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issuing injunction against state court derivative action where same stockholder sought to relitigate demand excusal
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Civil Action Nos. 00-1377; C/W 00-1387, SECTION "A"
June 28, 2000
MEMORANDUM OPINION AND ORDER GRANTING PRELIMINARY INJUNCTION
Before the Court are Motions for Preliminary Injunction and Stay of Proceedings in State Court filed pursuant to 28 U.S.C. § 2283 and § 1651 on behalf of the plaintiffs in the captioned consolidated proceedings, they are: William D. Treeby, Stone, Pigman, Walther, Wittmann Hutchinson, L.L.P. and Dennis P. Neyland. Formal opposition was filed on behalf of the defendant James E. Aymond. His opposition garnered formal reply briefs on behalf of the plaintiffs. The matter was deemed submitted for decision on the briefs and documents of record. For reasons set forth in detail below the Court is of the opinion that under the relitigation exception and to protect and effectuate this Court's prior final judgment in Aymond's Federal Derivative Action, the preliminary injunction requested by the plaintiffs is warranted.
Pursuant to the All Writs Act, 28 U.S.C. § 1651, and the relitigation exception to the Anti-Injunction Act, 28 U.S.C. 2283, and Fed.R.Civ.Proc. 65, plaintiffs request that this Court issue an order preliminarily and permanently enjoining the defendant, James E. Aymond, from prosecuting a state court shareholder derivative action so as to protect the integrity of this Court's January 5, 1998 judgment entered in Aymond's first shareholder derivative action filed in federal court entitled, "James Aymond v. Dennis P. Neyland, et al, Civil Action No. 97-2781 "A". Additionally, and or, alternatively, plaintiffs seek an order enjoining the Honorable Reginald Badeaux, Judge of the Twenty-Second Judicial District Court for the Parish of St. Tammany, State of Louisiana, from all further proceedings in the state court derivative action entitled, "James Aymond v. Dennis P. Neyland, et al", number 2000-10025, "I" on the docket of that court.
I. CONTENTIONS OF THE PARTIES.
Plaintiffs, William D. Treeby ("Treeby"), his law firm Stone, Pigman, Walther, Wittman Hutchinson, L.L.P. ("Stone Pigman") and Dennis P. Neyland ("Neyland") argue persuasively that January 3, 2000 State Derivative Action filed by the defendant herein, James E. Aymond ("Aymond"), is but one more facet of his campaign of harassment and misuse of the judicial process to carry out a personal vendetta against Treeby and Stone Pigman. Plaintiff's position is further to the effect that clearly the state court shareholder's derivative action represents a gross abuse of judicial process asserts, as well as an attempt to circumvent this Court's orders, since it is based upon essentially the same conduct, transactions and occurrences as Aymond's earlier Federal Derivative Action was derailed over two years ago by this Court's final judgment in James Aymond v. Dennis P. Neyland, et al, Civil Action No. 97-2781 "A" (hereinafter "the Federal Derivative Action").
See, "James Aymond v. Dennis Neyland, William Treeby, Stone, Pigman, Walther, Wittmann Hutchinson, L.L.P., National Safety Consultants, Inc. and Leta Laborde," Number 2000-10025 on the Docket of the Twenty-Second Judicial District Court for the Parish of St. Tammany (hereinafter referred to as "the State Derivative Action") [Treeby Exhibit "E"].
Treeby reminds the Court that he represented NSC in lawfully removing Aymond (a convicted felon) from control of NSC in October, 1995. Treeby, et al, recounts the evidence of Aymond's vengeful campaign of harassment, as follows:
Aymond not only filed two lawsuits against Treeby [Treeby Exhibits "B" and "E"], but also a State Bar Complaint (which was rejected) [Treeby Exhibits "F", "G", and "H"], and a formal complaint with the NSC Board (which was independently investigated and rejected) [Treeby Exhibits "A" and "D"]See, Treeby/Stone Pigman Memo in Support, at p. 2. The clearest evidence of abuse of the judicial process is evidenced by the May 2000 transcription of the April 6, 2000 recorded telephone conversation between Aymond and Neyland. In that conversation, Aymond in no uncertain terms offers to dismiss his claims against Neyland, if Neyland join forces with him and turn on Treeby, et al. Aymond outlined the deal to Neyland as follows:
When its all over with, I think we'll come out with a pot of money for our backpay. Let me just tell you this, if I beat Treeby on my own without you, then I get 60 percent of it, and Joe Ward [Aymond's attorney] gets 40 percent of it. If I beat Treeby with you, you get half, and I get half.
