Donoghue v. Tannenbaum
- Paul Engelmayer
- 1:21-cv-04770
- U.S. District Court · Southern District of New York
- 3
In Donoghue v. Tannenbaum, Judge Engelmayer denied dismissal, converted it to summary judgment, and limited discovery.
The order affected plaintiffs Deborah Donoghue and Mark Rubenstein, defendant Leonard M. Tannenbaum, and nominal defendant Oaktree Specialty Lending Corporation by setting limited discovery and a schedule for possible summary-judgment briefing.
What happened
Deborah Donoghue and Mark Rubenstein sued Leonard Tannenbaum to recover profits allegedly covered by Section 16(b) of the Securities Exchange Act. Oaktree Specialty Lending Corporation was named as a nominal defendant. Tannenbaum argued that the transaction was an unusual type of transaction outside Section 16(b). The dispute focused partly on how he voted on a merger that led to his receipt of the shares at issue.
The court concluded that resolving whether the transaction was unusual depended on facts outside the complaint, including Tannenbaum’s voting instructions. The parties proposed a limited plan involving documents, written questions, and a one-hour deposition of Tannenbaum. The court found that the parties had adequate notice that the motion might be converted into a request for summary judgment.
Judge Paul A. Engelmayer denied Tannenbaum’s motion to dismiss, converted it into a motion for summary judgment on whether the transaction was an unusual transaction under Section 16(b), approved the limited discovery plan, and stayed all other discovery. The court set deadlines for completing discovery and briefing any summary-judgment motion, and directed the clerk to terminate the pending motions.
The detailed version
- Donoghue v. Tannenbaum · No. 1:21-cv-04770
- Paul Engelmayer
- Oct. 15, 2021
Background
Deborah Donoghue and Mark Rubenstein brought claims under Section 16(b) of the Securities Exchange Act of 1934, which allows recovery of certain short-swing profits. Leonard M. Tannenbaum moved to dismiss the First Amended Complaint under Federal Rule of Civil Procedure 12(b)(6), or alternatively asked the court to treat the motion as one for summary judgment under Rule 56. He also sought a stay of discovery while the motion was pending. Oaktree Specialty Lending Corporation was named as a nominal defendant.
Tannenbaum’s argument was that the alleged purchase-and-sale transaction was an “unorthodox transaction” outside Section 16(b). The argument centered on the first part of the transaction and the circumstances under which Tannenbaum voted on a merger between OCSI and OCSL that resulted in his receipt of the shares at issue.
Court’s analysis
The court stated that the question whether the transaction was unorthodox appeared to depend on facts not suitable for resolution on a motion to dismiss, including voting instructions Tannenbaum gave to OCSI and OCSL. The court therefore considered conversion of the motion into one for summary judgment to be an efficient way to address that potentially decisive issue.
Federal Rule of Civil Procedure 12(d) requires conversion when matters outside the pleadings are presented and not excluded, provided the parties have a reasonable opportunity to present material relevant to the converted motion. The court found that the parties had sufficient notice because Tannenbaum had proposed conversion, the court had discussed the issue with counsel, and the parties had submitted a limited discovery plan anticipating conversion.
Ruling and case schedule
The court denied Tannenbaum’s motion to dismiss. It converted the motion into a motion for summary judgment on the specific question whether the transaction was an unorthodox transaction under Section 16(b). The court approved the parties’ limited discovery plan and stayed all other discovery.
The court ordered the limited discovery to be completed by November 15,
- Any summary-judgment motion was due December 1, 2021; opposition was due December 15, 2021; and any reply was due December 22,
- The court also directed the clerk to terminate the motions at docket numbers 25 and
- The opinion did not decide whether the transaction was in fact unorthodox.
Read the full 3-page opinion on CourtListener, the free public archive maintained by the Free Law Project.