The Hemmer Group v. Southwest Water Company
663 F. App'x 496
| 9th Cir. | 2016Background
- Hemmer Group sued SouthWest Water Co. under Sections 10(b)/20(a) (Exchange Act) and Sections 11/15 (Securities Act) following securities offerings.
- On prior appeal the Ninth Circuit affirmed dismissal with prejudice of Hemmer Group’s Section 10(b) claim and remanded remaining claims to the district court.
- Hemmer Group sought leave in district court to amend and reopen its Section 10(b) and derivative Section 20(a) claims after remand.
- District court denied leave to amend the Section 10(b) claim, concluding the appellate mandate precluded amendment, and denied reopening the Section 20(a) claim as derivative.
- On summary judgment the district court held Hemmer Group could not trace its shares to the challenged registration statement (defeating Section 11 strict-liability standing) and dismissed the derivative Section 15 claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether district court erred by refusing to reopen/amend Section 10(b) claim | Hemmer argued it should be allowed to amend the dismissed claim | SouthWest relied on the appellate mandate affirming dismissal with prejudice, which precludes amendment | Denied — mandate (affirming dismissal with prejudice) impliedly precluded amendment; district court lacked authority |
| Whether Section 20(a) claim could be refiled | Hemmer sought to renew derivative control-person claim | SouthWest argued Section 20(a) is derivative of Section 10(b) and barred if 10(b) cannot be reopened | Denied — 20(a) is derivative of 10(b); refusal to reopen 10(b) bars 20(a) |
| Whether Hemmer can pursue Section 11 claim (tracing requirement) | Hemmer contended its shares were part of the offering and traceable to the registration statement | SouthWest showed shares held as a fungible mass by transfer agent, precluding tracing to the specific offering | Summary judgment for SouthWest — Hemmer cannot trace shares to the relevant registration statement, so lacks standing under §11 |
| Whether Section 15 control-person claim survives | Hemmer argued control-person liability independent of other claims | SouthWest argued §15 is derivative and requires an underlying primary violation | Summary judgment for SouthWest — §15 claim fails because no primary §11 violation remains |
Key Cases Cited
- United States v. Thrasher, 483 F.3d 977 (9th Cir. 2007) (describing the rule of mandate and its effect on district court authority)
- In re Sanford Fork & Tool Co., 160 U.S. 247 (U.S. 1895) (foundational statement that a mandate makes prior appellate dispositions final)
- Nguyen v. United States, 792 F.2d 1500 (9th Cir. 1986) (mandate can explicitly or implicitly preclude amendment)
- Livid Holdings Ltd. v. Salomon Smith Barney, Inc., 416 F.3d 940 (9th Cir. 2005) (standards for dismissing with prejudice — amendment cannot save the complaint)
- In re Rigel Pharms., Inc. Sec. Litig., 697 F.3d 869 (9th Cir. 2012) (holding §20(a) is derivative of §10(b))
- In re Century Aluminum Co. Sec. Litig., 729 F.3d 1104 (9th Cir. 2013) (explaining §11 tracing requirement and the practical difficulty of tracing in a fungible-share context)