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Campbell v. American International Group, Inc.

United States District Court, E.D. Virginia, Alexandria Division

January 20, 2015

KATHRYN LYNN CAMPBELL, on behalf of herself and similarly situated Equity Units holders of American International Group, Inc., Plaintiff
v.
AMERICAN INTERNATIONAL GROUP, INC. et al., Defendants

Page 465

For Kathryn Lynn Campbell, On behalf of herself and similarly situated Equity Units Holders of American International Group, Inc., Plaintiff: Wendu Mekbib, LEAD ATTORNEY, Law Offices of Wendu Mekbib, Vienna, VA.

For American International Group, Inc. (AIG), R. H. Benmosche, Chairman, President, CEO, Members of the Board of Directors, Individually, jointly and severally, W. D. Cornwell, Members of the Board of Directors, Individually, jointly and severally, J. H. Fitzpatrick, Members of the Board of Directors, Individually, jointly and severally, S. N. Johnson, Members of the Board of Directors, Individually, jointly and severally, L. T. Koellner, Members of the Board of Directors, Individually, jointly and severally, D. H. Layton, Members of the Board of Directors, Individually, jointly and severally, C. S. Lynch, Members of the Board of Directors, Individually, jointly and severally, A. C. Martinez, Members of the Board of Directors, Individually, jointly and severally, G. L. Miles, Jr., Members of the Board of Directors, Individually, jointly and severally, H. S. Miller, Members of the Board of Directors, Individually, jointly and severally, R. S. Miller, Jr., Members of the Board of Directors, Individually, jointly and severally, M. W. Offit, Members of the Board of Directors, Individually, jointly and severally, R. A. Rittenmeyer, Members of the Board of Directors, Individually, jointly and severally, D. M. Steenlan, Members of the Board of Directors, Individually, jointly and severally, Defendants: Gary Alan Coad, Weil Gotshal & Manges LLP (DC), Washington, DC.

Page 466

MEMORANDUM OPINION

Leonie M. Brinkema, United States District Judge.

Before the Court are plaintiff's Motion for Declaratory Judgment [Dkt. No. 7], plaintiff's Motion for Summary Judgment [Dkt. No. 8], and defendants' Motion to Dismiss. [Dkt. No. 18] For the reasons stated in open court and in this opinion, defendants' Motion to Dismiss will be granted and plaintiff's Motions for Declaratory Judgment and for Summary Judgment will be denied.

I. BACKGROUND

This purported class action arises fro the sale of publicly-traded securities issued by defendant American International Group, Inc. (" AIG" ). Plaintiff Kathryn Lynn Campbell (" Campbell" )[1] alleges that AIG deliberately devalued her investment to enrich itself and its directors. Campbell seeks both a declaratory judgment that AIG violated Securities and Exchange Commission (" SEC" ) regulations and money damages under various state law claims.

In May 2008, AIG issued complex securities called " Equity Units" and listed them on the New York Stock Exchange. Complaint ¶ 1. AIG issued a prospectus detailing how the Equity Units operated:

[AIG is] offering Equity Units initially consisting of Corporate Units. Each Corporate Unit will have an initial stated amount of $75 and will consist of a stock purchase contract issued by [AIG] and, initially, a 1/40, or 2.5%, undivided beneficial ownership interest in (i) [AIG's] Series B-1 Junior Subordinated Debentures initially due February 15, 2041 (the " Series B-1 Debentures" ), (ii) [AIG's] Series B-2 Junior Subordinated Debentures initially due May 1, 2041 (the " Series B-2 Debentures" ) and (iii) [AIG's] Series B-3 Junior Subordinated Debentures initially due August 1, 2041 (the " Series B-3 Debentures" ), each with a principal amount of $1000.

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o The stock purchase contract will obligate you to purchase from [AIG], and [AIG] to sell to you, on each of February 15, 2011, May 1, 2011 and August 1, 2011 (each, a " stock purchase date" ) for $25 in cash on each of the three stock purchase dates, a variable number of shares of [AIG's] common stock, subject to anti-dilution adjustments, equal to the applicable settlement rate, calculated as follows:
○ if the applicable market value of [AIG's] common stock, which will be determined by reference to the average of the trading prices of [AIG's] common stock over the 20-trading day period ending on the third business day prior to the relevant stock purchase date, is greater than or equal to the threshold appreciation price of $45.60, the settlement rate will be 0.54823 shares of [AIG's] common stock;
○ if the applicable market value of [AIG's] common stock is less than the threshold appreciation price, but greater than the reference price of $38.00, the settlement rate will be a number of shares of [AIG's] common stock equal to $25 divided by the applicable market value; and
○ if the applicable market value of [AIG's] common stock is less than or equal to the reference price, the settlement rate will be 0.6579 shares of [AIG's] common stock.
o [AIG] may also pay you quarterly contract adjustment payments on the stock purchase contracts:
○ from and including May 16, 2008 to but excluding the first stock purchase date, at an annual rate of 2.7067% on the initial amount of $75 per Equity Unit;
○ from and including the first stock purchase date to but excluding the second stock purchase date, at an annual rate of 2.6450% on the adjusted stated amount of $50 per Equity Unit; and
○ from and including the second stock purchase date to but excluding the third stock purchase date, at an annual rate of 2.6100% on the adjusted stated amount of $25 per Equity Unit.

Complaint Ex. 3 (" Prospectus" ) at Cover Page. The Prospectus explained that the number of shares that a purchaser would receive was " subject to anti-dilution adjustments," id., and described the circumstances in which anti-dilution would occur and how anti-dilution would be performed. Id. at S-48 - S-51. Although the Prospectus recognized that the market value of the common stock could increase (resulting in a profit for the purchaser of an Equity Unit), Prospectus at S-39, it also warned purchasers that

There can be no assurance that the market value of [AIG's] common stock on the three stock purchase dates will not be less than the price paid by you for the Equity Units . . . Accordingly, you bear the entire risk that the market value of the common stock may decline, and that the decline could be substantial and result in a loss of all or a portion of your investment.

Prospectus at S-22. This warning appeared in a section labeled, in bold and italics, " You will bear the entire risk that the market value of our common stock will decline." Id.

At some point, Campbell acquired some number of the Equity Units issued by AIG. Complaint ¶ 1.[2] On each of the stock purchase dates, however, AIG paid Campbell " the approximate value of $1.58 . . .

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per Equity Unit." Complaint ΒΆ 2(B). Campbell alleges that she was " promised" that the Equity Units would have a value of $25 per stock purchase date, and that therefore defendants owe her $23.42 per ...


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