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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,
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,
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,
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.
Stadtmueller, U.S. District Judge.
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). 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.
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
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. 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.
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.
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
(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
28 U.S.C. § 1332(d)(9).
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 ...