from the Hamilton Superior Court The Honorable Steven R.
Nation, Judge Trial Court Cause No. 29D01-1801-CT-760
ATTORNEYS FOR APPELLANTS Brad A. Catlin Price Waicukuauski
Joven & Catlin, LLC Indianapolis, Indiana Eric L. Zagar
Justin O. Reliford J. Daniel Albert Christopher Windover
Kessler Topaz Meltzer & Check, LLP Radnor, Pennsylvania
Jeremy Friedman David Tejtel Friedman Oster & Tejtel,
PLLC New York, New York Robert T. Dassow William Fredrick
Eckhart Hovde Dassow & Deet, LLC Indianapolis, Indiana
Stephen J. Oddo Robbins, LLC San Diego, California
ATTORNEYS FOR APPELLEES Scott S. Morrisson Mark J.R. Merkel
Krieg DeVault, LLP Carmel, Indiana Libby Yin Goodknight Krieg
DeVault, LLP Indianapolis, Indiana Michael E. Bern Latham
& Watkins, LLP Washington, District of Columbia
Christopher Clark Latham & Watkins, LLP New York, New
Joseph Hipps and Eugene Protz, individually and on behalf of
a class of common shareholders ("Shareholders") of
Biglari Holdings, Inc. ("Biglari Holdings") appeal
the trial court's grant of a motion to dismiss filed by
the Defendants, Biglari Holdings, BH Merger Company, NBHSA,
Inc., Sardar Biglari ("S. Biglari"), and the other
members of the Biglari Holdings board of directors-Phillip
Cooley, Kenneth Cooper, James Mastrian, and Ruth Person
(collectively, the "Board"). We
Shareholders raise one issue, which we restate as whether the
trial court properly dismissed their complaint against
Biglari Holdings is a publicly-traded company incorporated in
Indiana that, among other things, franchises and operates two
restaurant chains-Western Sizzlin and Steak 'n Shake. S.
Biglari is the CEO and chairman of the Board of Biglari
Holdings. Cooley, Cooper, Mastrian, and Person are the
remaining members of the Board.
The Lion Fund and the Lion Fund II (collectively, "the
Lion Funds") are private limited partnerships that each
own substantial shares of Biglari Holdings. In turn, Biglari
Holdings is the majority limited partner of the Lion Funds.
Biglari Capital Corp. ("Biglari Capital") is the
general partner of the Lion Funds, and S. Biglari is the
chairman, CEO, and sole owner of Biglari
In 2011 and 2012, Biglari Holdings unsuccessfully sought to
create a dual-class capital structure at Biglari Holdings,
which required shareholder approval. The dual-class structure
would have redesignated common stock as Class A and Class B
S. Biglari then sought to acquire voting control over Biglari
Holdings. Through a series of complex transactions, Biglari
Holdings contributed hundreds of millions of dollars in
securities and cash to the Lion Funds in exchange for
additional limited partnership interests in each of the Lion
Funds. The Lion Funds then acquired additional common stock
of Biglari Holdings. As a result of these transactions, S.
Biglari, through his control of Biglari Capital and the Lion
Funds, gained control of 54.7% of the Biglari Holdings common
Having gained voting control over Biglari Holdings, S.
Biglari then sought to implement the dual class capital
structure previously rejected by the shareholders. On
December 21, 2017, Biglari Holdings entered into an agreement
("Reclassification Agreement") whereby Biglari
Holdings would merge with BH Merger Company to create NBHSA,
Inc. Upon completion of the merger, NBHSA would be renamed
Biglari Holdings, Inc. ("New Biglari Holdings").
Under the Reclassification Agreement, shareholders of Biglari
Holdings would become shareholders of New Biglari Holdings.
Biglari Holdings would be a wholly-owned subsidiary of New
Biglari Holdings and renamed OBH, Inc.
For every ten shares of common stock in Biglari Holdings,
shareholders would receive ten shares of Class B stock and
one share of Class A stock of New Biglari Holdings. Owners of
Class B stock would have no voting rights. The purpose of
this change was "[t]o sustain the dual goal of
maintaining the founder's control and of preserving the
option of issuing equity in acquisitions, financings or for
other purposes." Appellants' App. Vol. II p. 42.
