United States District Court, D. Nevada
(PL.'S MOTION FOR PARTIAL SUMMARY JUDGMENT - DKT. NO. 71) (DEFS.' AMENDED MOTION
FOR PARTIAL SUMMARY JUDGMENT - DKT. NO. 73) (DEFS.' MOTION FOR PARTIAL SUMMARY
JUDGMENT - DKT. NO. 92)
MIRANDA M. DU, District Judge.
Before the Court are three motions for partial summary judgment: (1) Plaintiff China Energy Corporation's ("CEC") Motion for Partial Summary Judgment on Count I of the Complaint as to the Sammons Defendants ("CEC's Motion") (dkt. no. 71); (2) Defendants Michael and Elena Sammons' ("the Sammons") Amended Motion for Partial Summary Judgment re Right to Appraisal of 350, 000 Shares of CEC ("Appraisal Motion") (dkt. no. 73); and (3) the Sammons' Motion for Partial Summary Judgment Regarding Substantial Compliance and Prejudice ("Substantial Compliance Motion") (dkt. no. 92). The Court has reviewed the oppositions and replies to each motion (dkt. nos. 94, 95, 97, 105, 107, 110, 130, 233, 243, 251, 253, 254).
For the reasons discussed below, CEC's Motion (dkt. no. 71) is denied, and the Sammons' Appraisal Motion (dkt. no. 73) and Substantial Compliance Motion (dkt. no. 92) are denied as moot.
After carrying out a reverse stock split, CEC initiated this action on September 27, 2013, in the First Judicial District Court for the State of Nevada in and for the County of Carson City. (Dkt. no. 71-1 at 1.) CEC seeks a declaratory judgment that certain stockholders - including the Sammons - failed to perfect their rights to dissent to the stock split. ( Id. at 4-6.) As the basis for declarative relief, CEC alleges that the Sammons untimely submitted their stockholder's certificates and inappropriately demanded payment in Chinese Yuan. ( Id. ¶¶ 33-35.) Alternatively, CEC seeks a fair value determination that its stock was worth $0.14 per share prior to the stock split. ( Id. ¶ 49.)
CEC moves for summary judgment on its declarative relief claim with regard to the Sammons. (Dkt. no. 71.) Proceeding pro se, the Sammons seek summary judgment on the same claim, contending that they either perfected their dissenter's rights for 350, 000 CEC shares they beneficially owned (dkt. no. 73), or that they substantially complied with Nevada law in attempting to perfect those shares (dkt. no. 92). Unless noted, the following facts are undisputed.
CEC is a Nevada corporation that operates as a holding company to facilitate coal production, processing, and trade in the People's Republic of China. (Dkt. no. 71-1 ¶ 1; dkt. no. 71-2 ¶¶ 5-6.) On July 3, 2013, CEC filed a Certificate of Amendment to its Articles of Incorporation with the Nevada Secretary of State to carry out a 12, 000, 000 to 1 reverse stock split. (Dkt. no. 71-3 ¶ 2; id., Ex. A.) At the time of the stock split, the Sammons were the joint beneficial owners of 350, 000 shares of CEC ("Jointly Held Shares"), and Elena Sammons was the beneficial owner of 650, 000 shares held in a rollover IRA through Delaware Charter Guarantee & Trust ("Elena Sammons' Shares"). (Dkt. no. 71-1 ¶¶ 3-4; dkt. no. 7 ¶¶ 1-2; dkt. no. 8 ¶¶ 1-2.) Cede & Co. ("Cede") was the owner of record for the Sammons' shares. (Dkt. no. 71-1 ¶ 16; dkt. no. 7 ¶ 3; dkt. no. 8 ¶ 3.) Cede is the nominee for The Depository Trust Company ("DTC"), a securities depository and clearing corporation. (Dkt. no. 152-1, Ex. 1 ¶ 9.)
