Case: 13-2818 Document: 23-1 Filed: 11/12/2013 Pages: 40 (1 of 129) No. 13-2818 UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT Dr. Fortunee Massuda, Plaintiff-Appellant v. Panda Express, Inc., Panda Restaurant Group, Inc., Citadel-Panda Express, Inc., Andrew Cherng and Peggy Cherng, Defendants-Appellees Appeal From The United States District Court For the Northern District of Illinois, Eastern Division Case No. 12 CV 9683 The Honorable Ronald A. Guzman BRIEF OF THE DEFENDANTS-APPELLEES PANDA EXPRESS, INC., PANDA RESTAURANT GROUP, INC., CITADEL-PANDA EXPRESS, INC., ANDREW CHERNG, AND PEGGY CHERNG GIBSON, DUNN & CRUTCHER LLP Theodore J. Boutrous Jr. Christopher D. Dusseault Alexander K. Mircheff 333 South Grand Avenue Los Angeles, California 90071 (213) 229-7000 EDWARDS WILDMAN PALMER LLP Michael Docketerman William R. Lee Tanya H. Miari 225 West Wacker Drive, Suite 3000 Chicago, Illinois 60606 (312) 201-2000 Attorneys for Defendants-Appellees Case: 13-2818 Document: 23-1 Filed: 11/12/2013 Pages: 40 (2 of 129) CIRCUIT RULE 26.1 DISCLOSURE STATEMENT The undersigned, counsel of record for Defendants-Appellees Panda Express, Inc., Panda Restaurant Group, Inc., Citadel-Panda Express, Inc., Andrew Cherng, and Peggy Cherng, furnishes the following list in compliance with Circuit Rule 26.1: (1) The full name of every party that the attorney represents in the case: Panda Express, Inc., Panda Restaurant Group, Inc., Citadel-Panda Express, Inc., Andrew Cherng, and Peggy Cherng (2) The names of all law firms whose partners or associates have appeared for the party in the case (including the proceedings in the district court or before an administrative agency) or are expected to appear for the party in this court: GIBSON, DUNN & CRUTCHER LLP; EDWARDS WILDMAN PALMER LLP (3) If the party or amicus is a corporation, i) Identify its parent corporations, if any: Panda Express, Inc. and Citadel Panda Express, Inc. are wholly owned subsidiaries of Panda Restaurant Group, Inc. (“PRG”). PRG is a subsidiary of Andrew and Peggy Cherng Family Company. ii) Any publicly held company that owns 10% or more of the party’s or amicus’ stock: None. /s/ Christopher D. Dusseault Christopher D. Dusseault GIBSON, DUNN & CRUTCHER LLP 333 South Grand Avenue Los Angeles, California 90071 (213) 229-7000 /s/ Michael Docketerman Michael Docketerman EDWARDS WILDMAN PALMER LLP 225 West Wacker Drive, Suite 3000 Chicago, Illinois 60606 (312) 201-2000 Case: 13-2818 Document: 23-1 Filed: 11/12/2013 Pages: 40 (3 of 129) TABLE OF CONTENTS I. JURISDICTIONAL STATEMENT ................................................................................... 1 II. STATEMENT OF ISSUES ................................................................................................ 1 III. STATEMENT OF THE CASE ........................................................................................... 2 IV. STATEMENT OF FACTS ................................................................................................. 4 A. Background ............................................................................................................. 4 B. The Instant Allegations ........................................................................................... 6 C. The District Court’s Order ...................................................................................... 8 V. SUMMARY OF ARGUMENT ........................................................................................ 10 VI. ARGUMENT .................................................................................................................... 11 A. The District Court Correctly Dismissed the Claims Plaintiff Asserts Because They Are Derivative And Were Released By PE Chicago. ................... 11 1. The Claims Are Derivative Under Tooley. ............................................... 11 2. Gentile Does Not Change the Claims’ Derivative Characterization. ....... 14 3. PE Chicago Settled and Released the Claims. .......................................... 18 B. The District Court Was Well Within Its Discretion to Reject Judicial Estoppel................................................................................................................. 20 1. PE Chicago’s Claims Were Addressed on the Merits. ............................. 21 2. Defendants’ Arguments Have Been Entirely Consistent. ......................... 23 C. The District Court Properly Dismissed Plaintiff’s Fraud Claim For Failure To Adequately Plead Intent, Reliance, and Damages. .......................................... 25 D. Leave to Amend Should be Denied. ..................................................................... 29 VII. CONCLUSION ................................................................................................................. 