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Defazio v. Hollister

June 26, 2009

JAMES P. DEFAZIO, ET AL., PLAINTIFFS,
v.
HOLLISTER, INC., ET AL., DEFENDANTS.



MEMORANDUM AND ORDER RE: CROSS-MOTIONS FOR PARTIAL SUMMARY JUDGMENT, DEFENDANTS' MOTION TO STRIKE CLASS ACTION ALLEGATIONS, AND PLAINTIFFS' MOTION TO REMOVE PLAN TRUSTEES

Plaintiffs James P. DeFazio, Theresa Beetham, Brenda DiMaro, DeLane Humphries, Hallie Lavick, Michael McNair, Sonya Pace, Judy Seay, Nancy Russell Stanton, Cindy Worth, and Kathleen Ellis filed these consolidated actions against defendants Hollister, Inc. ("Hollister"), Hollister Employee Share Ownership Trust ("HolliShare"), The Firm of John Dickinson Schneider, Inc. ("JDS"), Samuel Brilliant, Richard I. Fremgen, Donald K. Groneberg, Charles H. Gunderson, Alan F. Herbert, James A. Karlovsky, Lori Kelleher, James J. McCormack, Charles C. Schellentrager, Loretta L. Stempinski, Michael C. Winn, and Richard T. Zwirner alleging violations of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001-1144. Presently before the court are plaintiffs' and defendants' cross-motions for partial summary judgment, defendants' motion to strike class action allegations, and plaintiffs' motion to remove the plan trustees.

I. Factual and Procedural Background*fn1

In a fourteen-month period between 2004 and 2005, three groups of the current makeup of plaintiffs--former participants and beneficiaries of HolliShare, a defined contribution plan*fn2 established by Hollister (see 1st Zwirner Decl. (Docket No. 399) ¶ 7)--independently filed complaints against defendants Hollister, its parent company JDS, the HolliShare trustees, and various members of the boards of directors of both companies. The cases were consolidated by court order on May 25, 2006. (Docket No. 87.) Currently, the plaintiffs are divided into two groups based upon the two operative complaints in this litigation. Ten of the plaintiffs ("DeFazio/DiMaro plaintiffs") are represented by the same counsel and filed their Fifth Amended Complaint ("HAC") on July 22, 2008. (See Docket No. 368.) Ellis, the only plaintiff represented by separate counsel, filed her Fourth Amended Complaint ("FAC") on January 23, 2008.*fn3 (See Docket No. 314.) Though they differ in some respects--most notably, the HAC contains class action allegations while the FAC does not--the allegations asserted against defendants are substantially similar in both the HAC and FAC.

The claims in this case are based upon the alleged misconduct by the fiduciaries of HolliShare. HolliShare is funded through contributions by Hollister from the company's profits; participants are not permitted to make personal contributions. (See Defs.' 1st App'x (Docket Nos. 486-488) Ex. 1 ("Trust Instrument") §§ 6.01, 6.02.) Hollister is a privately-held Illinois corporation that manufactures and markets healthcare products. (1st Zwirner Decl. (Docket No. 399) ¶¶ 4, 8.) It is the operating subsidiary of JDS, an Illinois corporation that holds all of Hollister's capital stock.*fn4 (Id. ¶ 5.) Consistent with the terms of the HolliShare Trust Instrument, the plan's principal investment is common shares of JDS.*fn5 (Trust Instrument § 11.01(1); 2d Zwirner Decl. (Docket No. 494) ¶ 8.)

In their papers on the instant motions, the parties have divided plaintiffs' claims into three rough categories according to the three primary factual bases upon which they are premised: the prohibited transactions between HolliShare and JDS, the 1999 Transaction (a series of events culminating in the transfer of all of the preferred shares of JDS to a new trust), and the DeFazio-Ellis divorce proceedings.*fn6 Though these categorizations overlap in certain areas, given the complexity of the factual issues in this case, the court will follow the convention adopted by the parties.

A. Prohibited Transactions

JDS has two classes of shares, preferred and common, neither of which has a generally recognized public market. (2d Zwirner Decl. ¶¶ 10-11.) The JDS Articles of Incorporation ("JDS Articles") provide several restrictions on JDS shares relevant to this case.*fn7 First, pursuant to article five, paragraph II.C ("paragraph II.C"), only certain persons and entities are entitled to own JDS shares, including holders of shares as of May 5, 1978, employees of JDS and/or Hollister, and any deferred benefit plan maintained by JDS and/or Hollister.*fn8 (Defs.' 1st App'x Ex. 4 ("JDS Articles") 9.)

