Posts Categorized: Derivative Actions

Posted: December 5, 2016

First Department Reverses Trial Court Approval of Derivative Action Settlement

On November 29, 2016, the First Department issued a decision in Company v. Clayton Dubilier & Rice, LLC, 2016 NY Slip Op. 08021, reversing the approval of the settlement of a derivative action, explaining: The settlement does not provide for payment to the company. Plaintiffs are to receive the bulk of the $4 million settlement... Read more »

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 »