Posts Categorized: Derivative Actions

Posted: November 30, 2016

Board Did Not Breach Fiduciary Duty By Entering Into Management Contract With Former Employees

On November 22, 2016, the First Department issued a decision in Doppelt v. Denahan, 2016 NY Slip Op. 07868, holding that directors did not breach their fiduciary duty by entering into a management contract with former employees, explaining: Contrary to the argument advanced by plaintiff, a shareholder who seeks to bring a derivative action on... Read more »

Posted: October 29, 2016

Family Relationship of Majority of Managers Does Not Excuse Demand in Derivative Suit

On October 11, 2016, Justice Scarpulla of the New York County Commercial Division issued a decision in Danial v. Monasebian, 2016 NY Slip Op. 31909(U), holding that a family relationship among managers did not excuse demand in a derivative action, explaining: Demand is deemed futile and thus excused in the following three situations when alleged... Read more »

Posted: October 11, 2016

Demand Futility Allegations in Amended Complaint Judged Based on Facts at Time of Amendment

On October 4, 2016, the First Department issued a decision in Korsinsky v. Winkelreid, 2016 NY Slip Op. 06454, holding that demand futility allegations in an amended complaint are based on the facts at the time of amendment, explaining: In this purported derivative action challenging the valuation of the nominal defendant’s compensatory stock options, the... Read more »

Posted: July 10, 2016

Derivative Complaint Dismissed for Failure Adequately to Allege Demand Futility

On June 27, 2016, Justice Ash of the Kings County Commercial Division issued a decision in Guzman v. Kordonsky, 2016 NY Slip Op. 31208(U), dismissing a complaint for failure adequately to allege demand futility. In Guzman, the plaintiff shareholders in a black car service brought a derivative action alleging that the president of the service... Read more »

Posted: March 15, 2016

Plaintiff Allowed to Replead Derivative Claims Against Directors to Show Discrimination

On March 10, 2016, the First Department issued a decision in Davis v. Scottish Re Group Ltd., 2016 NY Slip Op. 01756, distinguishing direct and derivative claims and allowing a plaintiff to replead certain claims as derivative claims, explaining: In the fourth cause of action, plaintiff alleges that the Directors and the Investors breached their... Read more »

Posted: February 3, 2016

Arbitrary Decisions Not Covered by the Business Judgment Rule

On January 21, 2016, the First Department issued a decision in Tsui v. Chou, 2016 NY Slip Op. 00428, holding that the trial court “incorrectly determined that plaintiffs’ breach of fiduciary duty and breach of contract claims [we]re barred by the business judgment rule,” explaining: Plaintiffs, suing derivatively on behalf of all unit owners of... Read more »

Posted: January 24, 2016

When a Majority of Directors in Derivative Action Are Independent, Demand is Not Excused

On January 14, 2016, the First Department issued a decision in Wandel v. Dimon, 2016 NY Slip Op. 00252, holding that when the majority of the directors of a Delaware corporation are independent, demand is not excused in a derivative action because of allegations that some directors declined to investigate a matter for fear that... Read more »

Posted: November 30, 2015

Client Q&A: I am a shareholder in a family-owned business. I think that CEO of the company has been taking advantage of us. Besides firing her, is there anything we can do?

By John M. Lundin Shareholders own the corporation, but the directors and the officers they employ run it. Making sure that corporate officers act in the best interests of the shareholders, who own the company, rather than themselves, is one of the fundamental problems of corporate law. Fiduciary Duties A corporate officer has a fiduciary... Read more »