See, Transcription of the April 6, 2000 Recorded Telephone Conversation, at p. 36 [Treeby Exhibit "J" and Neyland's Reply Exhibit "A"].
In the Federal Derivative Action, this Court granted the defendants' Rule 23.1 motions to dismiss on the basis of multiple standing defects, to wit: (1) as a 50% shareholder of NSC, Aymond lacked standing to assert a shareholder derivative action; (2) having made formal demand on the NSC Board to take legal action on behalf of the corporation, Aymond conceded the NSC Board's independence; and finally (3) plaintiff failed to demonstrate demand futility, a defect which could not be cured. See, Order and Reasons, Aymond v. Neyland, et al, U.S.D.C. E.D. La. Civ. No. 97-2781(A) [Treeby Exhibit "C"].
Aymond's opposition is simply that this Court's prior ruling, dismissing his federal shareholder's derivative action in January of 1998 for lack of standing, is not an adjudication on the merits, and thus, it can have no preclusive effect in the nature of either res judicata or collateral estoppel. Aymond argues that this court's earlier ruling is not an adjudication of his standing in the state court derivative action because "the facts that existed as of the filing of the state court suit in January, 2000, [were] circumstances [that were] unknowable in January of 1998." See, Aymond's Memorandum in Opposition, at p. 2. Aymond opposition does not address either Neyland's contention or evidence to the effect that the only reason Neyland was named as a defendant in the State Derivative Action was to procure his cooperation in the suit against Treeby and Stone Pigman.
See Aymond's Opposition Memoranda, at p. 2.
In reply, plaintiff's note that NSC has in fact timely filed a lawsuit for damages against Timbermens Fund, et al on account of its failure to renew a service agreement with NSC. The table attached as an appendix to Treeby's reply amply illustrates the parallel nature of the allegations against Treeby, et al, and Neyland in the Federal and the now pending State Derivative Actions. As to Aymond's statement that the circumstances which presaged his State Derivative Action being unknowable at the time of the Federal Derivative Action, the parallel nature of the allegations belie any such assertion. A side by side review of the allegations of the Federal Derivative Complaint [Treeby Exhibit "B"] and those of the State Derivative Complaint [Treeby Exhibit "E"] clearly demonstrates that the circumstances regarding the latter were both knowable and foretold by the former. Plaintiffs' reply brief further explains and amply illustrates that Special Litigation Committee's (SLC's) report constitutes final and binding authority.
See, Complaint styled, "National Safety Consultants, Inc. v. Denvor H. Martin, et al," No. 97-11091 "A" on the docket of the Twenty-Second Judicial District Court for the Parish of St. Tammany [Neyland's Reply Exhibit "B"].
The August 3, 1998 Report of the Special Litigation Committee of the NSC Board, pertaining to the derivative claims of shareholder James Aymond, concluded that Aymond's claims either lacked merit or factual support, or both, and that cost and potential losses to NSC on account pursuing any such litigation outweighed any benefit to NSC. See August 3, 1998 Report of the SLC [Treeby Exhibit "D"]. Aymond's ability to challenge the SLC's conclusions through a shareholder's derivative action is limited to a claim that the actions of the SLC were not in good faith or were unreasonable; There are no such allegations in the State Derivative Action. [Treeby Exhibit "E"]. Aymond simply reiterates the allegations, facts and circumstances which precipitated his filing the earlier Federal Derivative Action. [Treeby Exhibit "B"].
