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Lusk v. Akradi

United States District Court, D. Minnesota

January 30, 2018

MATTHEW LUSK and ST. CLAIR EMPLOYEES' RETIREMENT SYSTEM, individually and on behalf of all others similarly situated, Plaintiffs,
v.
BAHRAM AKRADI, GILES H. BATEMAN, JACK W. EUGSTER, GUY C. JACKSON, JOHN K. LLOYD, MARTHA A. MORFITT, JOHN B. RICHARDS, and JOSEPH S. VASSALLUZZO, Defendants.

          David T. Wissbroecker, ROBBINS GELLER RUDMAN & DOWD LLP, Kai H. Richter and Carl F. Engstrom, NICHOLS KASTER, PLLP, Jason M. Leviton and Jacob A. Walker, BLOCK & LEVITON LLP, for plaintiffs Matthew Lusk and St. Clair Employees' Retirement System.

          James K. Nichols, Thomas P. Swigert, Lincoln S. Loehrke, and Caitlin L. D. Hull, DORSEY & WHITNEY LLP, for defendant Bahram Akradi.

          Matthew B. Kilby, Wendy J. Wildung, and Cicely R. Miltich, FAEGRE BAKER DANIELS LLP, for defendants Giles H. Bateman, Jack W. Eugster, Guy C. Jackson, John K. Lloyd, Martha A. Morfitt, John B. Richards, and Joseph S. Vassalluzzo.

          MEMORANDUM OPINION AND ORDER DENYING PLAINTIFFS' MOTION TO VACATE THE JUDGMENT AND FOR LEAVE TO AMEND

          JOHN R. TUNHEIM CHIEF JUDGE

         Plaintiffs Matthew Lusk and the St. Clair County Employees' Retirement System (collectively, “Plaintiffs”) are former shareholders of Life Time Fitness, Inc. (“Life Time”). Defendant Bahram Akradi was Life Time's CEO, and Defendants Giles H. Bateman, Jack W. Eugster, Guy C. Jackson, John K. Lloyd, Martha A. Morfitt, John B. Richards, and Joseph S. Vassalluzzo sat on its Board of Directors (collectively, “Defendants”). After the Court granted Defendants' Motion for Summary Judgment on the Pleadings and dismissed the case with prejudice, Plaintiffs timely filed a Motion to Vacate the Judgment and for Leave to Amend. The Court will deny the motion because Plaintiffs have not shown the existence of extraordinary or exceptional circumstances warranting Rule 59 or Rule 60 relief, even taking into account the Rule 15 considerations that favor affording parties an opportunity to test their claims on the merits.

         BACKGROUND

         Life Time is a Minnesota corporation that operates a chain of health-fitness centers. (Am. Compl. ¶¶ 2, 12, Aug. 31, 2015, Docket No. 87.) This litigation relates to the 2015 purchase of Life Time by several private equity firms. See Lusk v. Life Time Fitness, Inc., 213 F.Supp.3d 1119, 1124-27 (D. Minn. 2016). Specifically, Plaintiffs alleged that Life Time and Defendants issued a false or misleading proxy statement prior to the buyout in violation of § 14(a) of the Securities Exchange Act and SEC Rule 14a-9, (Am. Compl. ¶¶ 94-100), that Defendants and the Buyout Group acted as controlling persons of Life Time in violation of § 20(a) of the Securities Exchange Act, (id. ¶¶ 101-07), that Defendants breached fiduciary duties owed to Life Time's shareholders, (id. ¶¶ 108-12), and that the Buyout Group aided and abetted Defendants' breach of fiduciary duties, (id. ¶¶ 113-15). Defendants moved to dismiss the action, and the Court dismissed all claims except for breach of fiduciary duties. Life Time, 213 F.Supp.3d at 1137-38.

