In 2011, six former officers and directors of a software company in the Research Triangle were sued by the former CEO and chair of the Board of Directors for a range of fraud-related tort claims arising out of a 2008 merger with a French company.
The clients retained Gregg McDougal of our Raleigh office to defend them in the case. Gregg McDougal quickly brought Mike Kaeding from Atlanta and John Moye from Raleigh onto the team, and the team set about trying to having the case dismissed. After the case had been removed to federal court in Raleigh, the Kilpatrick Townsend team obtained a dismissal with prejudice of the case.
Three weeks after the first case was filed, however, a second action was filed in the North Carolina Business Court in Raleigh. This time, over 50 individual plaintiffs (all former holders of common stock in the company) alleged claims against the same board members based on the terms of the 2008 merger transaction. Notably, the “lead plaintiff” in the second action was the same individual who had filed the first action.
In the fall of 2011, the Kilpatrick Townsend team prepared and filed a Motion for Judgment on the Pleadings, asserting that, under the doctrine of res judicata, the "lead plaintiff's" second action was barred because he had all of the facts in his possession when he filed the first action – and he could have and should have alleged them all in one place. A two-hour hearing was held in late February 2012 before the Business Court; John Moye and Gregg McDougal argued the motion on behalf of the defendants.
The team obtained a great result: on May 18, 2012, the Business Court ruled in favor of the defendants, agreeing with the client’s position and dismissing the lead plaintiff from the case, with prejudice, under the doctrine of res judicata.
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Prior results do not guarantee a similar outcome.