II. BACKGROUND.
On September 8, 1997, Aymond, defendant in the captioned consolidated proceedings, initiated his first shareholder derivative action in federal court entitled, "James Aymond v. Dennis P. Neyland, et al," Civil Action No. 97-2781, Section "A" (the "Federal Derivative Action") [Treeby Exhibit "B"]. National Safety Consultants, Inc. ("NSC") is a corporation created by Aymond and Dennis P. Neyland. NSC contracted to act as a third-party administrator to the Louisiana Safety Association of Timbermens-Self Insurers Fund ("LSAT" or "Timbermens Fund"). In the Federal Derivative Action, Aymond accused Neyland and Treeby, et al, of violation of the "RICO" statute by engaging in various acts of fraud and mismanagement in connections with the operations of NSC and the servicing of the LSAT contract. These alleged wrongful acts were the same allegedly wrongful acts addressed to the NSC Board via Aymond's August 7, 1997 formal demand [Treeby Exhibit "A"] urging an investigation and into and legal action with respect wrongful conduct of NSC management and its attorney, William Treeby of Stone Pigman.
Racketeering Influenced and Corrupt Organization Act, 18 U.S.C. § 1961 et seq.
In response to Aymond's formal demand, NSC's Board appointed independent Director Brice Jones ("Jones") as a Special Litigation Committee ("SLC") to investigate the allegations. Jones, in turn, hired an investigative firm run by two retired FBI Special Agents, and the law firm of Jones, Walker, Waechter, Poitevent, Carrere Denegre to conduct an independent investigation. As previously mentioned NSC's Board delegated binding authority to the SLC to take apppropriate action to determine whether it was in the NSC's best interest to pursue any of the claims alleged by Aymond.
See, Affidavit of G. Brice Jones (with attachments).
This Court granted Neyland and Treeby, et al's Motion to Dismiss the Federal Derivative Action, entering an order on January 5, 1998, which determined: (1) that as a 50% shareholder of NSC Aymond lacked standing under Louisiana law to assert a shareholder's derivative action; (2) that Aymond made formal demand on NSC's Board of Directors to take legal action, conceded the Board's independence, and was therefore without standing to bring a shareholder derivative action; and (3) that Aymond's demand futility argument was similarly "a goner." Aymond did not appeal this Court's order and judgment dismissing his Federal Derivative Action on account of multiple standing defects and concomitant finding that Aymond could only and had only alleged duties owed to NSC and not to himself individually.
Prior to filing the Federal Derivative Action, James Aymond through counsel made written demand on the NSC's Board of Directors to "take all necessary legal action against present management of NSC and its counsel for all monetary losses which the company had sustained as a result of wrongful conduct engaged in by these parties." See Letter dated August 7, 1997 [Treeby Exhibit "A"] Complaints of wrongdoing addressed to NSC's Board all related to the management and servicing of the LSAT contract, and included: misappropriation of assets, setting up subsidiary corporations to divert funds, providing false and misleading information to the LSAT, breaching contractual commitments to the LSAT and NSC, and improper billing practices. Id.
This Court also noted since it was necessary to this determination that judgment of dismissal was appropriate: (1) that Aymond had not alleged any grounds under Louisiana law which would have allowed him to proceed with a non-derivative action; (2) Aymond lacked standing to raise his RICO claims individually against the defendants; and (3) that Aymond's proposed new allegation failed to cure the multiple standing defects.
Two and a half years after dismissal of the Federal Derivative Action, as a self-proclaimed "49% shareholder" Aymond instituted the second shareholder derivative action, this time in state court. Aymond peddles the very same claims against NSC, its officers including Neyland, and its counsel, Treeby and the Stone Pigman law firm. Aymond's second derivative action (i.e., the State Derivative Action) is pending in the Twenty-Second Judicial District Court for the Parish of St. Tammany, Louisiana.
Aymond claims that after this Court issued its order dismissing the Federal Derivative Action on account of lack of standing, he donated 1% of his shares of NSC stock to his wife.
This Court is hardly persuaded by Aymond's argument that the standing delimma, which warranted dismissal of his Federal Derivative Action by this Court, was completely cured by donation of 1% of his NSC stock to his wife, Leta Laborde. Aymond does not adequately address the multiplicity of defects which doomed his Federal Derivative Action. Aymond's claims in the State Derivative Action simply rehash the claims detailed in his August 7, 1998 formal demand on the NSC Board and in his Federal Derivative Action.
