Demand and Demand Futility | Brian JM Quinn | February 22, 2013


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Demand and Demand Futility

by Brian JM Quinn Show/Hide

In derivative litigation, procedure is extremely important. In order to preserve the central importance of the board in the management of the corporation, courts will require shareholders who wish to sue on behalf the corporation to jump through certain hoops.

This section provides an overview to procedural requirements with respect to “demand” and “demand futility.”


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  1. 3 Show/Hide More Spiegel v. Buntrock
    Original Creator: Brian JM Quinn

    Deriviative litigation requires stockholder plaintiffs to either make a demand on the board unless such a demand would be futile. If a plaintiff makes a demand on the board and that demand is rejected, is that the end of stockholder's litigation?

    The following case, Spiegel, illustrates the effect on litigation of making demand on the board and the standard of review a court will use when asked to review a board's decision to refuse a stockholder's demand.

  2. 4 Show/Hide More Rales v. Blasband
    Original Creator: Brian JM Quinn
    Demand and demand futility standards
  3. 6 Show/Hide More Shoen v. SAC Holding Corp.
    Original Creator: Brian JM Quinn Current Version: Brian JM Quinn

    Shoen is a Nevada case. In Shoen, the Nevada Supreme Court adopts the Delaware standards (Aronson and Rales) for determination of demand futility. The Nevada high court's discussion of both standards provides a clear overview and restatement of both tests and their application to pleadings.

    Shoen is also an example of how state courts around the country look to the Delaware courts for guidance as they form their corporate law.  Through cases like Shoen you can begin to appreciate Delaware's outsized influence in the corporate law arena.

  4. 7 Show/Hide More Brehm v. Eisner
    Original Creator: Brian JM Quinn
    When a court is asked to rule on a Rule 23.1 motion to dismiss, the court will apply the Aronson or Rales standards to each member of the board in order to determine whether a majority of the board was disinterested or independent such that a majority of the board could fairly consider the challenged transaction or the plaintiff's demand. 

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January 22, 2014

corporate demand futility derivative litigation

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