     Case: 16-10671   Document: 00513800825        Page: 1   Date Filed: 12/16/2016




        IN THE UNITED STATES COURT OF APPEALS
                 FOR THE FIFTH CIRCUIT
                                                                 United States Court of Appeals
                                                                          Fifth Circuit

                                    No. 16-10671                        FILED
                                                                December 16, 2016
                                                                   Lyle W. Cayce
ASHFORD HOSPITALITY PRIME, INCORPORATED,                                Clerk

             Plaintiff - Appellee

v.

SESSA CAPITAL (MASTER), L.P.,

             Defendant-Third Party Plaintiff - Appellant

SESSA CAPITAL GP, L.L.C.; SESSA CAPITAL IM, L.P.; SESSA CAPITAL
IM GP, L.L.C.; JOHN E. PETRY; PHILIP B. LIVINGSTON; LAWRENCE A.
CUNNINGHAM; DANIEL B. SILVERS; CHRIS D. WHEELER,

             Defendants - Appellants

v.

DOUGLAS A. KESSLER; ANDREW STRONG; STEFANI D. CARTER;
CURTIS B. MCWILLIAMS; MONTY J. BENNETT; ASHFORD
HOSPITALITY ADVISORS, L.L.C.; ASHFORD, INCORPORATED;
MATTHEW D. RINALDI; W. MICHAEL MURPHY,

             Third Party Defendants - Appellees

_______________________________________________________________________

Consolidated w/16-10672

ASHFORD HOSPITALITY PRIME, INCORPORATED,

             Plaintiff - Appellee

v.
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SESSA CAPITAL (MASTER), L.P.; SESSA CAPITAL GP, L.L.C.; SESSA
CAPITAL IM, L.P.; SESSA CAPITAL IM GP, L.L.C.; JOHN E. PETRY;
PHILIP B. LIVINGSTON; LAWRENCE A. CUNNINGHAM; DANIEL B.
SILVERS; CHRIS D. WHEELER,

               Defendants - Appellants




                  Appeals from the United States District Court
                       for the Northern District of Texas
                             USDC No. 3:16-CV-527
                             USDC No. 3:16-CV-713


Before WIENER, CLEMENT, and COSTA, Circuit Judges.
PER CURIAM:*
       This dispute arises from a contentious election for seats on the board of
directors of Ashford Hospitality Prime, Inc. (Ashford Prime), a Maryland
corporation that primarily invests in luxury resort hotels.                Sessa Capital
(Master), L.P. (Sessa), a New York-based hedge fund and Ashford Prime’s third
largest stockholder, sought to nominate five candidates to displace a majority
of the incumbent board.
       Ashford Prime’s bylaws contain “advance notice provisions,” which
require a nominee to submit a questionnaire so the Board can evaluate the
nominee’s background, qualifications, investments in the company, and plans




       * Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.

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if elected. 1 The Sessa nominees submitted the questionnaires, but Ashford
Prime rejected the applications contending that they were incomplete. The
alleged nondisclosures involve not revealing “plans or proposals” as required
under the bylaws and federal securities laws. 2 The alleged “plans” were either
forcing a sale of the company or attempting to invalidate an agreement with
other Ashford entities that operate Ashford Prime. That advisory agreement
contains a substantial termination fee in the event there is a change in
composition of a majority of Ashford Prime’s board. Sessa responds that the
nominees substantially completed the questionnaires and characterizes any
“omissions and inaccuracies” as “immaterial.”
       The questionnaire dispute led to a flurry of litigation. Sessa filed suit in
Maryland seeking a court order that Ashford approve its candidates.                          In
response, Ashford Prime filed two suits related to the purportedly deficient
questionnaires. The first suit (Ashford I) was filed in federal court in Texas
and asserted that the Sessa candidates had violated securities laws with their
deficient disclosures; the second suit (Ashford II) was filed in Texas state court
and alleged contractual claims based on alleged violations of the bylaws’
advance notice requirements. Sessa answered with counterclaims alleging
that the Directors had breached their fiduciary duties by (1) not approving the
Sessa candidates and (2) approving the advisory agreement that requires


