Arkansas Teacher Retirement System, Fire & Police Pension Association of Colorado v. Angelo R. Mozilo

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
ARKANSAS TEACHER RETIREMENT
SYSTEM, FIRE & POLICE PENSION
ASSOCIATION OF COLORADO;
LOUISIANA MUNICIPAL POLICE
EMPLOYEES’ RETIREMENT SYSTEM;
CENTRAL LABORERS PENSION
FUND; PUBLIC EMPLOYEES
RETIREMENT SYSTEM OF
MISSISSIPPI,
Plaintiffs - Appellants,
v.
ANGELO R. MOZILO; DAVID
SAMBOL; HENRY G. CISNEROS;
ROBERT J. DONATO; JEFFREY M.
CUNNINGHAM; MARTIN R. MELONE;
ROBERT T. PARRY; OSCAR P.
ROBERTSON; KEITH P. RUSSELL;
STANFORD L. KURLAND; CARLOS
M. GARCIA; ERIC P. SIERACKI;
COUNTRYWIDE FINANCIAL
CORPORATION, Nominal Defendant,
Defendants - Appellees,
____________________________,
No. 10-56340
D.C. No. 2:07-cv-06923-MRP-
MAN
MEMORANDUM*
FILED
DEC 31 2013
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
* This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.

-- 1 of 4 --

HARLEY W. SNYDER; MICHAEL E.
DOUGHERTY; BANK OF AMERICA
CORPORATION,
Defendants,
And
ROBERT L. GARBER,
Third-party-plaintiff.
Appeal from the United States District Court
for the Central District of California
Mariana R. Pfaelzer, Senior District Judge, Presiding
Argued and Submitted November 8, 2012
Submission Withdrawn January 10, 2013
Resubmitted December 27, 2013
Pasadena, California
Before: REINHARDT and THOMAS, Circuit Judges, and NAVARRO, District
Judge.**
In this shareholder derivative action, five institutional investors have sued on
behalf of the former Countrywide Financial Corporation (“Countrywide”),
asserting state and federal derivative claims for breach of fiduciary duty and
securities law violations against former Countrywide officers and directors. While
the suit was pending in the district court, Countrywide merged into a wholly-
** The Honorable Gloria M. Navarro, District Judge for the U.S. District
Court for the District of Nevada, sitting by designation.
-2-

-- 2 of 4 --

owned subsidiary of Bank of America Corporation in a stock-for-stock transaction
that divested the plaintiffs of their Countrywide shares. Nominal defendant
Countrywide then moved for judgment on the pleadings, arguing that the merger
destroyed the plaintiffs’ standing to pursue derivative claims on Countrywide’s
behalf. The district court granted the defendant’s motion, finding that the plaintiffs
cannot satisfy the “continuous ownership” requirement for shareholder derivative
standing under Fed. R. Civ. P. 23.1 and Delaware law.
On appeal, the parties agree that Delaware law governs the plaintiffs’
derivative standing, with both parties relying on Ark. Teacher Ret. Sys. v. Caifa,
996 A.2d 321 (Del. 2010).
We certified the question of post-merger derivative standing to the Supreme
Court of the State of Delware, pursuant to Delaware Supreme Court Rule 41. The
Supreme Court graciously accepted our certification of the following question:
Whether, under the “fraud exception” to Delaware’s continuous ownership
rule, shareholder plaintiffs may maintain a derivative suit after a merger that
divests them of their ownership interest in the corporation on whose behalf
they sue by alleging that the merger at issue was necessitated by, and is
inseparable from, the alleged fraud that is the subject of their derivative
claims.
The Delaware Supreme Court issued its decison and answered our question
in the negative, holding that the Countrywide-Bank of America merger
-3-

-- 3 of 4 --

extinguished the plaintiffs’ derivative standing. Arkansas Teacher Retirement
System v. Countrywide Financial Corp. 75 A.3d 888, 897 (Del. 2013).
The Delaware Supreme Court’s opinion is self-explanatory and dispositive
of this appeal. We need not, and do not, reach any other question urged on appeal.1
We deny all pending motions as moot. We affirm the judgment of the district
court.
AFFIRMED.
1 Following the decision of the Delaware Supreme Court, Plaintiffs urge us
now to decide the question of standing under federal common law. However, prior
to certification, all parties agreed that Delware law controlled, and we certified the
question of standing to the Delware Supreme Court on that basis. Under the
doctrine of law of the case, we decline to revisit that decision. Jeffries v. Wood,
114 F.3d 1484, 1489 (9th Cir. 1997) (en banc). We leave any decision as to federal
common law for another day.
-4-

-- 4 of 4 --