Minority shareholders voiced significant disapproval of the
On January 29, 2018, Hipps filed a class action complaint in
Hamilton County that sought to enjoin the Reclassification,
and Defendants removed the litigation to federal court. Hipps
also filed a second state court action, which was removed to
federal court. While Hipps' actions were pending in
federal court, Protz filed a class action complaint in
Hamilton County on March 26, 2018. Protz sought injunctive
relief to prevent the merger. In April 2018, the parties
reached an agreement whereby: (1) Defendants consented to
remand to Hamilton County from federal court; and (2)
Shareholders abandoned their request for injunctive relief,
agreed to consolidate the actions, and agreed to challenge
the Reclassification after it was consummated. The
Reclassification plan was finalized on April 30, 2018.
On May 17, 2018, Shareholders filed a consolidated class
action complaint against Defendants. The Shareholders'
main complaints relate to: (1) the shares acquired by the
Lion Funds and the treatment of these shares as voting stock,
which Shareholders contend violates the Indiana Business
Corporations Law ("IBCL" or "BCL"); and
(2) the consummation of the Reclassification Agreement.
According to Shareholders, the voting and alleged improper
treatment of the Lion Funds shares allowed S. Biglari to gain
voting control of Biglari Holdings and consummate the
The complaint included the following counts:
(1) Count I, a claim against S. Biglari, as Biglari
Holdings' controlling shareholder, for breach of
fiduciary duty "by exploiting his position of control to
cause [Biglari Holdings] to enter into the Reclassification
on terms unfairly beneficial to himself and detrimental to
(2) Count II, a claim against the Board for breach of
fiduciary duty "by, among other things, facilitating and
approving the Reclassification, which only serves to benefit
S. Biglari at the expense of Plaintiffs and the Class";
(3)Count III, a claim against Biglari Holdings and the Board
for breach of the company's articles of incorporation by
violating the IBCL by deeming shares acquired by the Lion
Funds to be voting shares;
(4) Count IV, a claim against S. Biglari for unjust
enrichment by maintaining his voting control "in
perpetuity" through consummation of the Reclassification
(5) Count V, a claim for declaratory relief against Biglari
Holdings and the Board that the voting of the shares acquired
by Lion Funds "and treatment of said shares as voting
stock violated the IBCL" and the articles of
(6) Count VI, a claim for declaratory relief against Biglari
Holdings, New Biglari Holdings, and BH Merger Company that
the Reclassification Agreement was "invalid, void,
voidable and/or unenforceable" because the
Reclassification Agreement "is the product of breaches
of fiduciary duty by S. Biglari and the other members of the
App. Vol. II pp. 56-59.
Pursuant to Indiana Trial Rule 12(B)(6), Defendants filed a
motion to dismiss the complaint with an attached exhibit.
Shareholders filed a response brief with exhibits, and
Defendants filed a reply brief in support of their motion to
dismiss. After a hearing, the trial court summarily granted
Defendants' motion to dismiss. Shareholders now appeal.
Shareholders appeal the trial court's grant of
Defendants' motion to dismiss. Indiana Trial Rule
12(B)(6) allows a party to request dismissal for
"[f]ailure to state a claim upon which relief can be
granted . . . ." A motion to dismiss under Trial Rule
12(B)(6) "tests the legal sufficiency of the
[plaintiffs'] claim, not the facts supporting it."
Bellwether Properties, LLC v. Duke Energy Indiana,
Inc., 87 N.E.3d 462, 466 (Ind. 2017) (citation omitted).
Dismissals are improper under Trial Rule 12(B)(6)
"'unless it appears to a certainty on the face of
the complaint that the complaining party is not entitled to
any relief.'" Id. (quoting State v.
American Family Voices, Inc., 898 N.E.2d 293, 296 (Ind.
2008)). We review a Trial Rule 12(B)(6) dismissal "de
novo, giving no deference to the trial court's
decision." Id. "In reviewing the
complaint, we take the alleged facts to be true and consider
the allegations in the light most favorable to the nonmoving
party, drawing every reasonable inference in that party's
favor." Id. The dismissal of a complaint under
Trial Rule 12(B)(6) "is seldom appropriate" because
such dismissals "undermine the policy of deciding causes
of action on their merits." BloomBank v. United Fid.
Bank F.S.B., 113 N.E.3d 708, 720 (Ind.Ct.App. 2018),
Although not raised by the parties, we note that Indiana
Trial Rule 12(B) provides:
If, on a motion, asserting the defense number (6), to dismiss
for failure of the pleading to state a claim upon which
relief can be granted, matters outside the pleading are
presented to and not excluded by the court, the motion shall
be treated as one for summary judgment and disposed of as
provided in Rule 56. In such case, all parties shall be given
reasonable opportunity to present all material made pertinent
to such a motion by Rule 56.