         Defendants subsequently moved for judgment on the pleadings. (Def. Akradi's Mot. for J. on Pleadings, Oct. 28, 2016, Docket No. 160; Def. Board's Mot. for J. on Pleadings, Oct. 28, 2016, Docket No. 166.) The Court held a hearing on the motions on February 17, 2017. (Minute Entry, Feb. 17, 2017, Docket No. 194.) There, counsel for Plaintiffs made two conditional statements regarding the possibility of seeking leave to amend. First: “[I]f the Court is inclined to apply Corwin, [1] we think that we would need to amend the pleading to include [troubling facts that shareholders did not know] and some other spurious allegations.” (Tr. at 48:16-21, Mar. 17, 2017, Docket No. 205.) Second: “If the Court thought Corwin applied, we should have the opportunity to amend our complaint.” (Id. at 49:14-15.) Notably, however, counsel for Plaintiffs did not explicitly move for leave to amend - conditionally or otherwise. (See generally id.)

         After the hearing, Plaintiffs filed a “Motion for the Alternative Relief of Leave to Amend in the Event that the Court Grants Defendants' Motions for Judgment on the Pleadings.” (Mot. for Alt. Relief, Mar. 15, 2017, Docket No. 199.) In it, Plaintiffs claimed to have made “an oral motion for leave to amend in the event that this Court were to grant Defendants' Motions.” (Id. at 2.) Plaintiffs acknowledged their failure to submit a proposed amendment as required by Local Rule 15.1, explaining that the written motion was being made “in advance of any ruling from the Court that would necessitate leave to amend.” (Id. at 3-4.) The Magistrate Judge denied the written motion without prejudice for failure to comply with the Local Rules, disclaiming that her denial “in no way precludes the District Court from ruling one way or the other” on what Plaintiffs characterized as an oral motion. (Text-Only Order, June 16, 2017, Docket No. 210.)

         The Court subsequently granted Defendants' Motions for Judgment on the Pleadings and dismissed the case with prejudice. Lusk v. Akradi, No. 15-1911, 2017 WL 3382301, at *7 (D. Minn. Aug. 6, 2017). Two days later, Plaintiffs filed a letter seeking clarification as to whether the Court had considered and denied Plaintiffs' purported “oral motion for leave to amend in the event that the Court were to grant Defendants' motions.” (Letter at 1, Aug. 8, 2017, Docket No. 225.) The Court declined to provide such clarification, and judgment was entered accordingly. (Order Responding to Letter, Aug. 28, 2017, Docket No. 227; J., Aug. 28, 2017, Docket No. 228.) Plaintiffs timely filed the Motion to Vacate the Judgment and for Leave to Amend under Rules 59 and 60 that is now before the Court. (Mot. to Vacate, Sept. 25, 2017, Docket No. 229.)

         DISCUSSION

         I. STANDARD OF REVIEW

         Plaintiffs bring this motion under Rules 59 and 60 of the Federal Rules of Civil Procedure. “[D]istrict courts in this circuit have considerable discretion to deny a post-judgment motion for leave to amend because such motions are disfavored, but may not ignore the Rule 15(a)(2) considerations that favor affording parties an opportunity to test their claims on the merits.” United States ex rel. Roop v. Hypoguard USA, Inc., 559 F.3d 818, 824 (8th Cir. 2009). “Leave to amend will be granted if it is consistent with the stringent standards governing the grant of Rule 59(e) and Rule 60(b) relief.” United States v. Mask of Ka-Nefer-Nefer, 752 F.3d 737, 743 (8th Cir. 2014).

         Rule 59(e) motions “serve the limited function of correcting ‘manifest errors of law or fact or to present newly discovered evidence.'” United States v. Metro. St. Louis Sewer Dist., 440 F.3d 930, 933 (8th Cir. 2006) (quoting Innovative Home Health Care v. P.T.-O.T. Assocs. of the Black Hills, 141 F.3d 1284, 1286 (8th Cir. 1998)). ‚ÄúSuch motions cannot be used to introduce new evidence, tender new legal theories, or raise arguments which could have been ...


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