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In re MGM Mirage Derivative Litigation

United States District Court, D. Nevada

June 30, 2014

In re MGM MIRAGE DERIVATIVE LITIGATION

ORDER

KENT J. DAWSON, District Judge.

Before the Court is Defendant MGM Resorts International's ("MGM") Motion to Dismiss (#104). Defendants Alan Feldman, et al. filed a Notice of Joinder and Joinder in MGM's Motion to Dismiss (#106). Plaintiff filed a response in opposition (#115) to which MGM replied (#122). Also before the Court is MGM's Request for Judicial Notice (#105).

I. Background

Plaintiff, Mario Guerrero, is a shareholder of MGM. (#115 at 1; 12). MGM is a Delaware Corporation. (#104 at 2-3). Plaintiff filed a verified shareholder derivative complaint ("Complaint") against MGM in September 2009. (#1 at ¶ 1). Plaintiff alleges that from August 2007 through March 2009, MGM's "senior officers and directors falsely represented the true financial state of MGM's business, operations, management and the intrinsic value of its common stock, " in regards to the "construction of CityCenter, a massive, multi-billion dollar high rise on the Las Vegas strip." (#115 at 3; 8-12).

The parties do not dispute that Plaintiff failed to make a demand on MGM's Board of Directors prior to filing his verified shareholder derivative action (#1), as required by Delaware law. (#115 at 1; 16-19). Plaintiff alleges that he was not required to make a demand on MGM's Board as such demand would have been futile. (#115 at 1; 18-19).

In March 2011, two shareholders of MGM, Kim and Israni, filed a joint amended shareholder derivative complaint in a Nevada state court against MGM alleging the same issues of demand futility that were raised in the Complaint. (#104 at 7; 19-20). MGM brought a motion to dismiss the shareholders' joint amended shareholder derivative complaint in the Nevada State court due to the shareholders' inability to establish demand futility. (#104 at 8; 11-12). The Nevada state court granted MGM's Motion to Dismiss holding that "[the shareholders] have not alleged with particularity that a majority of MGM['s] [] Board of Directors were legally disabled from considering a shareholder's pre-suit demand." Kim v. Murren, 2012 WL 10218820, at *6 (Nev. Dist. Ct. May 15, 2012). The shareholders appealed to the Nevada Supreme Court and the judgment of the Nevada state court was affirmed in December 2013. Kim v. MGM Mirage, No. 61101, 2013 WL 7156106, at *2 (Nev. Dec. 30, 2013). In referring to the shareholders' joint amended shareholder derivative complaint, the Nevada Supreme Court held that the complaint "failed to demonstrate a reasonable doubt as to whether a majority of MGM's directors could exercise independent judgment and reasoning when considering a pre-suit demand." Id. at *1.

In the shareholder derivative action before this Court, MGM filed a Motion to Dismiss Plaintiff's Complaint in March 2014. MGM's main arguments for seeking to dismiss Plaintiff's Complaint are grounded in (1) issue preclusion, due to the previous Nevada Supreme Court affirmance, (2) Plaintiff's failure to establish demand futility, and (3) MGM's Certificate of Incorporation exculpatory provision, which immunizes the MGM Directors from personal liability for breaches of the duty of care. (#104 at 1-3).

II. Legal Standard for a Motion to Dismiss

A court may dismiss a plaintiff's complaint for "failure to state a claim upon which relief can be granted." Fed.R.Civ.P. 12(b)(6). A properly pled complaint must provide "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2); Bell Atlantic Corp. v. Twombly , 550 U.S. 544, 555 (2007). While Rule 8 does not require detailed factual allegations, it demands more than "labels and conclusions or a formulaic recitation of the elements of a cause of action." Ashcroft v. Iqbal , 556 U.S. 662, 678 (2009) (citations omitted). "Factual allegations must be enough to raise a right to relief above the speculative level." Twombly , 550 U.S. at 555. Thus, "[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter to state a claim for relief that is plausible on its face.'" Iqbal , 556 U.S. at 678 (citation omitted).

In Iqbal, the Supreme Court clarified the two-step approach district courts are to apply when considering motions to dismiss. First, a district court must accept as true all well-pled factual allegations in the complaint; however, legal conclusions or mere recitals of the elements of a cause of action, supported only by conclusory statements, are not entitled to the assumption of truth. Id. at 678. Second, a district court must consider whether the factual allegations in the complaint allege a plausible claim for relief. Id. at 679. A claim is facially plausible when the plaintiff's complaint alleges facts that allow the court to draw a reasonable inference that the defendant is liable for the alleged misconduct. Id. at 678. Further, where the complaint does not permit the court to infer more than the mere possibility of misconduct, the complaint has "alleged-but it has not show[n]-that the pleader is entitled to relief." Id. at 679 (internal quotation marks omitted). Thus, when the claims in a complaint have not crossed the line from conceivable to plausible, the complaint must be dismissed. Twombly , 550 U.S. at 570.

Moreover, "[a]ll allegations of material fact in the complaint are taken as true and construed in the light most favorable to the non-moving party." In re Stac Elecs. Sec. Litig. , 89 F.3d 1399, 1403 (9th Circ. 1996) (citation omitted).

III. Analysis

A. Judicial Notice

i. Legal Standard

Pursuant to Federal Rule of Evidence 201(b), the court may take judicial notice of a fact that "can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned." Fed.R.Evid. 201(b)(2). Further, "a court may take judicial notice of matters of public record.'" Lee v. City of Los Angeles , 250 F.3d 668, 689 (9th Cir. 2001) (internal citation omitted). Therefore, a court may properly take judicial notice of a court order, as a court order is a matter of public record. Kaufman v. Jesser , 884 F.Supp.2d 943, 951 (D. Ariz. 2012).

ii. Analysis

Pertinent to the case at hand, MGM requests, among other items, that this Court take judicial notice of (1) the Nevada state court Order Granting Motion to Dismiss, and (2) the Nevada Supreme Court Order of Affirmance in Case Number 61101. see Kim, 2012 WL 10218820; Kim, 2013 WL 7156106. Because the Nevada state court Order Granting Motion to Dismiss and the Nevada Supreme Court Order of Affirmance are matters of public record, the Court will take judicial notice of these orders.

B. Issue Preclusion

i. Legal Standard

28 U.S.C. § 1738 provides:

The preclusive effect of a state court judgment in a subsequent federal lawsuit generally is determined by the full faith and credit statute, which provides that State judicial proceedings shall have the same full faith and credit in every court within the United States... as they have by law or usage in the courts of such State... from which they are taken[]'... [t]his statute ...

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