Skoog v. Harbert Private Equity Fund, II, LLC
2013 NCBC 17
N.C. Bus. Ct.2013Background
- Plaintiffs Greg Skoog, Rosemary Skoog, and Alan Dietz are Catawba County residents and shareholders of Lance Transport.
- Lance Transport was a North Carolina freight-transport business.
- Defendants Harbert Private Equity Fund II MM, LLC and Harbert Private Equity Fund II, LLC own/manage CF Holding and were involved in the Lance Transport acquisition.
- Plaintiffs filed their suit March 5, 2012, asserting violations of the North Carolina Securities Act (NCSA) § 78A-56(a) and § 78A-56(c).
- Negotiations began in 2008 for CF Holding to acquire Lance Transport; Harbert led negotiations; Winston Gillum and Greg Skoog were key negotiators for Harbert and Lance Transport respectively.
- Closing on February 12, 2009 included cash, CF Holding stock, promissory notes, and CF Holding assuming Lance Transport debt; post-closing employment was offered to plaintiffs.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Harbert is liable under § 56(a)(2) for omissions/misstatements. | Plaintiffs contend Harbert’s omissions rendered statements misleading and tied to an offer/sale of CF Holding stock. | Harbert asserts no misstatement was tied to a designated statement; omissions were not connected to any actionable statement. | § 56(a)(2) claim dismissed as to Harbert. |
| Whether Harbert’s omissions were tied to specific statements made misleading. | Omissions about loans, defaults, and future support made Harbert’s statements misleading. | No adequate tie between omissions and a specific misleading statement; some omissions disclosed; some are immaterial. | Omissions could not anchor liability under § 56(a)(2). |
| Whether Harbert is liable under § 56(a)(1) for an overall fraudulent scheme. | Harbert engaged in a scheme to defraud by misrepresenting CF Holding’s financial state and the value of consideration. | Promises of future support and general misstatements do not prove a material misstatement or a scheme at this stage. | Plaintiffs sufficiently alleged § 56(a)(1) claim to survive at this stage. |
| Whether Harbert is liable as a control person under § 56(c) if not primarily liable. | As CF Holding’s controlling shareholder, Harbert can be liable as a control person. | Harbert as control person liable only if primary liability remains unresolved; court should determine later. | § 56(c) claim survives in the alternative; denial of dismissal on that theory. |
Key Cases Cited
- Pinter v. Dahl, 486 U.S. 622 (U.S. 1988) (importance of solicitation of buyer in determining offeror/seller status under securities laws)
- Williams v. Williams, 98 N.C. App. 274, 390 S.E.2d 746 (N.C. Ct. App. 1990) (definition of seller/offeror under NC securities act; reliance on the solicitation stage)
- Krim v. Coastal Physician Grp., Inc., 81 F. Supp. 2d 621 (M.D.N.C. 1998) (materiality and duty to disclose; tying omissions to statements)
- Raab v. Gen. Physics Corp., 4 F.3d 286 (4th Cir. 1993) (projections and non-guaranteed future promises generally not actionable)
- In re Alstom SA Sec. Litig., 406 F. Supp. 2d 433 (S.D.N.Y. 2005) (claims must show scheme beyond misrepresentations to sustain Rule 10b-5 liability)