Again, Aymond complains of misappropriation and/or conversion of corporate assets, setting up corporations to divert funds, refusing to provide information or providing false information to the LSAT, taking hostile or adversarial positions toward the LSAT, breaching contractual requirements of the LSAT, and improper billing practices. Generalized allegations of misconduct common to the August 7th demand letter and both shareholder derivative actions include his complaint that Neyland set up a new company to compete with NSC, Treeby allowed him to to do so, and that Treeby committed malpractice against NSC.
III. ANALYSIS
It is well established that injunctions enjoining parties from prosecuting state court actions may be issued pursuant to 28 U.S.C. § 2283 under the doctrine of collateral estoppel as well as res judicata. See, Next Level Communications LP v. DSC Communications Corp., 179 F.3d 244, 250-251 (5th Cir. 1999) (the relitigation exception "`was designed to permit a federal court' and `is founded in the well recognized concepts of res judicata and collateral estoppel") (quotingChick Kam Choo v. Exxon Corp, 108 S.Ct. 1684 (1988)).
There are two federal statutes which precisely address the issue before this Court, to wit: (1) the All Writs Act, 28 U.S.C. § 1651, which allows federal courts to issue all writs necessary in aid of their judgments; and (2) this authority is reiterated in the Anti-Injunction Act, 28 U.S.C. § 2283, which allows a federal court to enjoin state court proceedings "to protect or effectuate its judgments."
The Anti-Injunction Act prohibits a federal court from granting an injunction to stay proceedings in a state court "except as expressly authorized by an Act of Congress, or where necessary in aid of its jurisdiction, or to protect or effectuate its judgments." 28 U.S.C. 2293 (emphasis supplied). These exceptions are narrowly construed. See, Chick Kam Choo v. Exxon Corp., 108 S.Ct. 1684(1988); Atlantic Coast Line R.R. v. Brotherhood of Locomotive Eng'rs, 90 S.Ct. 1739(1970).
The relitigation exception (i.e., "to protect or effectuate" a federal court judgment) "was designed to permit a federal court to prevent a state litigation of an issue that previously was presented to and decided by the federal court" and "is founded in the well-recognized concepts of res judicata and collateral estoppel." Chick Kam Choo, 108 S.Ct. 1684.
The exception allowing an injunction to "protect and effectuate" a federal court judgment is commonly referred to as the relitigation exception.
Standing, although it does not involve an adjudication on the merits, is one of those questions of jurisdiction and justiciability which may preclude or collaterally estop relitigation of the precise issues of jurisdiction adjudicated. Aymond never appealed this Court's judgment dismissing his Federal Derivative Action on account of multiple standing defects. It is quite apparent that the same impediments to the justiciability of his derivative claims, which are substantially the same as the Federal Derivative Action, remain extant as of the filing of the State Derivative Action.
The question presented in this case is whether Aymond is estopped from relitigating the issues in the State Derivative Action that were actually and finally decided by this Court in the Federal Derivative Action. Aymond's facile response to the plaintiffs' tandem motions for preliminary injunction give this Court no reason to doubt the likelihood of the plaintiffs' success on the merits, regarding their contentions that: (1) the parties, the allegations, and the issues are precisely the same in the Federal and State Derivative Actions; (2) the State Derivative Action is a thinly veiled attempt to circumvent the orders of this Court adjudging that Aymond is without standing to bring such an action; and (3) Aymond, a vengeful and disgruntled litigant has diverted his "unholy" crusade against Treeby, et al, to another theater to avoid this Court's unfavorable justiciability determination.
Aymond responds that this Court's dismissal of his Federal Derivative Action for lack of standing is not an adjudication on the merits and can have no preclusive effect with respect to his State Derivative Action. Aymond, a fifty percent shareholder at the time of the commencement of his federal complaint, claims to have cured the standing defect by donating one percent of his shares of NSC stock to his wife.
See, May 2000 Transcript of Recorded Telephone Conversation of Aymond [Exhibit "A" to Neyland's Reply Memorandum].
Although state law may have provided the rule of law that controlled the disposition of Aymond's Federal Derivative Action (i.e., judgment of dismissal for lack of standing), federal law determines the judgment's preclusive effect." Next Level Communications LP v. DSC Communications, 179 F.3d 244, 250 (5th Cir. 1999).
