If you are bringing a shareholder derivative suit, always make a demand:
The Complaint in this shareholder derivative action was filed on May 6, 2008, along with a motion for a temporary restraining order and preliminary injunction. [*4] The Complaint asserts claims for breach of fiduciary duty, abuse of control, corporate waste, unjust enrichment and gross mismanagement, alleging that the Defendants, consisting of the entire Alcoa Board of Directors as well as certain senior executives and agents, breached their fiduciary duties to Alcoa by participating in and/or failing to prevent the misconduct alleged in the Alba Action. All of the claims are derivative in nature. In connection with its action, Plaintiff also sought a TRO and preliminary injunction enjoining any Alcoa Directors or officers identified as subjects or targets of the DOJ investigation from participating in Board decisions relating to Alcoa’s response to the investigation and any criminal charges ensuing therefrom.
Serious stuff! Oops:
The vast majority of Plaintiff’s opposition to the motion to dismiss discusses allegations as to whether Alcoa’s Board, the Special Committee appointed by the Board, and its counsel, are sufficiently independent to properly evaluate a demand. (See Pl. Opp. Br. at 10-19.) In the context of Defendants’ motion to dismiss for failure to make a pre-suit demand, this discussion is wholly irrelevant. I reiterate: had Plaintiff made a demand on the Board back in late March or April, it may now have been in a position to raise these arguments. However, having chosen not to make a demand, Plaintiff must lie in the bed that it has made.
Note also the heavy reliance on the ALI Principles, which I noted earlier:
In furtherance of these principles, and to assist trial courts in their application, the Pennsylvania Supreme Court adopted certain provisions of 2 ALI, Principles of Corporate Governance: Analysis and Recommendations (1994), specifically sections 7.02 (standing), 7.03 (the demand requirement), 7.04 (procedure in derivative action), 7.05 (board authority in derivative action), 7.06 (judicial stay of derivative action), 7.07, 7.08, and 7.09 (dismissal of derivative actions), 7.10 (standard of judicial review), and 7.13 (judicial [*15] procedures).
Hawaii Structural Ironworkers Pension Trust Fund, Derivatively on Behalf of Alcoa, Inc. vs. Alain J.P. Belda, et al., 2008 U.S. Dist. LEXIS 52888 (July 9, 2008).