ORDER. Page WL (N.D,Tex ) (Cite as : 2005 WL (N.D.Tex-))

Transcription

1 EXHIBIT CC

2 slip copy Page WL (N.D,Tex ) (Cite as : 2005 WL (N.D.Tex-)) H Only the Westlaw citation is currently available. United States District Court; N.D. Texas, Dallas Division. Donna EA.RLE, Plaintiff; V. A12AMA12K CORPORATION, Defendant. No. Civ.A.3:43-CV-2960K. Feb. 28, D'Metria Benson, Law Office of D'Metria Benson, Dallas, TX, for :Plaintil Bryant S. McFall, Ogletree Deakins Nash Smoak.& Stewart, Dallas, TX, Jeffrey C. Londa, Ogletree Deakins Nash Smoak & Stewart, Houston, TX, for Defendant. Kfl KEADE, J ORDER -1 Carne on for Consideration, Defendant Aramark Corporation's ("Aramark Corp") Motion to Dismiss the Securities Claims and Alternative Motion to Sever and Plaintiffs Motion to Strike the Motion to Dismiss. The Court finds that the Plaintiff ("Earle") failed to adequately plead fraud against the Defendant with the requisite particularity and, that there is no private right of action under Sections 13(a) and (b of the Exchange Act or Section 17 of the Securities Act. Therefore, the Defendant's Motion to Dismiss Earle's securities fraud claims is GRANTED. Plaintiffs Motion to Strike Defendant's Motion to D.ismiss,the Securities Claim is DENIED. L Background This is an employment dispute brought by Plaintiff Donna Earle against Aramark Business Dining Services of Texas, Inc. and Aramark Corporation ("Aramark Corp") Earle filed her Original Complaint on December 11, 2003 alleging claims of age and sex discrimination, retaliation, quantum mentit, promissory estoppel, and fraud. On March 17, 2004, Earle filed her First Amended Original Complaint, which alleged the same claims but named only Aramark Corp. as a Defendant. On September 1, 2004, Earle filed a Second Amended Complaint realleging the employment claims asserted in the First Amended Complaint and adding five new securities fraud causes of action: violations of Section 10b of the Securities Exchange Act of 1934 ("the Exchange Act"), violations of 17(a) of the Securities Act of 1933 ("the Securities Act' ), violations of Section 13(a) of the Exchange Act, violations of Section 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act, and violations of Section 13(b)(5) of the Exchange Act. Defendant Aramark Corp. moves to dismiss Earle's securities fraud claims pursuant to Rule of Civil Procedure 12(b)(6) on several grounds, including the following: (1) the Second Amended Complaint fails to state a claim under Sections 10(b), 13(a) or 13(b) of the Exchange Act and (2) the Second Amended Complaint fails to state a claim under Section 17(a) of the Securities Act. 11. Defendant's Motion to Dismiss the Securities claims A. Legal Standard Federal Rule of Civil Procedure 12(b)(6) authorizes dismissal of a complaint for "failure to state a claim upon which relief can be granted." However, a motion under Rule 12(b)(6) should be granted only if it appears beyond doutt that the plaintiff could prove no set of facts in support of its claims that would entitle it to relief. Conley, v. Gibson, 355 U.S. 4 1','4'5-46,78 S Q. 99,2 L.Ed.2d 80 (1957); Leffall v. Dallas Indep. School Dist, 28 F.3d 521, 524 (5th Cir.1994) ; see also Kaiser Thomson/West. No Claim to Orig. U.S. Govt. Works.

