Lyon III v. Aron

Background

John R. Lyon III, an AMC Entertainment Holdings, Inc. shareholder, brought a derivative action—an action filed by a shareholder on behalf of the corporation—against AMC’s directors and officers, with AMC as the nominal defendant. Lyon’s claims concerned AMC’s acquisition of Carmike Cinemas, its acquisitions of European theater chains, related financing, and alleged false or misleading public statements. He asserted claims for breach of fiduciary duty, corporate waste, unjust enrichment or a constructive trust, and contribution and indemnification under Sections 10(b) and 21D of the Securities Exchange Act.

Lyon had previously demanded that AMC’s board investigate and pursue claims on the company’s behalf. The board, acting after review by a committee, declined to pursue the demand at that time and said it had deferred the decision while the related securities litigation was pending. Lyon then filed this action.

Defendants’ Motions

Defendants moved to dismiss under three theories: forum non conveniens, meaning that another forum would be more appropriate; Federal Rule of Civil Procedure 12(b)(6), for failure to state a legally sufficient claim; and Rule 23.1, which requires particularized allegations about a shareholder’s demand on the corporation’s directors or the reasons demand was not made.

Federal Contribution Claim

The court first addressed the Rule 12(b)(6) arguments. It held that Lyon’s contribution claim under the Exchange Act required a final judgment against the relevant defendants in the related securities action and a specific finding that they knowingly violated the securities laws. The court also explained that contribution claims against settling parties are barred.

The related securities action had been settled and the settlement had been approved. The settlement agreement stated that the defendants denied the allegations and affirmed that they had acted properly and lawfully. It also provided that AMC’s insurers were funding the settlement in its entirety. The court therefore concluded that AMC would have no liability to which the individual defendants could contribute or for which they could indemnify AMC. The court held that Lyon’s contribution claim must be dismissed.

Remaining State-Law Claims

The court stated that federal-question jurisdiction was based on the federal contribution claim, with supplemental jurisdiction—the court’s authority to hear related state-law claims—providing the basis for the remaining claims. After dismissing the sole federal claim, the court declined to exercise supplemental jurisdiction over the state-law claims. The court noted that it did not decide whether the forum-selection clause in AMC’s bylaws or the confidentiality agreement was enforceable, although it found that Lyon had been given notice of an apparent state forum for at least future derivative suits based on state law.

Disposition

The court granted defendants’ motion to dismiss. Because it granted the motion based on Rule 12(b)(6), it did not consider the arguments based on the forum-selection clause, forum non conveniens, or Rule 23.1. The clerk was directed to terminate the motion docket entry.