A careful review of the record leads to but one conclusion — that is, Aymond is collaterally estopped from relitigating this Court's standing determination s in the State Derivative Action recently filed in St. Tammany Parish. The standing issues were actually litigated in the Federal Derivative Action. The determinations that Aymond was without standing to bring a shareholder derivative action and that the multiple defects could not be cured were essential to this Court's judgment dismissing the Federal Derivative Action.
Two and a half years since this Court's final determination dismissing the Federal Derivative Action on account of the standing pitfalls and some sixteen months after the issuance of the SLC's Report rejecting his claims, Aymond files a second derivative action involving the same claims in the state court.
Collateral estoppel applies even if the claims and the subject matter of each suit are different, there is not complete identity of the parties, and the state court suit alleges facts that occurred after the entry of judgment in the federal action.
Next Level, 179 F.3d at 255-56.
The All Writs Statute and the relitigation exception to the Anti-Injunction Act permit a federal court to issue an injunction to prevent state litigation of issues or claims presented to and decided by it "to protect and effectuate its judgments." 28 U.S.C. 2283.
However, this Court's analysis must also include consideration of the factors which support the issuance of injunctive relief in this case, they are: (1) the likelihood of success on the merits; (2) the threat of irreparable harm to the movers if a preliminary injunction is not granted; (3) whether the threatened injury outweighs the threatened harm that the injuncition may do to the defendant; and (4) whether granting the preliminary injunction will disserve the public interest.
1. The likelihood of success on the merits.
Whereas the general rule is that a federal district court may not enjoin state court proceedings, there are several notable exceptions which pertain to the instant case in light of the procedural/factual background. 28 U.S.C. § 2283 provides that "a court of the United States may not grant an injunction to stay proceedings in a State court except as expressly authorized by Act of Congress, or where necessary in aid of its jurisdiction, or to protect or effectuate its judgment." The exception embodied in the rule, termed the relitigation exception, is applicable where the following criteria are met: (1) the parties in the later action are identical to (or at least in privity with) the parties to the prior action; (2) judgment was rendered by a court of competent jurisdiction; (3) the prior action must have concluded with a final judgment on the merits; and (4) the same claim or cause of action must be involved in both suits. New York Life Insurance Co. v. Gillespie, 203 F.3d 384, 387 (5th Cir. 2000).
As to the first issue, in both the Federal Derivative Action and the State Derivative Action the parties include NSC, Dennis P. Neyland, William D. Treeby, Stone Pigman. For purposes of this analysis, the parties are the same. As plaintiffs' counsel aptly notes, under Louisiana law Aymond is incapable of instituting suit against his own wife, save an action for divorce. The fact that Leta Laborde is a nominal defendant in the State Derivative Action is of no moment.
There is no question but that this Court determined that there were multiple standing defects. In his opposition memorandum, Aymond less than adequately addressed all of the standing defects previously determined by this Court in the Federal Derivative Action. Aymond does not dispute that this Court dismissed the Federal Derivative Action rather than allow time to correct the pleadings because in this Court's opinion the defects could not be cured.
Again this Court reiterates that Aymond did not appeal this Court's judgment dismissing his Federal Derivative Action for lack of standing. Aymond's State Derivative Action simply rehashes the allegations originally set forth in his August 7th, 1997 formal demand on the NSC Board and then, the Federal Derivative Action. Aymond's half-hearted attempt to cure one of several standing problems is transparent. and it is difficult to mistake the State Derivative Action for anything but what it is — a second bite at the apple.
Under Texas Employers Ins. Assn. v. Jackson, 862 F.2d 491 (5th Cir. 1988) (en banc), cert. denied, 109 S.Ct. 1932(1989), a "claim" is defined broadly to include "all rights of the plaintiff to remedies against the defendant with respect to all or any part of the transaction, or series of connected transactions, out of which the action arose." Id. at 501. Since Aymond had the opportunity to bring all of his claims in this federal forum, an injunction is warranted under both the principles of collateral estoppel and res judicata. Under the teaching of Jackson, supra, any claims that Aymond did not try to assert in the Federal Derivative Action may be enjoined. However, the Court notes that his claims in both the Federal and the State Derivative Actions are substantially the same.