3 Slip co py Page2 2Q05 WL (N.D.Tex.) (Cite as: 2005 WL (N.D Tex.)) Aluminum & Chemical Sales, Inc. v. Avondale Shipyards, Inc., 677 F.2d 1045, 1050 (5th Cir.1982). In determining whether dismissal should be granted, the court must accept all well-pleaded facts as true and view them in the light most favorable to the plaintiff, See Capital Parks, Inc. v. Southeaster; Adver. and Sales System, Inc., 30 F.3d 627, 629 (5th Cir.1994) ; Norma;: v. Apache Corporation, 19 F.3d 1017, 1421 (5th Cir.1994). However, the plaintiff "must plead specific facts, not mere conclusory allegations." Guidry, 954 F.2d 278, 281 (5th Cir.1992) (quoting.elliott v Foufas, 867 F.2d 877, 881 (5th Cir.1989)). B. Plaintiffs Seventh Cause of Action: Violations of Section 10(b)(5) and Rule IOb-5 of the Exchange Act *2 Plaintiff alleges violations of section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. 78j, as amended by the Private Securities Litigation Reform Act ('PSLRA"). Section 10(b) makes it unlawful for a person to use or employ, in connection with the purchase or sale of any secu rity, any manipulative or deceptive device or contrivance in contravention of the rules promulgated by the Securities and Exchange Commission ("SEC") as necessary or appropriate in the public interest or for the protection of the investors. See 15 U.S.C. 78j(b). Rule IOb-5, promulgated pursuant to sec tion 10(b), makes it unlawful for any person, either directly or indirectly, to make any untrue statement of material fact or to omit a material fact necessary in order make the statements made, in light of the circumstances under which they were made, not misleading in connection with the purchase or sale of any secu ri ty. See 17 C.F. R Ob-5. To state a claim under section 10(b) of the Exchange Act, a plaintiff must allege, in connection with the purchase or sale of securities, the following. (1) a misstatement or an omission ; (2) of material fact; (3) made with scienter; (4) on which the.plaintiff relied ; (5) which proximately caused injury to the plaintiff. See ABC Arbitrage v Tchuruk, 291 Fad 336, 348 (5 th Cir.2002). 1. Earle failed to specifically plead facts that Aramark made a misstatement with the required particularity Claims brought under 10(b) of the 1934 Act are fraud claims. Accordingly, the pleading requirements of the PSLRA incorporate the standard for pleading fraud under Rule 9(b). Rule 9(b) requires a plaintiff "to specify the statements contended to be fraudulent identify the speaker, state when and where the statements were made, and explain why the statements were fraudulent." ABC Arbitrage, 291 Fad at 349. The PSLRA :requires a plaintiffs complaint to (1) specify each statement alleged to have been misleading; (2) the reason or reasons why the statement is misleading ; and (3) if an allegation regarding the statement or omission is made on information and belief, the complaint shall state with particularity all facts an which the belief is formed. See 15 U.S.C. 78u-4(b)()). A plaintiff alleging securities fraud must not only allege the time, place, identity of the speaker, and content of the alleged misrepresentation, but also must explain why the challenged statement or omission is false or misleading. See Williams v. WMX Tcthnologies Inc;, 112 F.3d 175, 177 (5t1 Cir.1997). To satisfy Rule 9(b) and the PSLRA, a plaintiff must plead facts and avoid reliance on conclusory allegations. Tuciunan v. DSC Communications Corp., 14 Fad 1061, 1067 (5th Cir.1994). if a complaint fails to satisfy the pleading requirements of the PSLRA or Rule 9(b), the Court must dish ass the complaint. See ABC Arbitrage, 291 F.3d at 350. Earle alleges that the Defendant committed security fraud by failing to disclose information material to the company's revenue. Earle alleges that Aramark Corp, has "engaged in a pattern and course of intentional deceit and fraud not only with Plaintiff, but with its employees, shareholders and the State of Texas and potentially many other states." The extent of Earle's securities claims is that Aramark Corp. is a service provider having employees and doing business in Texas and, as such, is subject to Texas unemployment taxes and franchise taxes which it has not paid. Earle bases this assertion on Aramark's statements in its October 3, 2003, September 27; 2002, and September 28, ThomsonlWest, No Claim to O rig. U.S. Govt. Works.