Second, article five, paragraph II.D ("paragraph II.D") restricts the manner in which holders of JDS stock may transfer ownership. Specifically, paragraph II.D.2 gives JDS a first right of refusal by requiring that any holder of JDS stock who intends to transfer one or more shares to another must first offer to sell those shares to JDS. (JDS Articles 10.) Paragraph II.D.3 further provides that the price paid for any common share purchased by JDS "shall be its book value as of the end of the calendar month in which the Repurchase Date occurs.... The book value of each common share shall be computed in accordance with generally accepted accounting principles...."*fn9 (Id. 12.) Despite these requirements, paragraph II.D.7 provides that: "Under exceptional circumstances and in the discretion of the Corporation's Board of Directors, shares may be repurchased by the Corporation at such other times, upon such other terms, in such other manners, over such other periods of time, or on such other conditions as the Corporation and the owner or holder of such shares may from time to time agree." (JDS Articles 15.)

JDS common shares are HolliShare's primary investment, and HolliShare must sell those shares in order to raise the cash needed to pay benefits to participants and beneficiaries. (3d Zwirner Decl. (Docket No. 515) ¶ 7.) Since the mid-1980s, HolliShare has sold its holdings of JDS common shares to JDS pursuant to the "exceptional circumstances" provision of paragraph II.D.7, not the first right of refusal embodied in paragraph II.D.2. (Pls.' Stmt. of Undisputed Facts Ex. B ("Zwirner Dep.") 237:19-238:8; 3d Zwirner Decl. ¶¶ 9, 16, 18.) Defendants contend that HolliShare and JDS entered into an agreement ("mid-80s buy-back agreement") that has since governed JDS's repurchase of common shares from HolliShare in order to avoid certain complications. (See 3d Zwirner Decl. ¶ 16.)

The JDS Articles provide that when JDS repurchases shares pursuant to the first right of refusal, it is obligated to pay a only minimal amount in cash (set originally at $5,000 and then increased to $250,000 in 1999) and can pay the remainder with a promissory note. (JDS Articles 12, 44.) Because HolliShare, as an ERISA plan, is prohibited from accepting a promissory note as payment from an employer, see 29 U.S.C. § 1106(a)(1)(B), and HolliShare's cash needs often exceeded the $5,000 and $250,000 minimums, HolliShare could not have sold its shares to JDS under the terms of that provision. (3d Zwirner Decl. ¶ 15.) If JDS did not waive its right of refusal, HolliShare would thus have been unable to sell its JDS stock to anyone pursuant to paragraph II.D.2. (Id.)

To avoid this problem, and to allow JDS to plan ahead for its cash flow needs, HolliShare and JDS agreed in the mid-1980s that: 1) JDS would repurchase HolliShare's common shares entirely for cash (i.e., would not tender promissory notes); 2) the price employed would be the most recent audited December 31 per share book value rather than the month-end book value from the date of the transaction, as provided in paragraph II.D.3; and 3) such transactions would take place only once a year. (3d Zwirner Decl. ¶ 16.)

Plaintiffs contend that these repurchases of JDS common shares from HolliShare using book value violated defendants' statutory duties under ERISA. Particularly in light of evidence that JDS common shares may have had a value in the "outside world" of up to three-times book value (Pls.' Stmt. Disputed Facts Ex. F ("Winn Dep.") 91:15-92:13), plaintiffs assert that defendants breached their fiduciary duties, 29 U.S.C. 1104(a)(1)(B), and violated the provision on prohibited transactions, id. § 1106(a)(1)(A).*fn10

B. 1999 Transaction

HolliShare does not invest in JDS preferred shares.

John Schneider, the founder of JDS, owned a majority of the outstanding preferred shares until he placed all of his holdings into a trust in 1977 ("1977 Schneider Trust"). (2d Zwirner Decl. ¶ 24; Defs.' 1st App'x Ex. 3 at 2-3.) Because those shares comprised a controlling interest in JDS, the 1977 Schneider Trust, through its trustees, effectively controlled JDS.*fn11 (2d Zwirner Decl. ¶ 24.) After 1981, defendants Winn, Stempinksi, and Zwirner became trustees of the trust. (Id. ¶ 29.)

