Phillip Sprando, derivatively on behalf of International Game Technology v. Patti S. Hart;

This disposition is not appropriate for publication and is not precedent*
except as provided by 9th Cir. R. 36-3.
The panel unanimously concludes this case is suitable for decision**
without oral argument. See Fed. R. App. P. 34(a)(2).
NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
PHILLIP SPRANDO, derivatively on
behalf of International Game Technology,
Plaintiff - Appellant,
v.
PATTI S. HART; et al.,
Defendants - Appellees.
No. 11-17018
D.C. No. 3:10-cv-00415-ECR-
VPC
MEMORANDUM*
Appeal from the United States District Court
for the District of Nevada
Edward C. Reed, Senior District Judge, Presiding
Submitted May 15, 2013**
San Francisco, California
FILED
JUN 13 2013
MOLLY C. DWYER, CLERK
U .S. C OU R T OF APPE ALS

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The Honorable Edward R. Korman, Senior District Judge for the U.S.***
District Court for the Eastern District of New York, sitting by designation.
2
Before: CLIFTON and BEA, Circuit Judges, and KORMAN, Senior District
Judge.***
Phillip Sprando initiated a shareholder derivative action on behalf of
International Game Technology (“IGT”) against certain of IGT’s directors and
officers. The district court dismissed that action on two grounds: (1) Sprando
failed to allege contemporaneous ownership of IGT stock, because much of the
conduct challenged in the complaint occurred prior to Sprando’s acquisition of
stock, and (2) Sprando failed to comply with the requirements of Federal Rule of
Civil Procedure 23.1, because IGT’s Board of Directors (“the Board”) had not
refused Sprando’s demand for investigation and action. Sprando appeals the
dismissal on both grounds. With respect to the first issue, he urges us to adopt the
“continuing wrong” exception to the contemporaneous ownership requirement and
hold that it applies on the facts of this case. With respect to the second issue,
Sprando argues that the district court abused its discretion by basing its decision on
a clearly erroneous factual finding (i.e. that the Board had not refused his demand).
We have jurisdiction under 28 U.S.C. § 1291 and affirm.

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Because the second issue can dispose of the appeal, we address it first. This
court reviews “district court determinations regarding the demand requirement for
derivative actions . . . for abuse of discretion.” Potter v. Hughes, 546 F.3d 1051,
1056 (9th Cir. 2008). Because Sprando argues that the district court abused its
discretion by basing its determination that the Board did not refuse Sprando’s
demand on a clearly erroneous assessment of facts, we must determine whether the
district court’s decision was “(1) illogical, (2) implausible, or (3) without support
in inferences that may be drawn from the facts in the record.” United States v.
Hinkson, 585 F.3d 1247, 1262 (9th Cir. 2009) (en banc) (internal quotation marks
and citation omitted). Only when at least one of those three conditions is met can
this court hold that the district court “abused its discretion by making a clearly
erroneous finding of fact.” Id.
The district court’s determination that the Board did not refuse Sprando’s
demand is not illogical, implausible, or without support in inferences which may
be drawn from the record. Indeed, the record of the parties’ correspondence
confirms the district court’s determination. The record establishes that Sprando
sent the Board his demand on October 7, 2009. IGT’s general counsel, David
Johnson, responded to that letter with a request for information on October 30,

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2009. On the same day, Sprando sent a supplemental letter to bolster the claims in
his initial demand. On November 4, 2009, Johnson responded to confirm that he
had received the supplemental letter. In that response, Johnson said he would wait
until he received the previously requested information, and then give both letters to
the Board at the same time.
Sprando’s attorneys apparently sent the necessary information on November
12, 2009. They sent a follow-up letter and requested an update on December 21,
2009. It is not clear from the record what happened to these two letters. Johnson
left IGT around that time, and his replacement, Robert Melendres, subsequently
explained that they may have been misplaced as a result. The facts in the record
support an inference that the letters were inadvertently misplaced or lost. First, the
complaint did not allege that any IGT representative intentionally withheld or
destroyed the letters in question, nor did it allege that any IGT representative took
any action in bad faith with respect to those letters. Second, when Sprando’s
attorneys sent the confirmation materials a second time, the legal department
promptly delivered them with Sprando’s demand to the Board, as it had promised
in the November 4, 2009, letter. These facts support an inference that IGT’s legal

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department held Sprando’s demand in the hopes that it would receive the requested
information.
On March 25, 2010, Sprando’s attorneys sent the two letters a second time
and requested a “definitive response” to the demand by April 2, 2010. It is not
clear what Sprando’s attorneys meant by “definitive response” here. The eight-day
deadline and the fact that the Board had not yet seen the demand support an
inference that Sprando’s attorneys requested merely that the Board decide to
pursue an investigation or refuse the demand outright.
On March 31, 2010, Melendres responded to Sprando’s attorneys and stated
that the materials would be forwarded to the Board and that the Board would
respond within two weeks. On April 16, 2010, roughly two days after the two-
week deadline had expired, an IGT representative called Sprando’s attorneys and
told them the Board would respond within a week. On April 26, 2010, roughly
three days after that one-week deadline had expired, Philip Satre, the Chairman of
the Board, faxed Sprando’s attorneys a letter which stated that the Board had asked
him to perform an “initial[] review” of the demand and “report back . . . with a
recommendation for next steps to be taken.” Such language logically supports an
inference that the Board had decided not to refuse the demand outright and wanted

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at least some kind of investigation into its substance. Thus, the district court’s
determination that the Board did not refuse Sprando’s demand is not illogical,
implausible, or without support from inferences which may be drawn from the
record.
Because the above determination as to the demand-refusal issue is sufficient
to warrant an affirmance of the district court’s dismissal, we do not reach
Sprando’s argument that we should adopt the continuing wrong doctrine.
AFFIRMED.

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