31 i Case: 13-2818 Document: 23-1 Filed: 11/12/2013 Pages: 40 (4 of 129) TABLE OF AUTHORITIES Cases Agostino v. Hicks, 845 A.2d 1110 (Del. Ch. 2004) ................................................................................................ 24 Allied Artists Pictures Corp. v. Baron, 413 A.2d 876 (Del. 1980) ......................................................................................................... 18 Ashcroft v. Iqbal, 556 U.S. 662 (2009) .................................................................................................................. 29 Avacus Partners, L.P. v. Brian, 1990 WL 161909 (Del. Ch. Oct. 24, 1990) .............................................................................. 14 B A Mortg. & Int’l Realty Corp. v. Taylor, No. 84 C 7739, 1985 WL 1703 (N.D. Ill. June 7, 1985) .......................................................... 27 Beckham v. Keith, 2011 WL 9557991 (Mass. Super. Ct. June 15, 2011) ............................................................... 17 Boland v. Engle, 113 F.3d 706 (7th Cir. 1997) .................................................................................................... 30 Borsellino v. Goldman Sachs Group, Inc., 477 F.3d 502 (7th Cir. 2007) .................................................................................................... 26 Braddock v. Zimmerman, 906 A.2d 776 (Del. 2006) ......................................................................................................... 19 Connick v. Suzuki Motor Co., 675 N.E.2d 584 (Ill. 1996) ........................................................................................................ 27 Cyrus v. Town of Mukwonago, 624 F.3d 856 (7th Cir. 2010) .................................................................................................... 27 Economy Folding Box Corp. v. Anchor Frozen Foods Corp., 515 F.3d 718 (7th Cir 2008) ..................................................................................................... 14 Elf Atochem N. Am. v. Jaffari, 727 A.2d 286 (Del. 1999) ......................................................................................................... 12 Farnham v. Windle, 918 F.2d 47 (7th Cir. 1990) ...................................................................................................... 30 Feldman v. Cutaia, 951 A.2d 727 (Del. 2008) ....................................................................................... 12, 13, 16, 17 ii Case: 13-2818 Document: 23-1 Filed: 11/12/2013 Pages: 40 (5 of 129) Feldman v. Cutaia, 956 A.2d 644 (Del. Ch. 2007) .................................................................................................. 17 For Your Ease Only, Inc. v. Calgon Carbon Corp., 560 F.3d 717 (7th Cir. 2009) .................................................................................................... 28 G & S Holdings LLC v. Cont’l Cas. Co., 697 F.3d 534 (7th Cir. 2012) .................................................................................................... 12 Gatz v. Ponsoldt, 925 A.2d 1265 (Del. 2007) ....................................................................................................... 16 Gentile v. Rossette, 906 A.2d 91 (Del. 2006) ................................................................................... 10, 14, 15, 16, 17 In re CD Liquidation Co., 462 B.R. 124 (D. Del. Bnkpcy. 2011) ...................................................................................... 17 In re First Interstate Bancorp Consol. S’holder Litig., 729 A.2d 851 (Del. Ch. 1998) ............................................................................................ 13, 18 In re Knight-Celotex, LLC, 695 F.3d 714 (7th Cir. 2012) .................................................................................................... 20 In re NYMEX S’holder Litig., 2009 WL 3206051 (Del. Ch. Sept. 30, 2009) ........................................................................... 13 Innovative Therapies, Inc. v. Meents, No. DKC 12-3309, 2013 WL 2919983 (D. Md. June 12, 2013) .............................................. 17 Int’l Mktg., Ltd. v. Archer-Daniels-Midland Co., 192 F.3d 724 (7th Cir. 1999) .................................................................................................... 30 Joe W. & Dorothy Dorsett Brown Foundation v. Frazier Healthcare V, L.P., 889 F. Supp. 2d 893 (W.D. Tex. 2012) .................................................................................... 17 Kennedy v. Four Boys Labor Servs. Inc., 664 N.E.2d 1088 (Ill. App. Ct. 1996) ....................................................................................... 29 Kramer v. W. Pac. Indus., Inc., 546 A.2d 348 (Del. 1988) ............................................................................................