The terms of the 1977 Schneider Trust provided that it would expire on April 21, 2001. (Defs.' 1st App'x Ex. 3 at 11.) Upon its expiration, the trust called for its corpus of preferred shares to be distributed to employees of Hollister who then owned common shares and agreed to abide by certain principles in governing JDS.*fn12 (Id.) These employee-beneficiaries would have received a number of preferred shares in proportion to their relative holdings of JDS common shares. (Id.) Several years before the 1977 Schneider Trust was set to expire, however, its trustees considered the impact of the distribution of preferred shares on the company. (2d Zwirner Decl. ¶ 32.) Defendants contend that the trustees perceived several adverse effects from the distribution, including the possibility that a small number of employees might form an insulated controlling bloc, the prospect that the employees might vote to take JDS public, and the potential that votes to appoint members of the JDS and Hollister boards of directors could lead to factionalism in the company. (Id.)*fn13

Ultimately, Winn, Stempinski, and Zwirner proposed that a new trust ("1999 Preferred Share Trust") be created to hold the preferred shares that would otherwise be distributed to the employee beneficiaries of the 1977 Schneider Trust. (See 2d Zwirner Decl. ¶ 34; Winn Decl. (Docket No. 492) ¶ 28.) On February 17, 1999, they sent a letter ("1999 Proposal Letter") to all employees of Hollister who then owned JDS common shares, stating that the trustees believed that the 1999 Preferred Share Trust was desirable to maintain the independent and employee-owned nature of Hollister and adherence to the principles of John Schneider. (Defs.' 1st App'x Ex. 5 ("1999 Proposal Letter") at 2; 2d Zwirner Decl. ¶ 37.) The letter requested that the recipients transfer the preferred shares to which they would otherwise be entitled to the new trust. (Id.) The letter further informed recipients that they would either need to sign an enclosed "Agreement to Vote," which stated that the signatory agreed to adhere to the principles specified by the 1977 Schneider Trust, or the "Consent," which stated that the signatory agreed to transfer the preferred shares he or she would have been entitled to receive to the 1999 Preferred Share Trust. (1999 Proposal Letter 27; id. Enclosures 4, 5.)

On April 21, 1999, all of the recipients of the 1999 Proposal Letter agreed to transfer their prospective preferred shares to the 1999 Preferred Share Trust.*fn14 (Zwirner Decl. ¶ 43; Winn Decl. ¶ 41.) In order to effect the transfer of shares between the 1977 Schneider Trust and the 1999 Preferred Share Trust at the expiration of the former in 2001, however, the JDS Articles had to be amended to allow the 1999 Preferred Share Trust to own JDS shares. Because the JDS Articles provided that any changes to the stock restrictions required a two-thirds vote of all classes of shares--rather than simply a majority of all outstanding stock (JDS Articles 27)--votes from the shares held by HolliShare (approximately 69% of all common shares) were necessary to effect the amendment. (See Thielitz Decl. (Docket No. 493) ¶ 4; 2d Zwirner Decl. ¶ 49.)

At a meeting on April 28, 1999, the HolliShare trustees--who at that time were Zwirner, Karlovsky, and McCormack--agreed to vote HolliShare's JDS common shares in favor of the amendment to the JDS Articles. Ultimately, at the April 30, 1999 JDS shareholders' meeting, JDS shareholders voted unanimously to amend the JDS Articles, and those amendments were filed with the Illinois secretary of state on June 14, 1999. (2d Zwirner Decl. ¶ 65; JDS Articles 51-52.) The propriety of the vote to approve the amendments, as well as the adequacy of the trustees' decisionmaking process, form the basis of plaintiffs' claims related to the 1999 Transaction. Plaintiffs essentially argue that, but for the 1999 Transaction, HolliShare would have become the majority shareholder of JDS and its holdings would have experienced an increase in value.

For purposes of the instant motions, plaintiffs contend that all of the HolliShare fiduciaries who voted in favor of the 1999 Transaction violated ERISA by engaging in a self-dealing transaction, 29 U.S.C. § 1106(b), and breaching their fiduciary duties, id. §§ 1104, 1105.

C. DeFazio-Ellis Divorce Proceedings

Particular to plaintiffs DeFazio and Ellis, the HAC and FAC also assert claims against all defendants based upon Hollister's compliance with a series of domestic relations orders (DROs) issued by the Superior Court of Sacramento as part of DeFazio and Ellis's divorce proceedings. (HAC ¶¶ 132-34; FAC ¶¶ 69-71.)

