United States District Court, E.D. Michigan, Southern Division
LAND AND BUILDINGS INVESTMENT MANAGEMENT, LLC, a Delaware limited liability company, Plaintiff,
TAUBMAN CENTERS, INC., a Michigan corporation, and Relief Defendants ROBERT S. TAUBMAN, WILLIAM S. TAUBMAN, and GAYLE TAUBMAN KALISMAN, R&W-TRG LLC, TAUBMAN VENTURES GROUP LLC, TG PARTNERS, and TF ASSOCIATES, LLC, Defendants.
OPINION AND ORDER GRANTING DEFENDANTS' MOTION TO
CORBETT O'MEARA UNITED STATES DISTRICT JUDGE.
the court is Defendants' motion to dismiss, filed June
23, 2017, which has been fully briefed. The court heard oral
argument on August 10, 2017, and took the matter under
advisement. For the reasons explained below, Defendants'
motion is granted.
action arises under ' 14(a) of the Securities and
Exchange Act of 1934, 15 U.S.C. § 78n(a). Plaintiff Land
and Buildings Investment Management, LLC, contends that
Defendant Taubman Centers, Inc. issued a materially false or
misleading proxy statement in advance of the company's
June 1, 2017 annual meeting of shareholders. Plaintiff also
alleges that Defendant breached its articles of
incorporation. To remedy the alleged proxy violations,
Plaintiff seeks a new meeting or, alternatively, an order
requiring Plaintiff's nominees to be seated on the board.
See Amended Compl. (hereinafter
''Compl.'' at ¶ 1.
is an investment advisor that has purchased shares in Taubman
Centers, Inc. (''Taubman Centers''. Taubman
Centers was founded by A. Alfred Taubman and went public as a
real estate investment trust in 1992. Taubman Centers'
only asset is approximately 71% of the Taubman Realty Group
Limited Partnership ("TRG"), a limited partnership
that owns and manages shopping centers. See Compl.
at ¶¶ 26-27. The remaining 29% of TRG is owned
predominately by members of the Taubman family, including
siblings Robert S. Taubman, William S. Taubman, and Gayle
Taubman Kalisman, through the Defendant entities R&W-TRG,
LLC, Taubman Ventures Group, LLC, TG Partners, and TF
Associates, LLC. Id. at ¶¶18-25, 27.
result of a restructuring in 1998, the partnership committee
that managed TRG's assets was eliminated. See
1998 Form 8-K at 1; 1992 Prospectus at 8. Management of
TRG's assets was moved to Taubman Centers' board.
Id. This move would have disenfranchised TRG
partners (such as the Taubman family), who had a right to
four seats on TRG's partnership committee. To offset this
loss of management rights at the TRG partnership level,
Taubman Centers created a new class of preferred stock B
Series B stock B which was issued only to TRG partners (other
than Taubman Centers). See 1998 Form 8-K at 1;
Compl. at ¶¶ 29-30. Each share of Series B Stock
entitles the holder to one vote on all matters submitted to
Taubman Centers' shareholders. Id. Series B
stockholders are not entitled to dividends or earnings, and
the shares have a liquidation value of $.001. Id.
Series B stock is convertible to common stock at a ratio of
14, 000 shares of Series B preferred stock for one share of
common stock. Id. In other words, Series B preferred
stock gives TRG minority partners voting rights in Taubman
Centers, but has nominal economic value. See also
1998 Form 10-K (approximately 31 million shares of Series B
stock for an aggregate offering price of $38, 400). Taubman
Centers' Series B preferred stock does not trade
separately from units in the operating partnership (TRG);
they are considered "stapled" together. Compl. at
reasons, Taubman Centers' charter generally prohibits any
single person from owning more than 8.23 percent of the value
of its capital stock (common and preferred). See
Restated Articles of Incorporation at 30; Compl. at
¶¶ 30-34. The Taubman family
constitutes a "person" under the charter and
therefore cannot own more than 8.23 percent of value Taubman
Centers' stock. Taubman Centers' proxy materials
state that the Taubman family's ownership of the Series B
stock, with its nominal economic value, does not violate the
8.23 percent ownership limit. See 2017 Proxy
Statement at 14.
contends that the Taubman family's Series B stock in
Taubman Centers provides the Taubman family with 30% of the
voting power of Taubman Centers' shares. Plaintiff
asserts that the value of the Series B stock should be
considered in conjunction with the value of the Taubman
family's partnership units in TRG (to which it is
"stapled"), and that together the total
ownership interest (30.2%) exceeds the 8.23 percent ownership
limit. See Compl. at ¶ 45.
the Taubman Centers' charter, stock owned in excess of
the ownership limit are "Excess Shares" that may
not be voted by the individual. Plaintiff contends that the
Taubman family's Series B stock violates the 8.23 percent
ownership limit and was improperly voted at the company's
June 1, 2017 annual meeting.
alleges that Taubman Centers' proxy statement contains
the following false and misleading statements: (1) that
Series B preferred stock has a value of 1/14, 000ths of the
value of one share of common stock; (2) the Taubman
family's ownership of Series B preferred stock does not
violate the charter's 8.23 percent ownership limit; (3)
the Taubman family is entitled to an approximately 30% voting
interest at the annual meeting, based upon their ownership of
Series B preferred stock. Plaintiff also claims that Taubman
Centers violated its charter by permitting the Taubman family
to own more than 8.23 percent of the value of the
company's outstanding capital stock. Plaintiffs complaint
alleges the following counts: Count I, violation of Section
14(a) of the Exchange Act; Count II, breach of contract based
upon a breach of the charter; and Count III, declaratory
Standard of Review
seek dismissal pursuant to Fed.R.Civ.P. 12(b)(6). To survive
a motion to dismiss, the plaintiff must allege facts that, if
accepted as true, are sufficient ''to raise a right
to relief above the speculative level" and to
''state a claim to relief that is plausible on its
face.'' Bell Atlantic Corp. v. Twombly, 550
U.S. 544, 570 (2007). See also Ashcroft v. Iqbal,
129 S.Ct. 1937, 1949-50 (2009). AA claim has facial
plausibility when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.''
Id. at 1949. See also Hensley Manuf. v.
Propride, Inc., 579 F.3d 603, 609 (6th Cir.