The remaining three conditions necessary for the issuance of a preliminary injunction remain unaddressed by the defendant's opposition memorandum. They are, as plaintiffs submit, easily satisfied in this case.
2. The Threat of Irreparable Harm.
Requiring NSC, Treeby, Stone Pigman, and Neyland to relitigate in state court the multiple standing defects which were decided by this Court constitutes an irreparable harm. See, In re SDDS, Inc., 97 F.3d 1030, 1041 (8th Cir. 1996); and Ouintero v. Klaveness Ship Lines, 914 F.2d 717, 720 (5th Cir. 1990).
3. Foreclosing on Aymond's Opportunity to Relitigate Issues Regarding His Standing to Bring a Shareholder Derivative Action is Not a Legitimate Harm which must be Balanced.
While issuing an injunction in this case will foreclose the opportunity for the defendant to bring a shareholder derivative action in state court, the Court does not believe that this is a legitmate harm which must be balanced. Aymond had one full and fair opportunity to litigate these issues in the federal forum, and the rules of equity do not require that he be given a second bite at the apple in the state forum in order to obtain a more favorable result.
In Hart Steel Company v. Railroad Supply Co., the Supreme Court observed:
This doctrine of res judicata is not a mere matter of practice or procedure inherited from a more technical time than ours. It is a rule of fundamental and substantial justice, "of public policy and private peace," which should be cordially regarded and enforced by the courts to the end that rights once established by the final judgment of a court of competent jurisdiction shall be recognized by those who are bound by it in every way, whereever the judgment is entitled to respect.244 U.S. 294, 37 S.Ct. 506, 508(1917).
Whereas here, the plaintiffs' likelihood of success on the merits is quite apparent. The identity of the subject matter and the issues presented in the Federal and State Derivative Actions cannot seriously be disputed. The identity of the parties being the same in both proceedings similarly are not subject to doubt. The Court believes even at this preliminary juncture that the plaintiffs in the captioned proceeding should be put to no further expense and trouble pending trial/hearing with respect to the issuance of a permanent injunction.
4. Granting the preliminary injunction will not disserve the public interest.
To recap, and as discussed above, the plaintiffs in this case, including Treeby, Neyland, and Stone Pigman, successfully challenged Aymond's standing to a shareholder derivative complaint in the Federal Derivative Action. The plaintiffs' success on the merits of the preliminary standing issues is therefore already secured. In addition, the public policy concerns of finality and repose which buttress the res judicata/collateral estoppel jurisprudence also support the protection of this Court's prior judgment in the Federal Derivative Action.
This Court recognizes that a federal court's interference with a state court proceeding generally goes against the grain, as a matter of public policy. However, this preliminary injunction will serve only to promote judicial economy and protect the parties/movers from harassing, burdensome and duplicative litigation — interests which both the state and federal courts share. Public policy considerations are particularly compelling in this case considering the following unrebutted facts — that is, Aymond's professed purpose in pursuing the State Derivative Action against Neyland (the other 50% shareholder) to enlist and enforce his complicity in a campaign of harassment and vexatious litigation directed at Treeby and Stone Pigman.
The Court finds no merit in Aymond's arguments opposing relief in the form of a preliminary injunction enjoining his prosecution of the State Derivative Action. This Court previously held that having made formal demand on the NSC, Aymond is precluded from bringing a shareholder derivative suit; (2) this Court also determined that as a 50% shareholder, Aymond lacked standing to bring a shareholder derivative action; and (3) again in his state petition Aymond claims in conclusory fashion the futility of his making demand on NSC Board, a contention this Court rejected in its order dismissing his Federal Derivative Action.
Order and Reasons, at pp. 14-17 [Treeby Exhibit "C"]. This Court noted that Aymond's formal demand on the NSC Board precluded his contention that demand was futile. This Court further explained that once demand is made and it was in this case, absent wrongful refusal, the stockholder's ability to initiate a derivative suit is terminated. Thereafter, the only inquiry for the Court is into the Board's good faith and the reasonableness of the investigation. The Court here notes that Aymond has not challenged the report and finding of the SLC in any manner in any forum. The reasonableness and the good faith of the SLC in conducting their independent investigation with respect to Aymond's claims is not the topic of litigation.
