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Demand Futility Shareholders

Hogan Lovells

In re Cognizant Technology: Third Circuit adopts de novo review for failure to plead demand futility

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In re Cognizant Technology Solutions Corporation Derivative Litigation, the United States Court of Appeals for the Third Circuit, sitting en banc, overruled its prior decision in Blasband v. Rales that applied an...more

Morris James LLP

Chancery Holds Plaintiff Fails to Meet Rule 23.1 Pleading Standard, Dismisses Action Arising From T-Mobile Data Hack

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Harper v. Sievert, C.A. No. 2022-0819-SG (Del. Ch. May 31, 2024). A stockholder plaintiff brought derivative claims alleging that current and former directors of T-Mobile US, Inc. were liable for aggregating customers’...more

Faegre Drinker Biddle & Reath LLP

Like Delaware, the Third Circuit Will Now Apply De Novo Review to Demand-Futility Decisions

Twenty-four years ago, the Delaware Supreme Court clarified that de novo review was the appropriate standard of review for the Court of Chancery’s dismissal of a derivative case for failure to plead demand futility. Brehm v....more

Morris James LLP

Chancery Dismisses Derivative Action Based on Plaintiff’s Failure to Allege Particularized Facts Demonstrating Demand Futility

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The power to bring a claim for breach of duty causing injury to a Delaware corporation resides with the board of directors. It is part of their duty under Section 141(a) of the Delaware General Corporation Law to manage the...more

Morris James LLP

Chancery Dismisses Caremark Action Based on Insufficient Allegations of Bad Faith

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Clem v. Skinner, et al., C.A. 2021-0240-LWW (Del. Ch. Feb. 19, 2024) - This Caremark decision involved the retail pharmacy company, Walgreens, and concerned billing practices for a particular insulin pen product that gave...more

Hogan Lovells

Newman v. KKR: Suit dismissed by Delaware Chancery Court for failure to plead demand futility

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In Newman v. KKR, the Delaware Court of Chancery dismissed a shareholder suit against Transphorm, Inc.’s Board and KKR, the largest shareholder, for failure to plead demand futility. The plaintiff alleged that the Board...more

Morris James LLP

Following Flawed Business Acquisition, Chancery Dismisses Derivative Complaint for Failure to Plead Demand Futility

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City of Coral Springs Police Officers' Pension Plan v. Dorsey, C.A. No. 2022-0091-KSJM (Del. Ch. May 9, 2023) - A terrible business decision does not ensure the Court of Chancery will sustain a derivative claim. A...more

DarrowEverett LLP

AmeriSource Decision a Difficult Pill to Swallow for Securities Plaintiffs

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The opioid crisis has garnered nationwide attention for decades and has resulted in thousands of lawsuits, subjecting pharmaceutical distributors to billions of dollars in damages. AmerisourceBergen (“Amerisource”) — one of...more

Robson & Robson, P.C.

Can Closely Held Companies Investigate Shareholder Complaints Without Breaking The Bank?

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Last month, we tackled Pennsylvania’s “universal” demand requirement. As a refresher, unlike many states, Pennsylvania will not excuse the shareholder of a company who wants the company to sue its executives or directors from...more

A&O Shearman

Delaware Court Of Chancery Assesses The Application Of Timeliness Principles To Caremark Red Flags Claim And Applies “Separate...

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On December 15, 2022, Vice Chancellor J. Travis Laster of the Delaware Court of Chancery denied a motion to dismiss claims as untimely in a derivative action brought by stockholders against the officers and directors of...more

Morris James LLP

Chancery Dismisses Caremark Claim Against Energy Company Alleging Failure of Board Oversight Related to Fatal Pipeline Explosion

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City of Detroit Police and Fire Retirement System v. Hamrock, C.A. No. 2021-0370-KSJM (Del. Ch. June 30, 2022) - Stockholder plaintiff filed a derivative suit on behalf of an energy company alleging that certain of the...more

A&O Shearman

Delaware Court Of Chancery Dismisses Derivative Suit For Failure To Allege Substantial Likelihood Of Liability Sufficient To...