4 -Slip Copy Page WL (N.D.Tex.) (Cite as: 2005 WL (N.U,Tex.)) Annual Reports that it has approximat6ly 200,000. employees and serves millions of clients and customers in 17 or I8 countries around the world. Apparently, Earle is inferring from these statement and Aramark Corp_'s claim that it "does not [do] business in Texas and is not qualified to do business in Texas ; did not employ Ms. Earle or anyone else in Texas," that Aramark has unpaid unemployment and franchise tax liabilities in Texas and other states. *3 Earle alleges that Aramark Corp. made representations as to the financial condition of the company in its annual reports for the years ended October 3, 2003, Sepenibcr 27, 2002, and September 28, 2001, that did not rcfcct the unpaid employment and franchise taxes that Aramark Corp. was aware it owed. Earle alleges that the impact of these unpaid taxes could affect Aramark Corp.'s earning per share such that a restatement of earnings will be required. Earle alleges, that she purchased in. excess of 2000 shares of Class A Common Stock that were converted to Class B Common Stock when she was terminated. Plaintiff has failed to plead any facts that are sufficient to support her allegations that Ararnark Corp. made false and misleading statements, Although Earle has pled that Aramark Corp. does not pay unemployment taxes in Texas, that allegation alone does not support the conclusion that Aramark Corp.'s financial statements were misstated. Plaintiff has alleged no facts that support ber allegation that Aramark is subject to franchise and unemployment taxes in Texas and she has alleged no facts that support her assertion that the allegedly unpaid taxes would have any impact on Aramark Corp.'s financial statements. Because Plaintiff has failed to plead sufficient facts to support her allegation that Aramark Corp. owes unemploymen or franchise taxes in Texas or that Aramark Corp.'s financial statements inaccurately accounted for its tax liabilities in Texas, Plaintiffs claim 10(b) claim is dismissed without prejudice. C. Plaintiffs Eighth Cause of Action : Violations of Section 17(a) ofthe Exchange Act The Fifth Circuit does not recognize a private right of action under Section 17 (ai of the Securities Act of U.S.C. 77 q(a). See Landry v..411 Am. Assurance Co., 688 F 2d 381, 387 (5th Cir. 1982). Therefore, Plaintiffs Section 17(a) claim is dismissed with prejudice. See Stepliensor v. Paine Webber Jackson & Curtis Inc., 839 F.2d 1095, 1100 (5th Cir.1988)(affirming dismissal of Section 17(a) claim), D. Plaintiffs Ninth, Tenth and Eleventh Causes of Action: Violations of Section 13 of the Exchange Ac t Section 13(a) of the Exchange Act requixes certain issuers to file informatim and tloouments prescribed by the SEC's rates and regulations, including annual and quarterly reports. 15 U.S.C. - 78th(a). Section 13(b) requires certain issuers to maintain accurate books and records and maintain internal accounting controls. i5 U.S.C. 78m(b)(2) 15 U.S.C. 78m(b)(5). Althoughthe.Fifth Circuit has not addressed whether or not there is a private right of action under either Section 13(a) or Section 13(b), other circuits have consistently held that there is no private right o action under either section. See In re Penn Cent. Sec. Litig., 494 F.2d 528, (3d. Cir.1973) (holding that there is no implied private right of action under Section 13(a)) ; see also Davis v. DCB Fin.. Corp., 259 F.Supp.2d 664, (S D.Ohio 2003; (holding "there is no private right of action for a violation of I3(a)" and " :3(b) does not provide lbr a private right of action") ; Shields er rdl. Sundstrand Corp. tv. Erickson, 710 F.Supp. 686, 688 (N.D.T ) (dismissing 13(b)(2) claim because there is no private right of action) ; McLaughlin v. Campbell, 410 F.Supp. 1321, 1325 (D.C.Mass.1976) (holding that 13(a) does not affot3 a private right of action). In response to the Defendant's motion to dismiss, Plaintiff fails tc acknowledge the Defendant's argument that there is no private right of action for violations of Sections 13(a) and (b), of the Securities Act. Plaintiff :ails to point to any legal authority, teat a privat. right of action is implied under either of these sections. For these reasons, Counts 9, 10, and 11 of Plaintiffs Complaint are dismissed with prejudice Thomson/West No Claim to Orig. U.S. Govt. Works.

5 Slip Copy Page WL (N.D.Tex.) (cite as : 2065 WL (N.D.Tex.)) III. PlaintiffsMotion to Strike Defendant's Motion to Dismiss *4 Plaintiff argues that she is entitled to- a default Judgment because Defendant responded to Plaintiffs Second Amended Complaint with a Motion to Dismiss and not an, answer, Federal Rule.of Civil Procedure 15(a) states that a "party shall plead in response to an amended pleading within the time remaining for response to the original -pleading or within 1 0 days after service of the amended pleading." Fed.R.Civ.P. 15(a). Defendant timely filed its Motion to Dismiss on November 23, 20D4. It is Nye]] settled that a Motion to Dismiss delays the two for serving a responsive pleading, The Defendant's answer is due within ten days of the Courts ruling on the Motion to Dismiss. Therefore, the Defendant is not in default and Plaintiffs Motion to Strike Defendants Motion to Dismiss the Securities Claim is DENIED. TV. Conclusio n Plaintiffs Second Amended Complaint alleges that Atamark Corp. violated Sections lob and 13(a) and (b) of the Exchange Act and Section 17 of the -Secu rities Act by failing to disclose and report alleged unpaid employment and franchise tax liabilities, The Court finds that Earle's 10(b) claim faits to adequately plead fraud against the Defendant with the requisite particularity. Additionally, the Court finds that there is no private right of action under Sections 13(a) and (b) of the Exchange Act or Section 17 of the Securities Act. Therefore, the Defendant's Motion to Dismiss Earle's securities fraud claims is GRANTED and Plaintiffs Motion.to Strike the Motion ;o Dismiss is DENTED. SO ORDERED WL (N.D.Tex,) END OF DOCUMENT 2005 Thomson/West. No Claim to Orig. U.S. Govt Works.