Ryan, & Rochman Blog

At Tesser, Ryan, & Rochman we are committed to keeping current, former, and future clients up to date. Here on our blog we will have news regarding our firm, as well as business analysis, various cases, case studies, and legal findings for the benefit of our clients.