       1 This is the same information that is required to be disclosed for the solicitation of
proxies for the election of a proposed nominee in an election under the Securities Exchange
Act. 17 C.F.R. § 240.14a–101.
       2 Section 13(d) of the Securities Exchange Act of 1934 and related regulations require

that a party that acquires more than 5% of a covered public company file certain disclosures.
Among the disclosures is a statement describing the purpose of the transaction, pursuant to
which the party must explain “any plans or proposals” that would result in major changes to
the corporation’s governance, sales of its assets, and the like. 17 C.F.R. §§ 240.13d-1,
240.13d-101; see also Gearhart Indus., Inc. v. Smith Int’l, Inc., 741 F.2d 707, 712–13 (5th Cir.
1984) (describing disclosure requirement).
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payment of a termination fee if a majority of the board is replaced. Sessa
dismissed its Maryland suit and removed Ashford II to federal court on
diversity grounds. Ashford I and II are now consolidated.
         With the June 10, 2016 board election rapidly approaching, the parties
filed dueling motions for preliminary injunctions. In Ashford I, Sessa sought
approval of its candidates or, alternatively, to prohibit Ashford Prime and the
Board from soliciting proxy votes until the Board approved Sessa’s candidates.
It later expanded the request to prohibit the incumbent directors from
disqualifying the Sessa candidates and require Ashford to count votes cast in
favor of the Sessa nominees. Meanwhile, in Ashford II, Ashford Prime sought
a determination that the Sessa candidates were ineligible for election based on
their failure to follow the bylaws by submitting deficient questionnaires and to
enjoin Sessa from submitting its candidates for election, soliciting proxy votes,
or distributing proxy materials.
         The district court sided with Ashford Prime. Applying Maryland law,
the court found that the business judgment rule warranted deference to
Ashford Prime’s decision to deny approval to the Sessa candidates. It therefore
denied Sessa’s request for an injunction and granted the injunction requested
by Ashford Prime.
         Sessa filed a notice of appeal from the district court’s order denying its
request for injunction and granting Ashford Prime’s request. It also asked this
court to stay the district court’s order 3 and postpone the June 10 election until
resolution of the appeal. A motions panel denied Sessa’s request to stay the
order.




         3   Sessa did not first seek a stay of the order from the district court.
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         Since then and prior to oral argument, the election has taken place.
Running unopposed, the incumbent directors not surprisingly retained their
seats.
         Sessa still pursues this appeal of the injunction that ruled its candidates
were ineligible to stand for the June 2016 election and prohibited anyone from
soliciting proxy votes for the Sessa candidates. Before addressing the merits
of the appeal, which focuses on whether Maryland law applies the business
judgment rule to matters relating to board elections, we consider a
jurisdictional challenge raised by Ashford Prime. It filed a motion to dismiss
the appeal as moot in light of the June election. See Tex. Midstream Gas Servs.,
LLC v. City of Grand Prairie, 608 F.3d 200, 204 (5th Cir. 2010) (“Mootness is a
jurisdictional matter . . . .”).   “[A]n appeal should . . . be dismissed as moot
when, by virtue of an intervening event, a court of appeals cannot grant any
effectual relief whatever in favor of the appellant.” Calderon v. Moore, 518 U.S.
149, 150 (1996) (per curiam) (internal quotation marks omitted).
         Sessa asserts three reasons why it contends the appeal is not moot.
First, although most of the injunctive relief was expressly limited to the June
election, it notes that the part of the order enjoining Sessa from soliciting votes
had no expiration date. That makes the ban on solicitation, in Sessa’s view, a
continuing obligation presenting a live controversy. Ashford Prime disagrees
with Sessa’s interpretation of the district court order, arguing that all the relief
is limited to the June election. We need not resolve that dispute, however, as
Sessa’s appeal does not ask this court to modify or vacate this provision in the
preliminary injunction. Sessa did originally seek to modify the preliminary
injunction in its motion to stay, but that relief was denied and the absence of
such a request in Sessa’s brief on the merits means it is abandoned. See Cinel