The marriage of DeFazio and Ellis was dissolved by court order on March 1, 1999.*fn15 (Defs.' Req. Judicial Notice (Docket No. 530) Ex. A at 14.) In that order, the Superior Court reserved decision for a later date on the division of Ellis's retirement assets and the amount of DeFazio's share of those assets that would be held as security for the payment of child support. (Id. at 6-8.) The issue of the division of Ellis's retirement account with HolliShare was finally determined by a March 29, 2002 stipulation and order ("March 2002 order"). In that order, entitled "Stipulated Qualified Domestic Relations Order," DeFazio and Ellis agreed that DeFazio was entitled to one-half the value of Ellis's HolliShare account as community property, and HolliShare was ordered to hold DeFazio's share in a segregated account. (Req. Judicial Notice Ex. G ("March 2002 order") ¶¶ 4-5.) The order further provided that the Superior Court "retains jurisdiction over Husband's Share in the entire amount up to One Million Five Hundred Thousand and No/100 Dollars ($1,500,000.00), pending resolution of child support and property settlement issues between Husband and Wife," and ordered HolliShare to retain possession of those funds "pending further order of this court." (Id. ¶ 7.) The March 2002 order also stated that "this Order is intended to be a Qualified Domestic Relations Order, as that term is defined in [the Internal Revenue] Code section 414(p) and section 206(d)(3) of the Employee Retirement Income Security Act." (Id. 1:26-28.)

Pursuant to the March 2002 order, the Superior Court issued six subsequent orders ordering HolliShare to distribute payments to Ellis that comprised child support payments that DeFazio failed to make and advances on future anticipated child support obligations, as well as associated attorneys fees and costs for the collection of past-due child support payments. (See id. Exs. I (order dated August 5, 2002), J (order dated April 2, 2003), K (order dated May 4, 2004), N (order dated June 20, 2004), T (order dated November 9, 2005), U (order dated December 13, 2007).)*fn16

Presently before the court are the parties' seven separate motions: 1) defendants' motion to strike plaintiffs' class action allegations (Docket No. 495); 2) defendants' motion for partial summary on claims barred by the statute of limitations (Docket No. 483); 3) defendants' motion for partial summary judgment on the fiduciary status of the Hollister Board and JDS (Docket No. 484); 4) plaintiffs' motion for partial summary judgment on claims related to the prohibited transactions and 1999 Transaction (Docket No. 477); 5) defendants' motion for partial summary judgment on the claims related to the 1999 Transaction (Docket No. 489); 6) DeFazio's motion for partial summary judgment on claims related to the divorce proceedings (Docket No. 474);*fn17 and 7) plaintiffs' motion to remove the plan trustees (Docket No. 475).

Before turning to the merits of these motions, the court notes that despite the submission of twenty briefs and hundreds of pages of evidence in support of the instant motions, the parties have declined to address numerous claims and have chosen not to discuss specific arguments and factual issues. Plaintiffs in particular expressly chose to withhold certain theories and evidence in their motions. (See Docket No. 537 at 20:3-9 ("[P]laintiffs are smarter than that. Our motion for partial summary judgment of the prohibited transaction claims was tailored to narrow questions of law.... We also intentionally avoided disputed factual questions...."). Even assuming the wisdom of this strategy, the parties have pursued it haphazardly, creating a disjointed record and often confusing each other as to whether certain issues had been raised or whether plaintiffs had abandoned particular claims. The rationale underlying this strategy is not immediately apparent. Nevertheless, the court shall confine its analysis to the particular theories and arguments presented in the parties' moving papers.

II. Discussion

A. Motion to Strike Class Allegations

Defendants move to strike the DeFazio/DiMaro plaintiffs' class allegations, which were first alleged in the Fourth Amended Complaint filed on January 23, 2008. (See Docket No. 312 ¶¶ 13-20.) With discovery now closed and the trial date approaching, plaintiffs have not yet moved for class certification, and defendants contend that they have suffered prejudice as a result of the DeFazio/DiMaro plaintiffs' delay in doing so. (See Docket No. 495 2:20-26); Siskind v. Sperry Ret. Program, Unisys, 47 F.3d 498, 503 (2d Cir. 1995) ("[F]undamental fairness requires that a defendant named in a suit be told promptly the number of parties to whom it may ultimately be liable for money damages." (citing McCarthy v. Kleindienst, 741 F.2d 1406, 1412 (D.C. Cir. 1984))); see also Sterling v. Envtl. Control Bd. of N.Y., 793 F.2d 52, 58 (2d Cir. 1986) (holding that a plaintiff's "failure to move for class certification until a late date is a valid reason for denial of such a motion").