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On June 30, 2022, Chancellor Kathaleen St. J. McCormick of the Delaware Court of Chancery granted a motion to dismiss derivative claims for breach of fiduciary duty brought by a stockholder of an energy company (the...more

A&O Shearman

Eighth Circuit Affirms Dismissal Of Merger-Related Derivative Suit For Failure To Plead Demand Excusal

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On April 7, 2022, the United States Court of Appeals for the Eighth Circuit affirmed the dismissal of derivative claims brought by shareholders of Centene Corporation (the “Corporation”) against directors and officers of the...more

Morris James LLP

Chancery Dismisses Derivative Action Arising from $1.2 Billion Stock Sale Based on Plaintiffs’ Failure to Plead Demand Futility

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In re Kraft Heinz Co. Deriv. Litig., Cons. C.A. No. 2019-0587-LWW (Del. Ch. Dec. 15, 2021) - The Court of Chancery dismissed an insider-trading action on the grounds that plaintiffs failed to plead that a majority of a...more

Morris James LLP

Chancery Holds Plaintiffs Adequately Pled Wrongful Refusal Where Board Did Not Correct Unauthorized Charter Amendments

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Drachman v. Cukier, C.A. No. 2019-0728-LWW (Del. Ch. Oct. 29, 2021) - To survive a motion to dismiss in the demand refusal context, the plaintiff must allege facts that create a reasonable doubt that the board’s decision...more

Morris James LLP

Chancery Dismisses Derivative Claims That Private Equity Sponsors Comprised A Control Group

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Patel v. Duncan, C.A. No. 2020-0418-MTZ (Del. Ch. Sept. 30, 2021) - For stockholders to comprise a control group, the alleged group members must be connected in some “legally significant way – such as by contract, common...more

Hogan Lovells

United Food & Com. Workers Union v. Zuckerberg: Exculpatory clause does not render demand futile

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In United Food & Com. Workers Union v. Zuckerberg, No. 404, 2020 (Del. Sup. Sep. 23, 2021), the Delaware Supreme Court adopted a new, three-part test for determining when a shareholder is required to make a pre-suit demand on...more

Locke Lord LLP

Delaware Clarifies Its Rules Governing Stockholder Derivative Actions

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Derivative actions play an important role in policing corporate insider conduct and compliance by directors and controlling stockholders with their fiduciary duties. A derivative action enables a stockholder, upon...more

Holland & Knight LLP

Delaware Supreme Court Adopts Universal 3-Part Test to Assess Demand Futility

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In a Sept. 23, 2021, decision that may make it easier for Delaware boards of directors to obtain an early dismissal of derivative suits brought against them, the Delaware Supreme Court in United Food and Commercial Workers...more

Goodwin

Northern District of California Kicks Shareholder Derivative Suit Against Alphabet, Inc. for Failing to Allege Demand Futility

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Northern District of California Kicks Shareholder Derivative Suit Against Alphabet, Inc. For Failing to Allege Demand Futility; Rare Securities “Holder’s Claim” Trial Results in Jury Verdict for Defendants; Delaware Court of...more

Morris James LLP

Chancery Rejects Plaintiff’s Attempt to Recharacterize Pre-Suit Demands

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The Raj & Sonal Abhyanker Fam. Tr. v. Blake, C.A. No. 2020-0521-KSJM (June 17, 2021) - Court of Chancery Rule 23.1 presents a would-be derivative plaintiff with two exclusive options: make a pre-suit demand on the board to...more

Morris James LLP

Chancery Confirms the Challenges in Pleading Caremark and Non-Shareholder Action Disclosure Claims

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Fisher v. Sanborn, C.A. No. 2019-0631-AGB (Del. Ch. Mar. 30, 2021) - Under Court of Chancery Rule 23.1, a plaintiff attempting to bring a derivative action on behalf of a corporation faces a heightened “particularized”...more

Morris James LLP

Chancery Dismisses Derivative Action for Failure to Plead Demand Futility Despite Unocal Enhanced Scrutiny

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Gottlieb v. Duskin, C.A. No. 2019-0639-MTZ (Del. Ch. Nov. 20, 2020) - Defendants moved to dismiss a derivative action for failure to plead demand futility under Rule 23.1. The complaint alleged that the director...more

Morris James LLP

Chancery Questions Utility of Aronson Test, Dismisses Derivative Suit of Facebook Stockholder for Failure To Allege Demand...

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United Food and Comm. Workers Union v. Zuckerberg, C.A. No. 2018-0671-JTL (Del. Ch. Oct. 26, 2020) - In its recent decision in United Food and Comm. Workers Union v. Zuckerberg, the Court of Chancery discussed the legal...more

Morris James LLP

Chancery Dismisses Caremark Claims Against Metlife Board

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In re Metlife Inc. Derivative Litigation, Consol. C.A. No. 2019-0452-SG (Del. Ch. Aug. 17, 2020) - Shareholders seeking relief for alleged harm to a Delaware corporation must comply with Delaware’s pre-suit demand...more

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