In the State Derivative Action, it is no surprise that Aymond failed to mention, the following: (1) his August 7, 1997 formal demand on the NSC Board; (2) this Court's prior ruling s which warranted the dismissal of his Federal Derivative Action; (3) the SLC's independent investigation; and (4) its report or findings.
Aymond's State Derivative Action simply states, as did the Federal Derivative Action, that demand on NSC's Board would be useless. See, Aymond's State Derivative Petition, at para. 4 [Treeby Exhibit "E."]. The issue of demand futility was conclusively resolved against Aymond in the Federal Derivative Action, which had the same factual predicate as the State Derivative Action. Therefore, Aymond is collaterally estopped from relitigating the justiciability issues which presaged this Court rulings resulting in dismissal of the Federal Derivative Action. See, Next Level, 179 F.3d at 250.
See, Order and Reasons, at p. 11 [Treeby Exhibit "C"]. This Court held that under Louisiana law a 50% shareholder is not minority shareholder and is without standing to sue. This determination was also not the subject of any appeal by Aymond. Instead, Aymond argues that by donating 1% of his shares to his wife, he is now a 49% minority shareholder with standing. Of course, this position ignores the multiple standing defects which were determined by this Court. In any event, plaintiffs will in all likelihood demonstrate that Aymond's "transfer" of 1% of his shares of NSC stock to his wife, to be no more than a sham and a transparent and ineffective effort to circumvent the judgment of this Court.
This Court previously determined in the Federal Derivative Action that Aymond's conclusory allegation that that a majority of the NSC Board (i.e., Neyland and Brice Jones) were under the control of the defendants was wholly insufficient and in any event the independence of the Board was conceded when Aymond made formal demand.
Additionally, this Court previously rejected Aymond's contention in the Federal Derivative Action that he was entitled to bring such an action on his own behalf. In his State Derivative Action, Aymond asserts that he is bringing his action "personally for all causes of action which belong personally to Aymond." See, Aymond's State Petition [Treeby Exhibit "E"]. As this Court had the occasion to note in its prior order and reasons with respect to the his Federal Derivative Complaint, the allegations of Aymond's state petition allege only breach of duty owed to NSC.
Such a determination was necessary to this Court's judgment of dismissal. The Court noted that under Louisiana law, an action for mismanagement, fraud or breach of fiduciary duty belongs solely to the entity and not the individual shareholder. See, Order and Reasons, at 11-12, n. 11 [Treeby Exhibit "C"].
III. CONCLUSION
The August 7, 1997 Demand Letter, the Federal Derivative Action, and the State Derivative Action, all allege the same wrongful conduct. The essential prerequisites for application of the "relitigation exception" are met in this case. of utmost importance is that the claims and/or issues which this Court's ruling insulates from litigation in the state proceedings (i.e., standing, inter alia) were actually decided by this Court and were necessary to this Court's judgment.
Treeby Exhibit "A".
Treeby Exhibit "B".
Treeby Exhibit "E".
Accordingly,
IT IS ORDERED that the plaintiffs' Motions for Preliminary Injunction and Stay of the Aymond's State Derivative Action are hereby GRANTED.
IT IS FURTHER ORDERED that the defendant in the captioned consolidated proceedings, James E. Aymond, his agents, attorneys and all parties acting on his behalf, including all persons in active concert or participation with him who receive actual notice of this order are, subject to further orders of this Court or the Fifth Circuit Court of Appeals, ENJOINED from taking further action to prosecute the pending case filed January 3, 2000 entitled "James E. Aymond v. Dennis P. Neyland, et al", No. 2000-10025-I, on the docket of the Twenty-Second Judicial District Court for the Parish of St. Tammany, State of Louisiana.
The Clerk of Court is directed to: (1) place a copy of this order and accompanying reasons for decision in each of the captioned, now consolidated proceedings; (2) place a copy in the now closed Civil Action No. 97-2781 "A" (3); and (3) to mail two copies of the same to the clerk of court for the Twenty Second Judicial District Court for the Parish of St. Tammany, Louisiana, for inclusion in the file numbered No. 2000-10025-I on the docket of that court.