In response to defendants' motion to strike, the DeFazio/DiMaro plaintiffs submitted a statement of non-opposition. (Docket No. 533.) Having considered defendants' arguments and in light of plaintiffs' non-opposition, the court will grant defendants' motion to strike the DeFazio/DiMaro plaintiffs' class allegations. See, e.g., Rones v. N.A.A.C.P., 170 F.R.D. 80, 82 (D.D.C. 1997); Roberson v. Danny Ontiveros Trucking, No. 08-552, 2008 WL 4809960, at *6 (E.D. Cal. Nov. 3, 2008) (O'Neill, J.); Valdez v. St. Francis Mem'l Hosp., No. 78-2174, 1979 WL 146, at *1 (N.D. Cal. Jan. 17, 1979); see also Read v. Input/Output, Inc., No. 05-108, 2005 WL 2086179, at *2-3 (S.D. Tex. Aug. 26, 2005). Accordingly, paragraphs twelve through nineteen of the HAC shall be stricken.

B. Cross-Motions for Partial Summary Judgment

Summary judgment is proper "if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law."

Fed. R. Civ. P. 56(c). A material fact is one that could affect the outcome of the suit, and a genuine issue is one that could permit a reasonable jury to enter a verdict in the nonmoving party's favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The moving party bears the burden of demonstrating the absence of a genuine issue of material fact. Id. at 256. On issues for which the ultimate burden of persuasion at trial lies with the nonmoving party, the moving party bears the initial burden of establishing the absence of a genuine issue of material fact and can satisfy this burden by presenting evidence that negates an essential element of the nonmoving party's case or by demonstrating that the nonmoving party cannot produce evidence to support an essential element of its claim or defense. Nissan Fire & Marine Ins. Co., Ltd. v. Fritz Cos., Inc., 210 F.3d 1099, 1102 (9th Cir. 2000).

Once the moving party carries its initial burden, the nonmoving party "may not rely merely on allegations or denials in its own pleading," but must go beyond the pleadings and, "by affidavits or as otherwise provided in [Rule 56,] set out specific facts showing a genuine issue for trial." Fed. R. Civ. P. 56(e); accord Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986); Valandingham v. Bojorquez, 866 F.2d 1135, 1137 (9th Cir. 1989). On those issues for which it will bear the ultimate burden of persuasion at trial, the nonmoving party "must produce evidence to support its claim or defense." Nissan Fire, 210 F.3d at 1103.

In its inquiry, the court must view any inferences drawn from the underlying facts in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). The court also may not engage in credibility determinations or weigh the evidence, for these are jury functions. Anderson, 477 U.S. at 255.

When the parties submit cross-motions for summary judgment, the court must consider each motion separately to determine whether either party has met its burden, "giving the nonmoving party in each instance the benefit of all reasonable inferences." ACLU of Nev. v. City of Las Vegas, 333 F.3d 1092, 1097 (9th Cir. 2003); see also Fair Hous. Council v. Riverside Two, 249 F.3d 1132, 1136 (9th Cir. 2001) (when parties submit cross-motions for summary judgment, "each motion must be considered on its own merits" and "the court must review the evidence submitted in support of each cross-motion").

1. Defendants' Motion on the Statute of Limitations

Defendants move for partial summary judgment on several of plaintiffs' claims as time barred.*fn18 ERISA's statute of limitations provides:

No action may be commenced under this subchapter with respect to a fiduciary's breach of any responsibility, duty, or obligation under this part, or with respect to a violation of this part, after the earlier of--

(1) six years after (A) the date of the last action which constituted a part of the breach or violation, or (B) in the case of an omission the latest date on which the fiduciary could have cured the breach or violation, or

(2) three years after the earliest date on which the plaintiff had actual knowledge of the breach or violation; except that in the case of fraud or concealment, such action may be commenced not later than six years after the date of discovery of such breach or violation.