Here, both parties submitted matters outside of the pleading
in arguing the motion to dismiss. Our Court has held:
when examination of the face of a complaint alone reveals
that the plaintiff will not be entitled to relief under any
set of circumstances, consideration of external materials
aimed at substantiating or contradicting the complaint's
factual allegations is irrelevant, because a fortiori the
complaint fails to state a claim upon which relief can be
granted under any factual scenario.
Dixon v. Siwy, 661 N.E.2d 600, 603 (Ind.Ct.App.
1996); see also Thomas v. Blackford Cty. Area Bd. of
Zoning Appeals, 907 N.E.2d 988, 990 (Ind. 2009)
("If affidavits or other materials are attached to the
12(B)(6) motion, it is treated as one for summary judgment
under Rule 56."). "In that instance, the trial
court should exclude materials outside the pleadings which
are submitted with a 12(B)(6) motion, rather than convert the
motion into one for summary judgment, because the external
materials are irrelevant to the motion." Id.
The trial court here did not exclude the evidence outside the
pleadings, but there is no indication the extraneous
materials played a part in the trial court's decision.
See, e.g., Bd. of Commissioners of Union Cty. v.
McGuinness, 80 N.E.3d 164, 167 (Ind. 2017) ("[I]t
is apparent from the trial court's disposition of this
motion that the designated affidavit played no part in its
decision. Thus while it was error for the trial court to not
formally exclude the affidavit in its order, that error was
harmless."). At oral argument for this matter, both
parties agreed that we should apply the motion to dismiss
standard of review. As such, we address this matter under the
motion to dismiss standard of review, base our decision
solely upon the Shareholders' complaint, and exclude the
extraneous materials submitted by the parties.
This appeal involves a direct action by shareholders of a
publicly-held corporation. This type of action by
shareholders was described by our Supreme Court in
G&N Aircraft, Inc. v. Boehm, 743 N.E.2d 227, 234
A direct action is "[a] lawsuit to enforce a
shareholder's rights against a corporation."
Black's Law Dictionary 472 (7th ed. 1999). This action
may be brought in the name of the shareholder "to
redress an injury sustained by, or enforce a duty owed to,
the holder." 2 Principles of Corporate Governance §
7.01, at 17 (A.L.I. 1994). Direct actions are typically
appropriate to enforce the right to vote, to compel
dividends, to prevent oppression or fraud against minority
shareholders, to inspect corporate books, and to compel
shareholder meetings. Id.
direct action, the Shareholders' claims pertain to: (1)
the voting of the Lion Funds shares; and (2) the
Reclassification Agreement, which implemented the merger. We
must determine whether the trial court properly dismissed
each of the Shareholders' claims.
Counts III and V - Voting of the Lion Funds Shares
Because many of the Shareholders' arguments depend upon
whether the Lion Funds properly voted their shares in Biglari
Holdings, we begin by addressing this issue. In Count III,
Shareholders allege that Biglari Holdings and the Board
breached the company's articles of incorporation and
violated the IBCL by "reacquir[ing] hundreds of
thousands of shares of its common stock through the Lion
Funds" and deeming those shares "legally
outstanding" and eligible for voting. Appellants'
App. Vol. II p. 57. Similarly, in Count V, Shareholders
request declaratory relief that "the voting of the
Reacquired Shares and treatment of said shares as voting
stock violated the IBCL and the Charter." Id.
In the transactions at issue, Biglari Holdings used company
funds to purchase additional shares of the Lion Funds. The
Lion Funds then used the funds to purchase additional shares
of Biglari Holdings. This system allowed S. Biglari, who is
the sole owner of Biglari Capital-the general partner of the
Lion Funds-to gain control over 54.7% of the voting stock of
Shareholders argue the Lion Funds' voting of these shares
violated two IBCL statutes-Indiana Code Section 23-1-27-2(a)
and Indiana Code Section 23-1-30-2. Shareholders also contend
that, "[e]ven if the trial court believed that these
statutory provisions did not independently prohibit S.
Biglari's misconduct, it should have read these
provisions in conjunction to fulfill the legislative intent
underlying the IBCL as a whole." Appellants' Br. p.
Shareholders' arguments require that we interpret these
statutes. The first step in statutory interpretation is
determining if the legislature has spoken clearly and
unambiguously on the point in question. Siwinski v. Town
of Ogden Dunes, 949 N.E.2d 825, 828 (Ind. 2011). If a
statute is clear and unambiguous on its face, no room exists
for judicial construction. Id. "We are not at
liberty to construe a facially unambiguous statute."
Id. "However, if a statute contains ambiguity
that allows for more than one interpretation, it opens itself
up to judicial construction to effect the legislative