Summary
The U.S. Court of Appeals for the Ninth Circuit certified a question to the California Supreme Court concerning whether California Corporations Code § 1312(a) and Steinberg v. Amplica, Inc. bar a shareholder from seeking buyout-related damages when the underlying misconduct was discovered only after the buyout. The court concluded that the unresolved state-law issue was dispositive and stayed proceedings pending the California Supreme Court’s response.
Topics
Practice areas
Questions Presented
- Whether California Corporations Code section 1312(a) and Steinberg v. Amplica, Inc. preclude a shareholder from seeking buyout-related damages when the facts supporting the shareholder's claim were not known until after the buyout was consummated.
- Whether the Ninth Circuit should certify that unresolved California-law question to the California Supreme Court under California Rule of Court 8.548.
Holdings
- The Ninth Circuit certified to the California Supreme Court the question whether section 1312(a) and Steinberg preclude a shareholder from seeking buyout-related damages when the facts underlying the cause of action were not known until after the buyout was consummated.
- The Ninth Circuit vacated and deferred submission of the appeals pending the California Supreme Court's final response, administratively closed the docket, and stayed further proceedings.
Key quotations
“This unanswered question of California law—whether there is a non-statutory exception to § 1312(a) for a shareholder who does not become aware of a defendant’s buyout-related misconduct until after the buyout is consummated—is dispositive in the instant case.” (9)
“Do the appraisal requirements of California Corporations Code § 1312(a) and the California Supreme Court’s decision in Steinberg v. Amplica, Inc., 729 P.2d 683 (Cal. 1986) (Mosk, J.), preclude a shareholder from seeking buyout-related damages when the facts leading to the shareholder’s cause of action were not known until after the buyout was consummated?” (10)
“QUESTION CERTIFIED; PROCEEDINGS STAYED.” (11)
Factual background
ArcSoft shareholders approved a $150 million buyout in October 2017 after Michael Deng allegedly withheld information about negotiations with Huatai Securities, ArcSoft's improved financial condition, and the absence of a fairness opinion. Plaintiffs received approximately $14.22 million for their shares, and ArcSoft later completed an initial public offering in China. A jury found that plaintiffs were unaware of the alleged tortious conduct until after the buyout and awarded them $9.7 million in damages.
Procedural history
Plaintiffs sued ArcSoft and Michael Deng in the Northern District of California, alleging fraud, concealment, breach of fiduciary duty, and breach of contract arising from a shareholder buyout. Defendants argued at summary judgment and again after trial that section 1312(a) barred plaintiffs' recovery; the district court rejected the argument and entered judgment for plaintiffs on March 5, 2024. On cross-appeal, the Ninth Circuit determined that the unresolved state-law issue was dispositive and certified it to the California Supreme Court under California Rule of Court 8.548.