29 U.S.C. § 1113 (emphasis added).

Unless the "fraud or concealment" exception applies, a plaintiff must file a claim within six years of the date of the last act constituting a part of the alleged violation, regardless of when the plaintiff actually learned of the violation. Kanawi v. Bechtel Corp., 590 F. Supp. 2d 1213, 1225 (N.D. Cal. 2008). "The fraud or concealment exception applies only when an ERISA fiduciary either misrepresents the significance of facts the beneficiary is aware of (fraud) or... hides facts so that the beneficiary never becomes aware of them (concealment)." Barker v. Am. Mobil Power Corp, 64 F.3d 1397, 1401 (9th Cir. 1995) (quoting Radiology Ctr., S.C. v. Stifel, Nicolaus & Co., 919 F.2d 1216, 1220 (7th Cir. 1990)); see Ranke v. Sanofi-Synthelabo Inc., 436 F.3d 197, 204 (3d Cir. 2006) (stating that an ERISA fiduciary must "have taken affirmative steps to hide an alleged breach of fiduciary duty from a beneficiary in order for the 'fraud or concealment' exception to apply").

Some courts have recognized that the "fraud or concealment" exception to § 1113 incorporates the common law doctrine of "fraudulent concealment." Barker, 64 F.3d at 1402. Under that common law doctrine, passive concealment alone may toll the statute of limitations if the defendant has a duty to disclose material information. Thorman v. Am. Seafoods Co., 421 F.3d 1090, 1092 (9th Cir. 2005). Courts that have considered the question, however, have rejected the doctrine of passive concealment as applied to § 1113. See, e.g., Larson v. Northrop Corp., 21 F.3d 1164, 1174 (D.C. Cir. 1994) ("While a fiduciary's mere silence could, in some circumstances, amount to fraud, it would still fall short of the fraudulent concealment that courts have required for purposes of § 1113."); Schafer v. Ark. Med. Soc'y, 853 F.2d 1487, 1491 (8th Cir. 1988) (holding that active concealment under § 1113 requires "more than merely a failure to disclose").

The Ninth Circuit in Barker also implicitly found passive concealment insufficient to toll the six-year statute of limitations. In holding that the defendants in that case did not engage in "fraud or concealment," the Barker court focused only on whether the defendants had affirmatively concealed their breach, see 64 F.3d at 1401, even though the Court of Appeals recognized that an ERISA fiduciary generally has a duty to disclose accurate information to beneficiaries, see id. at 1403 (noting the fiduciary's duty "to convey complete and accurate information material to the beneficiary's circumstance"). The "fraud or concealment" exception, therefore, does not apply simply because an ERISA fiduciary fails to disclose material information.*fn19

a. Amendments to the JDS Articles

Defendants first move for summary judgment on plaintiffs' claims based upon HolliShare trustees' votes in favor of amending the JDS Articles in 1978, 1980, 1984, and 1999. (Docket No. 483 7:9-16.) According to the complaints, defendants' breached their fiduciary duties by voting for these amendments, which allegedly harmed HolliShare's assets. For example, the 1978 amendments reinstated the stock transfer restrictions on repurchases of JDS common shares. (HAC ¶ 66; FAC ¶ 50.) The 1980 amendment allegedly reduced JDS cash reserves and thus JDS's ability to repurchase HolliShare's holdings, while the 1984 amendment allegedly reduced the reliability of JDS audits. (See HAC ¶¶ 67-68; FAC ¶¶ 51-52.) The 1999 amendments--the votes for the last of which were cast on April 30, 1999--indemnified corporate directors from suit by shareholders and prohibited any natural persons from owning more than 10% of JDS stock. (See HAC ¶¶ 69-70, 76; FAC ¶¶ 53; Thielitz Decl. ¶ 40.)

The first of the complaints in this consolidated action was filed on July 15, 2004. (Docket No. 1.) However, the first complaints that asserted claims related to these amendments were not filed until April 19 and 20, 2007 (see Docket Nos. 182-183), more than six years after the vote for the last amendment at issue. Based on the record before the court, there is no evidence from which a reasonable inference could be drawn that defendants took steps to conceal any of the votes in favor of the amendments. Furthermore, all of the amendments to the JDS Articles were filed with the Illinois Secretary of State. (See JDS Articles 6, 32, 40, 42, 49.) Though it does not appear that HolliShare fiduciaries affirmatively disclosed to beneficiaries and participants that they had voted HolliShare's holdings of JDS common shares in favor of these amendments, such passive concealment does not qualify for the "fraud or concealment" exception of ยง 1113. Accordingly, because there is no dispute that the first complaints to assert claims based on votes in favor of amendments ...


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