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v. Connick, 15 F.3d 1338, 1345 (5th Cir. 1994) (“An appellant abandons all
issues not raised and argued in its initial brief on appeal.”).
      Sessa next contends that this appeal is one of the “exceptional situations”
in which the “capable of repetition yet evading review” exception to mootness
applies. See Bayou Liberty Ass’n v. U.S. Army Corp of Eng’rs, 217 F.3d 393,
398 (5th Cir. 2000). Sessa cannot, however, show that, if this conduct occurred
again, it would necessarily “evade review.” “Where prompt application for a
stay pending appeal can preserve an issue for appeal, the issue is not one that
will evade review.” N.Y.C. Emps.’ Ret. Sys. v. Dole Food Co., 969 F.2d 1430,
1435 (2d Cir. 1992); see also Bayou Liberty, 217 F.3d at 398–99 (noting that a
party’s ability to “seek a stay or injunction pending appeal to halt [the
occurrence of the challenged event] while the appeal is fully considered” may
allow for full judicial review of an issue even if it typically gets resolved within
a “limited span of time”). Sessa did not ask the district court to stay the
election. Although it made that request unsuccessfully in this court, failure
this time does not establish that, in a repeat of this controversy, Sessa would
not be able to meet the showing needed for a stay. Bayou Liberty, 217 F.3d at
399 (explaining that although the appellant “was not successful in the present
action in getting an injunction, this does not mean that upon the proper
evidentiary showing actions such as these are inherently capable of evading
review”). Indeed, its stay request cited cases in which courts have granted
stays to enjoin the holding of a board election until an appeal is resolved. See
Gearhart Indus., Inc. v. Smith Int’l, Inc., 741 F.2d 707, 712 (5th Cir. 1984);
Bath Indus., Inc. v. Blot, 427 F.2d 97, 113 & n.8 (7th Cir. 1970). And the body
of law both parties cite addressing the merits of challenges to corporate or
association elections belies the notion that these cases cannot reach the
appellate stage, either prior to the election or in a subsequent suit to undo the
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election. See, e.g., Tackney v. U.S. Naval Acad. Alumni Ass’n, 971 A.2d 309
(Md. 2009) (addressing claim that election of board of trustees should be
undone but finding no arbitrary conduct); NAACP v. Golding, 679 A.2d 554
(Md. 1996) (reversing order requiring association to permit youth members to
vote for branch officers). Because the questions posed in this case are not
inherently incapable of review, this exception does not apply.
      Sessa’s final argument against mootness is to seek for the first time the
relief sought in Tackney, 971 A.2d at 309: undoing an election that has already
taken place. It contends that if it succeeds in this appeal, we can invalidate the
June 10 election and order a new one in which its candidates will be qualified.
But Sessa never sought the invalidation of the shareholder election in the
district court. We addressed a similar procedural posture in the context of a
political election in Harris v. City of Houston, 151 F.3d 186 (5th Cir. 1998).
There, plaintiffs sued the city of Houston challenging the annexation of
Kingwood, a residential area north of the city. Id. at 187. Complicating the
annexation issue was the pendency of special elections in the following months
affecting whether Kingwood, soon-to-be-Houston, residents could vote;
preclearance requirements under the Voting Rights Act prevented an
immediate change in voting laws that would have allowed the formerly-
Kingwood residents to vote in Houston, making plaintiffs citizens without
voting rights for a brief time. Id. at 187–88. Plaintiffs sought additional
alternative relief if the injunction against the annexation was denied: (1)
staying the annexation until the election or (2), if the annexation went forward,
enjoining the elections until Kingwood residents could vote. Id. at 188. Like
here, not until the appeal did the Harris plaintiffs ask to invalidate the
elections in which Kingwood residents were not able to participate. Id. at 190.
Noting that plaintiffs only sought prospective relief in the trial court, we
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declined to “read into” the complaint additional requests for relief: “the record
reflects clearly that as a tactical matter, the appellants limited and focused
their pleading and arguments solely to enjoining the annexation and election.”
Id. at 191.   Because of that tactical decision, “when both of these events
occurred, the basic underlying dispute between the parties ended, and the case
became moot.” Id.
      So too here. Sessa repeatedly made a tactical litigation decision to seek
only prospective relief. When the district court contemplated pressing the
reset button by staying the shareholder election and allowing Sessa to
resubmit the questionnaires, Sessa vehemently opposed this solution. And
when the district court asked whether it had the power to delay the board
meeting, Sessa’s attorney’s responded: “Can you? Yes. Should you? No.” Sessa
at no point argued in the alternative that if it were to lose its preliminary
injunction motion, the annual meeting should be stayed or the election undone.
Because of that litigation strategy, when the election occurred, the issues
raised in the dueling motions for injunction became moot. See id. We see no
reason why this principle, which is a general rule stemming from our authority
to review at the interlocutory stage only the orders denying or granting
injunctions, see Ass’n of Co-op Members, Inc. v. Farmland Indus., Inc., 684 F.2d
1134, 1137-38 (5th Cir. 1982) (explaining that 28 U.S.C. § 1292(a)(1) allows
interlocutory review only of the injunctive relief sought in the trial court),
Bayou Liberty, 217 F.3d at 398 (“[T]his court may not fashion relief not
requested below in order to keep a suit viable.”); should apply differently in the
context of corporate elections than it did for the political election at issue in
Harris.




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                                      ***
      This appeal relates only to the injunctive relief the parties sought
concerning the election that was set to take place at the June 10, 2016 annual
meeting. As that event has now occurred, this appeal of the district court’s
ruling on the requests for injunctive relief does not present a live controversy.
The appeal is DISMISSED as moot. We express no view on whether Sessa may
start again in a trial court requesting the relief of undoing the June election or
whether such relief is warranted in the event it can establish liability.




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