Katz v. Gerardi
2011 U.S. App. LEXIS 17757
10th Cir.2011Background
- Katz and Infinity held minority 11% of Archstone Smith Operating Trust (Archstone REIT); Archstone Smith Trust controlled Archstone REIT as sole trustee.
- Merger approved in 2007: Lehman Brothers and Tishman Speyer acquired Archstone for about $22.2 billion; minority A-1 Unitholders could elect cash, new units, or a mix; they lacked voting rights.
- Katz elected $60.75 cash per A-1 Unit; Infinity elected new units in the post-merger entity; each asserted false/misleading statements in merger-related offering documents.
- Infinity filed a Colorado class action; district court dismissed it with prejudice except one contract claim; stayed pending arbitration.
- Katz filed Illinois state court securities class action; removed and transferred to Colorado; Katz joined Infinity in an amended complaint asserting 1933 Act claims; district court dismissed Katz’s claims for lack of purchaser standing and Infinity for claim-splitting.
- After dismissal, Infinity sought to amend its Colorado case to include the same securities claims; district court granted permission to amend in April 2011, while this appeal proceeded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Infinity’s second suit constitutes claim-splitting. | Infinity alleges no final judgment exists in the Colorado suit; claim splitting not triggered. | Infinity improperly split related securities claims across suits; dismissal appropriate. | Yes; district court did not abuse discretion in dismissing Infinity for claim splitting. |
| Whether Katz had standing under the 1933 Act as a purchaser. | Katz was a purchaser because merger changed his A-1 Units to 'new' units with different rights. | Katz sold his A-1 Units for cash; he was a seller, not a purchaser, so no standing. | Katz lacked standing; 1933 Act claims dismissed. |
| Whether the fundamental change doctrine applies to Katz’s 1933 Act claims. | Fundamental change doctrine converts a forced-seller into a purchaser, giving standing under 1933 Act. | Doctrine is inapplicable to 1933 Act claims and would not convert Katz into a purchaser even if applied. | Doctrine does not apply to 1933 Act claims. |
| Whether Katz’s 1933 Act claims were properly dismissed for lack of purchaser status. | Even if not a purchaser, Katz argues alternative theories under 1933 Act. | Under 1933 Act §§ 11, 12(a)(2), only purchasers may sue; Katz did not purchase. | Affirmed; Katz’s 1933 Act claims dismissed for lack of standing. |
| Whether the district court properly handled the interaction between 1933 Act and 1934 Act claims. | Securities claims under 1934 Act could be pursued; 1933 Act claims barred only for standing. | Fundamental doctrinal distinctions and loss causation issues bar resurrection of 1933 Act claims. | Affirmed; no reversible error in denying 1933 Act claims. |
Key Cases Cited
- Hartsel Springs Ranch of Colo., Inc. v. Bluegreen Corp., 296 F.3d 982 (10th Cir. 2002) (claim-splitting doctrine governs docket management; abuse of discretion standard)
- The Haytian Republic, 154 U.S. 118 (U.S. Supreme Court 1894) (test for claim-splitting: same parties, same rights, same relief, same facts)
- Curtis v. Citibank, N.A., 226 F.3d 133 (2d Cir. 2000) (bar on duplicative actions; res judicata-related reasoning)
- Pelt v. Utah, 539 F.3d 1271 (10th Cir. 2008) (final judgment element of res judicata; analysis cited for context)
- Jacobson v. AEG Capital Corp., 50 F.3d 1493 (9th Cir. 1995) (standing under 1933 Act; after-market purchaser recognized)
- Bold v. Simpson, 802 F.2d 314 (8th Cir. 1986) (standing and scope under securities acts; 1933 Act context)
- Isquith by Isquith v. Caremark Int'l, Inc., 136 F.3d 531 (7th Cir. 1998) (discussion of doctrinal status of the fundamental change concept)
- 7547 Corp. v. Parker & Parsley Development Partners, 38 F.3d 211 (5th Cir. 1994) (forced seller doctrine and 10(b) standing discussion (1933 Act context))
- Union Exploration Partners Securities Litigation, 1992 WL 203812 (N.D. Cal. 1992) (application to 12(a)(2) claims; forced seller doctrine discussion)