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Schumel v. Bank Mutual Corp.

United States District Court, E.D. Wisconsin

October 11, 2017

RUSSELL SCHUMEL, ALEX JAMES KOWALSKI, and HOLLY KAY KOWALSKI, Plaintiffs,
v.
BANK MUTUAL CORPORATION, MICHAEL T. CROWLEY, JR., DAVID A. BAUMGARTEN, RICHARD A. BROWN, MARK C. HERR, MIKE I. SHAFIR, DAVID C. BOERKE, LISA A. MAUER, ROBERT B. OLSON, THOMAS H. BUESTRIN, WILLIAM J. MIELKE, and ASSOCIATED BANC-CORP, Defendants. THOMAS L. PAQUIN, TODD BESTUL, and DAVID BIRKHOLZ, Plaintiffs,
v.
BANK MUTUAL CORPORATION, MICHAEL T. CROWLEY, JR., DAVID A. BAUMGARTEN, RICHARD A. BROWN, MARK C. HERR, MIKE I. SHAFIR, DAVID C. BOERKE, LISA A. MAUER, ROBERT B. OLSON, THOMAS H. BUESTRIN, WILLIAM J. MIELKE, and ASSOCIATED BANC-CORP, Defendants. FREDERICK WOLLENBURG, Plaintiff,
v.
BANK MUTUAL CORPORATION, MICHAEL T. CROWLEY, JR., DAVID A. BAUMGARTEN, WILLIAM J. MIELKE, THOMAS H. BUESTRIN, ROBERT B. OLSON, MARK C. HERR, DAVID C. BOERKE, RICHARD A. BROWN, LISA A. MAUER, MIKE I. SHAFIR, and ASSOCIATED BANC-CORP, Defendants.

          ORDER

          J. P. Stadtmueller, U.S. District Judge.

         As noted in the Court's prior order, Plaintiffs have filed motions to remand each of these actions to the Milwaukee County Circuit Court, from where they were removed to this Court. (Docket #11).[1] Defendant Associated Banc-Corp (“Associated”), the removing defendant, opposes Plaintiffs' request. (Docket #14). Defendant Bank Mutual (“Bank Mutual”) and its individual directors (the “Directors”) also contest the motion. (Docket #13). Plaintiff replied to both opposition briefs. (Docket #15). For the reasons stated below, the motions to remand must be granted.

         Bank Mutual and Associated are planning to merge, with Associated paying almost half a billion dollars for the privilege. (Docket #1-1 at 13-15). As part of the transaction, Bank Mutual's shareholders will be allowed to convert their shares into shares of Associated, at a little more than a 2:1 ratio. Id. at 14. Plaintiffs, individual shareholders in Bank Mutual, believe that this payment and conversion ratio “is unfair and grossly inadequate” consideration. Id. at 5, 16. Plaintiffs allege, on behalf of themselves and all Bank Mutual shareholders, that the Directors violated their fiduciary duties to the shareholders by agreeing to the transaction. Id. at 9-10, 16-17. Namely, the Directors entered into “certain onerous and preclusive deal protection devices” that “all but ensure that the [transaction will be] successful and no competing offers will emerge” for Bank Mutual. Id. at 16.

         Plaintiffs state two causes of action. The first is, of course, for breach of fiduciary duties by the Directors for “fail[ing] to take steps to maximize the value of Bank Mutual to its public shareholders.” Id. at 18. The second targets Associated for knowingly aiding and abetting the Directors in breaching their fiduciary duties. Id. at 19.[2] Bank Mutual is a named defendant, but it is not expressly implicated in either cause of action. It is before the Court, presumably, because Bank Mutual would be party to an injunction issued prohibiting the merger, which is part of Plaintiffs' request for relief. Id. at 19-20.

         Associated removed each of these actions pursuant to the Court's diversity jurisdiction, provided for in 28 U.S.C. § 1332(d), as modified by the Class Action Fairness Act of 2005 (“CAFA”). The Seventh Circuit recently explained CAFA's purpose and implementation:

Congress enacted CAFA in 2005 “to facilitate adjudication of certain class actions in federal court.” Dart Cherokee Basin Operating Co., LLC v. Owens, ___ U.S.___, 135 S.Ct. 547, 554, 190 L.Ed.2d 495 (2014). To meet these objectives, CAFA expands jurisdiction for diversity class actions by creating federal subject matter jurisdiction if: (1) a class has 100 or more class members; (2) at least one class member is diverse from at least one defendant (“minimal diversity”); and (3) there is more than $5 million, exclusive of interest and costs, in controversy in the aggregate. 28 U.S.C. § 1332(d); Hart v. FedEx Ground Package Sys., 457 F.3d 675, 677 (7th Cir. 2006). Consistent with this purpose, CAFA also loosens removal requirements: any defendant, including instate defendants, can remove; a defendant can remove even if all defendants do not consent; and there is no one-year limit on the timing of removal. 28 U.S.C. § 1453(b).
CAFA does not alter the burden of establishing the district court's jurisdiction. As in removal in non-CAFA diversity actions, the party asserting federal jurisdiction under CAFA must establish that the requirements of § 1332(d) are satisfied. Hart, 457 F.3d at 679.23

Sabrina Roppo v. Travelers Commercial Ins. Co., 869 F.3d 568, 578 (7th Cir. 2017). Associated's removal appears to fit with the prima facie requirements of CAFA, and Plaintiffs do not argue otherwise.[3]

         CAFA jurisdiction is subject to exceptions, however. CAFA's expansion of diversity jurisdiction does not apply to any class action that solely involves a claim-

(A) concerning a covered security as defined under 16(f)(3)1 of the Securities Act of 1933 (15 U.S.C. 78p(f)(3)2) and section 28(f)(5)(E) of the Securities Exchange Act of 1934 (15 U.S.C. 78bb(f)(5)(E)) [the “Covered Security Exception”];
(B) that relates to the internal affairs or governance of a corporation or other form of business enterprise and that arises under or by virtue of the laws of the State in which such corporation or business enterprise is incorporated or organized [the “Internal Affairs Exception”]; or
(C) that relates to the rights, duties (including fiduciary duties), and obligations relating to or created by or pursuant to any security (as defined under section 2(a)(1) of the Securities Act of 1933 (15 U.S.C. 77b(a)(1)) and the regulations issued thereunder) [the “Fiduciary Duty Exception”].

28 U.S.C. § 1332(d)(9).

         Plaintiffs maintain that all three exceptions apply to this case, but the vast majority of the parties' efforts are directed at the Fiduciary Duty Exception. Plaintiffs argue that their complaint is based entirely on “the rights, duties (including fiduciary duties), and obligations relating to or created by or pursuant to” the shares they hold (which are qualifying securities). 28 U.S.C. § 1332(d)(9)(C) (emphasis added). Associated responds by focusing on the impact of the word “solely” in the opening phrase of Section 1332(d)(9) (“Paragraph (2) [the CAFA jurisdiction paragraph] shall not apply to any class action that solely involves a claim--[exceptions listed]”) (emphasis added). Associated does not contend that the fiduciary duty claim, alleged against the Directors, would be removable under CAFA. Instead, Associated's removal is premised on Plaintiffs' addition of the aiding-and-abetting claim. Plaintiffs maintain that this claim must also ...


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