ARCHON CORPORATION; PAUL W. LOWDEN; AND SUZANNE LOWDEN, Petitioners,
THE EIGHTH JUDICIAL DISTRICT COURT OF THE STATE OF NEVADA, IN AND FOR THE COUNTY OF CLARK; AND THE HONORABLE JOSEPH HARDY, JR., DISTRICT JUDGE, Respondents, and STEPHEN HABERKORN, AN INDIVIDUAL, Real Party in Interest.
petition for a writ of mandamus or prohibition challenging
the denial of a motion to dismiss based on tolling of the
statute of limitations. Petition denied.
Dickinson Wright PLLC and John P. Desmond, Justin J. Bustos,
and Kenneth K. Ching, Reno, for Petitioners.
Williams PLLC and Stephen R. Hackett and Johnathon Fayeghi,
Las Vegas, for Real Party in Interest.
DOUGLAS, GIBBONS and PICKERING, JJ.
original writ proceeding raises the question of when it is
appropriate to exercise our discretion to grant extraordinary
relief in the form of advisory mandamus. Petitioners ask us
to direct the district court to vacate and reconsider its
order denying their motion to dismiss, without applying the
doctrine of cross-jurisdictional class-action tolling to
their statute of limitations defenses. We decline to grant
writ relief for three reasons. First, the district court did
not consider the statute-based argument petitioners make to
this court because petitioners failed to cite the statute
until the hearing on their motion to dismiss, after the
briefing on their motion had closed. Second, our
clarification of the law would not alter the district
court's disposition because the district court had
alternative grounds for its decision. Finally, the district
court denied the motion to dismiss without prejudice. Its
decision to defer final decision on petitioners' statute
of limitations defenses pending further factual and legal
development strikes us as sound and not the proper basis for
extraordinary writ relief.
party in interest Stephen Haberkorn owned exchangeable,
redeemable, preferred stock in petitioner Archon Corporation.
In 2007, Archon redeemed its preferred stock for $5, 241 per
share. The redemption led investors to file three separate
lawsuits against Archon in Nevada federal district court. In
each, the plaintiffs asserted that Archon had miscalculated
the redemption price and should have paid $8.69 per share.
Two of the suits, both by institutional investors, were
resolved on summary judgment awarding damages based on a
redemption price of $8.69 per share. See D.E. Shaw
Laminar Portfolios, LLC v. Archon Corp., 755 F.Supp.2d
1122, 1128-29 (D. Nev. 2010), affd, 483
Fed.App'x 358 (9th Cir. 2012). The third suit was a class
action in which the named plaintiff, David Rainero, sought
contract-based damages on behalf of himself and other
preferred stockholders, including Haberkorn, for the
correctly calculated redemption price. In 2013, based on the
summary judgments won by the institutional investors, the
federal district court granted partial summary judgment to
Rainero, holding that Archon should have paid all of its
preferred shareholders $8.69 per share to redeem their stock.
courts have limited subject matter jurisdiction. The Rainero
complaint laid claim to federal jurisdiction under 28 U.S.C.
§ 1332(d)(2), which creates federal jurisdiction for
certain class action suits provided the amount in controversy
exceeds $5 million. See Rainero v. Archon Corp., 844
F.3d 832, 836 (9th Cir. 2016). After losing on liability at
partial summary judgment, Archon moved to dismiss the Rainero
suit for want of subject matter jurisdiction. Archon argued
that the class members owned 1, 439, 270 shares of preferred
stock, making the amount in controversy $4, 964, 042, less
than the $5 million required for federal jurisdiction by 28
U.S.C. § 1332(d). The federal district court agreed. On
September 29, 2014, it granted Archon's motion to
dismiss, a ruling the Ninth Circuit affirmed in late 2016.
Archon, 844 F.3d at 841.
filed the complaint underlying this writ petition on February
29, 2016, after the district court's dismissal but before
the Ninth Circuit affirmed. Haberkorn's state court
complaint overlaps Rainero's federal court complaint in
that it includes allegations that Archon shortchanged its
preferred stockholders when it calculated the redemption
price for their stock in 2007. But Haberkorn's complaint
differs from Rainero's in that Haberkorn alleges rights
as both a common and preferred stockholder; adds as
defendants Paul and Suzanne Lowden, who are Archon's
officers, directors, and majority stockholders; alleges that
Archon's miscalculation of the redemption price
invalidates the redemption, meaning that Haberkorn's
ownership rights, including rights to dividends, have
continued to accrue; and asserts claims for a variety of
alleged wrongs, including breaches of fiduciary duty
associated with Archon's allegedly wrongful reverse stock
split and the deregistration that followed in 2011,
Archon's nondisclosure in 2012 that it had suffered a
final judgment declaring it to have miscalculated the 2007
redemption price, and its unequal treatment of certain
preferred stockholders. On these bases, suing individually
and not on behalf of a class, Haberkorn seeks a declaratory
judgment, compensatory and punitive damages, restitution for
unjust enrichment, and an accounting.
Archon Corporation and the Lowdens (collectively, Archon)
moved to dismiss Haberkorn's complaint under NRCP
12(b)(5). The motion asserted that Haberkorn waited too long
to file suit and the statute of limitations had run on all of
his claims. Haberkorn countered that the pendency of the
class action in federal court tolled the statute of
limitations and that, even if it didn't, Archon's
ongoing breaches caused ongoing harm, making it improper to
dismiss the complaint for failure to state a claim. At oral
argument on the motion to dismiss, Archon argued for the
first time that NRS 11.500, reprinted infra note 1,
district court denied Archon's motion to dismiss. Its
order summarizes its reasons as follows:
(1) general class action tolling applies; (2) under these
circumstances, cross jurisdictional tolling also applies; (3)
the remaining arguments in favor of, or against, dismissal,
would be more appropriately raised in a Motion for Summary
Judgment, in particular Defendants' argument that
Plaintiff knew or should have known of various public record
filings; (4) the Court could not rule on NRS 11.500 at this
time, as it was not raised in the briefs; and ...