661 F.Supp.3d 3
E.D.N.Y2023Background
- Brad Packer brought a derivative action on behalf of 1-800-Flowers under Section 16(b) alleging Raging Capital et al. (beneficial owners >10%) made short-swing profits from buying and selling Flowers stock in 2014–2015.
- Plaintiff satisfied the statutory prerequisites to bring a derivative §16(b) claim; Flowers did not pursue the action on its own behalf.
- The case has extensive procedural history: filed in 2015, cross-motions for summary judgment (district court favored plaintiff; Second Circuit remanded on factual issues), protracted discovery and reassignment, and renewed briefing.
- Defendants moved to dismiss for lack of Article III standing after the Supreme Court’s decision in TransUnion v. Ramirez clarified that a statutory violation alone does not establish a concrete injury.
- Central legal question: whether TransUnion’s “no concrete harm, no standing” rule undermines Second Circuit precedent (Donoghue v. Bulldog) holding that a §16(b) violation suffices to establish Article III standing for the issuer/derivative plaintiff.
- The court held the motion to dismiss for lack of standing and dismissed the case: Bulldog’s rule that a §16(b) violation alone confers Article III standing cannot be squared with TransUnion, and Packer failed to allege any concrete harm beyond the statutory violation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does Packer have Article III standing to pursue a derivative §16(b) claim post-TransUnion? | Packer: meeting §16(b) statutory prerequisites (and the statutory fiduciary right) is enough; reputational harm is presumed. | Defendants: TransUnion requires a concrete, non-speculative injury beyond a statutory violation. | Court: No standing; plaintiff alleged only the statutory violation and no concrete reputational or monetary harm. |
| Does TransUnion abrogate Bulldog (Donoghue) that treated §16(b) violations as sufficient for standing? | Packer: Bulldog remains controlling; TransUnion is inapplicable or limited. | Defendants: TransUnion casts fatal doubt on Bulldog; concrete-harm requirement applies to §16(b). | Court: TransUnion controls; Bulldog cannot stand for the proposition that a bare §16(b) violation alone establishes Article III injury. |
| Can standing be raised now given prior litigation history and alleged waiver? | Packer: defendants previously did not press constitutional standing; court should not entertain late attack. | Defendants: Article III standing is jurisdictional and may be raised at any time in light of intervening Supreme Court precedent. | Court: Standing is jurisdictional; the issue may be considered and dismissal was proper. |
Key Cases Cited
- TransUnion LLC v. Ramirez, 141 S. Ct. 2190 (U.S. 2021) (a statutory violation alone does not establish Article III standing; requires concrete injury)
- Donoghue v. Bulldog Investors Gen. P’ship, 696 F.3d 170 (2d Cir. 2012) (pre-TransUnion: held §16(b) violation gives issuer/derivative plaintiff Article III standing)
- Spokeo, Inc. v. Robins, 578 U.S. 330 (U.S. 2016) (standing requires concrete, particularized injury; intangible harms can qualify if traditionally recognized)
- Klein v. Qlik Techs., Inc., 906 F.3d 215 (2d Cir. 2018) (reiterated Bulldog’s pre-TransUnion view on §16(b) standing)
- Maddox v. Bank of New York Mellon Trust Co., N.A., 19 F.4th 58 (2d Cir. 2021) (post-TransUnion adjustment: concrete harm required; earlier reasoning revised)
- Harty v. West Point Realty, Inc., 28 F.4th 435 (2d Cir. 2022) (applied TransUnion to reject standing where statutory violation produced no concrete downstream harm)
- Gollust v. Mendell, 501 U.S. 115 (U.S. 1991) (interpreted statutory standing under §16(b); addressed financial interest but not Article III concrete-harm requirement)