CEC alleges that on July 11, 2013, CEC's stock transfer agent, Quicksilver Stock Transfer ("Quicksilver"), mailed a package regarding the stock split to Cede. (Dkt. no. 71-5 ¶ 4; dkt. no. 233-1 at 1; dkt. no. 233-2 at 1.) The package included a Transmittal Letter from CEC, a Dissenters' Rights Notice, a form Demand Letter, and a copy of Chapter 92A of the Nevada Revised Statutes, NRS §§ 92A.005-92A.500. (Dkt. no. 71-5, Exh. A.) The Dissenters' Rights Notice was undated, but it instructed recipients to take the following three actions "within 30 days of the date that [the] Notice is delivered" to exercise their rights as dissenters: "(i) deliver the completed Demand Letter; (ii) certify whether [they] acquired beneficial ownership of the shares before the date set forth in the Demand Letter; and (iii) deliver the certificates representing the dissenting shares to the Company." ( Id. at 11.) The Notice does not specify a date by which these actions must occur. ( Id. )
The parties dispute the date on which Cede, the stockholder of record for the Sammons' shares, received the Dissenters' Rights Notice. ( See dkt. no. 251 at 3-4.) The Sammons suggest an "unconfirmed" receipt date of July 16, 2013. (Dkt. no. 233-1 at 1; dkt. no. 233-2 at 1.) Third-Party Defendant COR Clearing, LLC ("COR") argues that Cede never received the document by mail. (Dkt. no. 251 at 3-4.) Rather, COR contends that Cede, through DTC, was given a courtesy copy of the Dissenters' Rights Notice on July 22, 2013, or July 23, 2013. ( Id. at 4 & n.2.)
In response to the Dissenters' Rights Notice, the Sammons - alone and through their intermediaries, including Cede, DTC, and COR - transmitted three sets of documents for their Jointly Held Shares and for Elena Sammons' Shares to CEC. The first documents are dissenter's rights letters prepared and submitted on the Sammons' behalf ("Dissenter's Rights Letter"). On either July 30, 2013, or July 31, 2013, CEC's statutory agent, United Corporate Services, Inc. ("UCS") received a Dissenter's Rights Letter from Cede with respect to the Sammons' Jointly Held Shares. (Dkt. no. 71-3 ¶ 3; id., Exh. B; dkt. no. 233-1 at 1.) UCS received a Dissenter's Rights Letter from COR regarding Elena Sammons' Shares on either August 1, 2013, or August 14, 2013. ( See dkt. no. 71-3 ¶ 4 (stating August 1); dkt. no. 130-2 ¶¶ 10-11 (stating August 14); dkt. no. 251-1 ¶ 15 (noting that COR submitted the Dissenter's Rights Letter to CEC and Quicksilver on August 1, 2013, and on August 13, 2013); dkt. no. 233-2 at 1.) On August 13, 2013, COR withdrew this Dissenter's Rights Letter after realizing it had two typographical errors; COR resubmitted a revised Dissenter's Rights Letter to Quicksilver the same day. (Dkt. no. 200, Rex Decl. ¶¶ 10-13; id., Ex. E.) Several days earlier, Elena Sammons sent a letter noting these errors to UCS. (Dkt. no. 130-2, ¶¶ 6-7; id., Ex. C.)
Second, the Sammons submitted letters demanding payment for their shares and asserting when they acquired beneficial ownership of their shares ("Demand Letter"). With regard to the Jointly Held Shares, UCS received a Demand Letter from the Sammons on July 31, 2013. (Dkt. no. 71-3 ¶ 3; id., Exh. B at 6-7; dkt. no. 233-1 at 1.) On August 7, 2013, UCS received a similar Demand Letter for Elena Sammons' Shares. (Dkt. no. 130-2 ¶¶ 6-7; id., Exh. B; dkt. no. 233-2 at 1.)
Third, the Sammons submitted stock certificates for their Jointly Held Shares and for Elena Sammons' Shares. After receiving a request from DTC, Quicksilver printed and mailed a certificate for the Jointly Held Shares to DTC on July 31, 2013. (Dkt. no. 130-1 ¶¶ 3-4; id., Exhs. A-1, A-2; dkt. no. 233-1 at 1.) UCS received this certificate on August 14, 2013. (Dkt. no. 130-2 ¶¶ 10-11; id., Exh. D at 20-21; dkt. no. 233-1 at 1.) For Elena Sammons' Shares, Quicksilver printed and mailed a certificate to DTC on August 8, 2014, after receiving DTC's request for the certificates the same day. (Dkt. no. 130-1 ¶¶ 5-6; ...