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Obeslo v. Great-West Capital Management, LLC

United States District Court, D. Colorado

December 23, 2019

JOAN OBESLO, JAMES DIMAGGIO, ANNE HALL, CAROL A. REYNON-LONGORIA, CYNTHIA BERNAL, TINA GORRELL-DEYERLE, on behalf of Great West Funds, Inc., Plaintiffs,
v.
GREAT-WEST CAPITAL MANAGEMENT, LLC, Defendant. DUPLASS, ZWAIN, BOURGEOIS, PFISTER & WEINSTOCK APLC 401 K PLAN, Plaintiff,
v.
GREAT-WEST CAPITAL MANAGEMENT, LLC, Defendant. JOAN OBESLO, JAMES DIMAGGIO, ANNE HALL, CAROL A. REYNON-LONGORIA, CYNTHIA BERNAL, and TINA GORRELL-DEYERLE, on behalf of Great-West Funds, Inc., Plaintiffs,
v.
GREAT-WEST LIVE & ANNUITY INSURANCE CO, and GREAT-WEST CAPITAL MANAGEMENT, LLC, Defendants.

          ORDER GRANTING DEFENDANTS' MOTION IN LIMINE AND GRANTING DEFENDANTS' MOTION TO DISMISS

          CHRISTINE M. ARGUELLO JUDGE

         This matter is before the Court on Defendants Great-West Capital Management, LLC and Great-West Life & Annuity Insurance Company, LLC's Motion in Limine to Exclude Claims and Evidence Relating to Funds not Continuously Owned throughout Litigation and Unregistered Investment Products (Doc. # 306) as well as Defendants' Motion to Dismiss Pursuant to Fed.R.Civ.P. 12(b)(1) (Doc. # 337). Plaintiffs filed Responses (Doc. ## 314, 343) to both Motions. For the following reasons, the Court grants each Motion.

         I. BACKGROUND

         This case is a shareholder derivative action that arises under § 36(b) of the Investment Company Act (“ICA”), 15 U.S.C. § 80a-35(b). As with derivative actions generally, a continuous ownership requirement “throughout the pendency of the litigation assures that the plaintiff will adequately represent the interests of the security holders in obtaining a recovery for the benefit of the company.” (Doc. # 270 at 10.) (emphasis added) (quoting Santomenno ex rel. John Hancock Trust v. John Hancock Life Ins. Co., 677 F.3d 178, 182 (3d Cir. 2012)). Thus, a plaintiff who “disposes of his or her holdings in the company . . . no longer has a stake in the outcome of the litigation because any recovery would inure to the benefit of existing securities holders, not former ones.” (Id.) (quoting Santomenno, 677 F.3d at 184).

         II. DISCUSSION

         In the Motions at issue, Defendants assert that Plaintiffs should be precluded from introducing evidence at trial or seeking recovery on funds that they have not continuously owned. (Doc. # 306.) Defendants further assert that various Plaintiffs should be dismissed for lack of standing because they no longer meet the continuous ownership requirement. (Doc. # 337.) The Court will address Defendants' Motion to Dismiss before turning to the Motion in Limine.

         A. DEFENDANTS' MOTION TO DISMISS

         The constitutional elements of standing “. . . injury, causation, and redressibility . . . must exist before federal courts will exercise jurisdiction.” Schutz v. Throne, 415 F.3d 1128, 1133 (10th Cir. 2005). “A court lacking jurisdiction cannot render judgment but must dismiss the cause at any stage of the proceedings in which it becomes apparent that jurisdiction is lacking.” Siloam Springs Hotel, L.L.C. v. Century Sur. Co., 906 F.3d 926, 931 (10th Cir. 2018) (emphasis added) (quoting Basso v. Utah Power & Light Co., 495 F.2d 906, 909 (10th Cir. 1974)). As the party seeking to invoke the jurisdiction of this Court, Plaintiffs bear the burden of alleging facts that support jurisdiction. See Dutcher v. Matheson, 733 F.3d 980, 985 (10th Cir. 2013) (“Since federal courts are courts of limited jurisdiction, we presume no jurisdiction exists absent an adequate showing by the party invoking federal jurisdiction”).

         In this Court's prior September 11, 2018 Order, the Court concluded that extending a continuous ownership requirement to ICA claims is “the logical extension of the Tenth Circuit's continuous ownership requirement in shareholder derivative actions, ” and it advances the purposes of the ICA. (Doc. # 270 at 10.) The Court incorporates by reference its analysis as set forth in the September 11, 2018 Order.

         Plaintiffs concede that Carol Reynon-Longoria, Cynthia Bernal, and James DiMaggio no longer satisfy the continuous ownership requirement. (Doc. # 337-1.) Therefore, those Plaintiffs are dismissed from this case because they lack standing to bring claims on behalf of any investment company within the Great-West Funds, Inc. complex. See generally (Doc. # 270) (Order on Defendants' Motion to Dismiss). Similarly, Plaintiffs' claims on behalf of the Great-West Profile Funds and the Great-West SecureFoundation Lifetime 2015 Fund are dismissed because Plaintiffs concede that no Plaintiff currently owns shares of those funds. (Doc. # 337-1.)[1]

         B. DEFENDANTS' MOTION IN LIMINE

         Defendants' Motion in Limine asserts that Plaintiffs should be precluded from introducing evidence-or raising arguments-about “any Funds in which Plaintiffs have not owned shares from the inception of and throughout the pendency of this litigation . . . .” (Doc. # 306 at 9.) Defendants assert that, according to the continuous[2] ownership requirement, Plaintiffs lack standing to raise claims regarding those funds. The Court agrees that such matters should not be raised at trial.

         Federal Rule of Evidence 401 indicates that evidence is relevant if it “has any tendency to make a fact more or less probable than it would be without the evidence” and “the fact is of consequence in determining the action.” Additionally Rule 403 provides that the Court “may exclude relevant evidence if its probative value is substantially outweighed by a danger of . . . unfair prejudice, confusing the issues, misleading the jury, undue delay, wasting time, or needlessly presenting cumulative evidence.”

         As a preliminary matter, if Plaintiffs lack standing to raise claims about a particular Fund, evidence about that Fund is not relevant. Assuming, arguendo, that evidence about those Funds were to have some relevance to the claims at issue, any probative value would be substantially outweighed by a danger of confusing the issues, undue delay, wasting time, and needlessly presenting cumulative evidence. In addition, limiting the presentation of evidence to Funds for which Plaintiffs ...


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