Rich v. Chong

Plaintiff, a stockholder, made a demand to Defendant corporation, asking the corporation to prosecute claims against its officers and directors for violating their Caremark duties. The individual Defendants failed to respond to the demand over the next two years and allegedly took actions making a meaningful response to the demand unlikely. Plaintiff subsequently brought this action, alleging breaches of fiduciary duty under Caremark. Defendants moved to dismiss the complaint under Court of Chancery Rule 23.1 because the corporation had not yet rejected Plaintiff's demand. Additionally, the corporation moved to dismiss for failure to state a claim and moved to dismiss or stay the case under the McWane doctrine in favor of several prior-filed cases in New York. The Court of Chancery (1) denied the Rule 23.1 motion, as Plaintiff pled particularized facts that raised a reasonable doubt that the corporation acted in good faith in response to the demand; (2) denied the motion to dismiss, as Plaintiff pled facts from which could be inferred that the corporation's directors knew its internal controls were deficient yet failed to act; and (3) denied the motion to dismiss under the McWane doctrine because it was unlikely New York courts had personal jurisdiction over Defendants. View "Rich v. Chong" on Justia Law