Commercial Division Blog

Posted: April 5, 2015 / Categories Commercial, Derivative Actions

First Department Examines Demand Futility

On April 2, 2015, the First Department issued a decision in Bodner v. Grunstein, 2015 NY Slip Op. 02849, reversing a trial court dismissal of a derivative claim for failure to make a demand on the company. The First Department explained that

Plaintiff set forth sufficiently particularized facts to raise a reasonable doubt that defendant Harry Grunstein, the only individual upon whom demand to bring suit could be made, was disinterested and independent, and thereby to establish that a demand would have been futile. His codefendant brother, although not an officer, director or member of the nominal defendant entities, was the prime mover in the underlying transactions complained of, and, indeed, claimed to control the entities notwithstanding that Harry Grunstein held the management positions in them. Moreover, Harry Grunstein had operated as a willing extension of his brother in related transactions that resulted in litigation.

(Internal quotations and citations omitted) (emphasis added).