QLIK TECHNOLOGIES, INC. v. Cadian Capital Management, LP
1:15-cv-08140
S.D.N.Y.Sep 15, 2017Background
- Klein, a Qlik shareholder at the time she filed suit (but not during the alleged trading period), brought a derivative action under Section 16(b) seeking disgorgement of short‑swing profits from Cadian and related defendants.
- Klein demanded Qlik sue on June 11, 2015; Qlik declined on July 24, 2015; Klein filed on October 15, 2015.
- Qlik was acquired in a cash‑out merger (closing August 22, 2016) that cancelled public Qlik shares and paid $30.50 per share in cash; Klein received cash and no continuing equity.
- After the merger, Qlik (the nominal defendant) retained Klein’s counsel and sought substitution as plaintiff to continue the §16(b) claim.
- Cadian moved to dismiss under Rule 12(b)(1) for lack of subject‑matter jurisdiction, arguing Klein lacked standing at filing or lost it after the cash‑out; Klein cross‑moved to substitute Qlik under Rules 17(a)(3) and 25(c).
- The district court concluded Klein initially had standing (she owned shares when suit was filed) but lost any continuing personal stake after the cash‑out, and that substitution could not cure the jurisdictional defect; the complaint was dismissed and substitution denied.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing at inception: Was Klein a proper §16(b) plaintiff though she did not own shares during the alleged short‑swing trades? | Klein argued ownership at filing is sufficient under §16(b); no requirement to have owned during alleged trades. | Cadian argued lack of ownership during the trading period defeats standing. | Court: Klein had standing at filing; §16(b) and precedent (Gollust, Bulldog Investors) permit suit by a shareholder who owned at institution of suit even if not owner at time of trades. |
| Mootness/continuing stake after cash‑out merger: Did the post‑filing cash‑out divestment strip the court of jurisdiction? | Klein conceded she lost personal stake but urged the derivative claim on behalf of Qlik survives and substitution should be allowed. | Cadian argued the cash‑out eliminated any continuing financial interest, rendering the case moot and divesting jurisdiction. | Court: Cash‑out left Klein with no continuing financial interest; loss of personal stake rendered the controversy non‑justiciable and jurisdiction lacking. |
| Substitution under Fed. R. Civ. P. 17(a)(3): Can the real party in interest (Qlik) be substituted after original plaintiff lost standing? | Klein argued Rule 17(a)(3) permits reasonable time to ratify/join/substitute the real party in interest and that substitution would vindicate §16(b) policy. | Cadian argued Rule 17 cannot create subject‑matter jurisdiction where Article III standing is absent. | Court: Rule 17 cannot cure a constitutional standing defect or create jurisdiction; substitution denied. |
| Substitution under Fed. R. Civ. P. 25(c) / relation back under Rule 15(c): Could transfer of interest or relation‑back save the suit? | Klein argued transfer/substitution or relation‑back would preserve the claim and timely relate any substitution to the original filing. | Cadian argued Rule 25(c) and Rule 15 cannot overcome Article III requirements and cannot resurrect jurisdiction once plaintiff was divested. | Court: Declined to reach merits of these arguments because jurisdiction was lacking; Rules 25(c)/15(c) do not overcome constitutional standing requirements. |
Key Cases Cited
- Gollust v. Mendell, 501 U.S. 115 (1991) (holding shareholder who owned securities when suit was instituted met §16(b) standing requirements and emphasizing plaintiff must maintain a continuing personal stake)
- Donoghue v. Bulldog Inv’rs Gen. P’ship, 696 F.3d 170 (2d Cir. 2012) (recognizing §16(b) claims are derivative and that statutory rights can supply the basis for Article III standing when a concrete injury to the issuer exists)
- Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016) (clarifying that Congress cannot grant standing absent a concrete and particularized injury-in-fact)
- Cortlandt St. Recovery Corp. v. Hellas Telecommunications, 790 F.3d 411 (2d Cir. 2015) (discussing limits of Rule 17 substitutions and noting district courts’ caution about using Rule 17 to cure standing defects)
- Oscar Gruss & Son, Inc. v. Hollander, 337 F.3d 186 (2d Cir. 2003) (holding Rule 17 does not affect subject‑matter jurisdiction and cannot be used to expand it)