John Olagues v. Ward Timken, Jr.
908 F.3d 200
6th Cir.2018Background
- Plaintiff John Olagues, a pro se shareholder, sued under § 16(b) of the Securities Exchange Act alleging TimkenSteel CEO Ward Timken made short-swing profits by repurchasing company stock within six months of transferring shares to the company.
- Olagues sought disgorgement of $554,700, but TimkenSteel informed him any recovery would go to the company, not to him.
- Defendants moved to strike/dismiss under Fed. R. Civ. P. 12(f), arguing TimkenSteel was the real party in interest and a pro se litigant cannot represent a corporation.
- The district court struck and dismissed Olagues’ complaint because he was proceeding pro se on behalf of the company.
- The Sixth Circuit affirmed that a plaintiff may not proceed pro se when litigating rights that belong to a corporation or other third party, but remanded to allow Olagues to retain counsel and re-file an amended complaint through counsel.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a shareholder may proceed pro se under § 16(b) when suing to recover short‑swing profits | Olagues: § 16(b) creates a private right to sue and contains no textual requirement that a shareholder must have counsel | TimkenSteel: § 16(b) suits brought by shareholders are in the name and on behalf of the issuer, so the plaintiff would be litigating the company’s rights and cannot appear pro se | Held: Pro se litigant cannot represent the interests of a company under 28 U.S.C. § 1654; Olagues cannot proceed pro se under § 16(b) |
| Whether dismissal via Rule 12(f) was proper | Olagues: Striking the complaint under Rule 12(f) was improper to effect dismissal | TimkenSteel: dismissal justified because Olagues was improperly proceeding pro se on behalf of the issuer | Held: Rule 12(f) is not the proper mechanism to dismiss a complaint, but dismissal (or conditional dismissal) is appropriate under the court’s authority if plaintiff refuses to obtain counsel; remand to allow counsel retention and refiling |
Key Cases Cited
- Winget v. JP Morgan Chase Bank, NA, 537 F.3d 565 (6th Cir. 2008) (standard of review for dismissal of complaint)
- Shepherd v. Wellman, 313 F.3d 963 (6th Cir. 2002) (28 U.S.C. § 1654 bars pro se litigants from representing others)
- Bass v. Leatherwood, 788 F.3d 228 (6th Cir. 2015) (purpose of prohibition on non‑lawyer representation is to protect third parties)
- Osborn v. Bank of U.S., 22 U.S. 738 (U.S. 1824) (historical rule that corporations must appear through counsel)
- Gollust v. Mendell, 501 U.S. 115 (U.S. 1991) (shareholder suing under § 16(b) sues on behalf of issuer; any recovery inures to issuer)
- Phillips v. Tobin, 548 F.2d 408 (2d Cir. 1976) (substantive right in stockholder derivative suits belongs to the corporation)
- Donoghue v. Bulldog Investors Gen. P’ship, 696 F.3d 170 (2d Cir. 2012) (§ 16(b) is a procedural device to enforce issuer’s rights)
- Simon v. Hartford Life, Inc., 546 F.3d 661 (9th Cir. 2008) (collecting circuit authority prohibiting non‑lawyers from representing others)