Del. Walmart Ruling Might Bring New Derivative Strategies

By Jonathan Richman (February 5, 2018, 12:04 PM EST) -- The Delaware Supreme Court held recently that the dismissal of a shareholder derivative action for lack of demand futility can preclude other derivative actions as long as the plaintiff in the dismissed case adequately represented the corporation's interests. The court's Jan. 25, 2018, decision in California State Teachers' Retirement System v. Alvarez — a suit brought on behalf of Wal-Mart Stores Inc. (now Walmart Inc.) — refused to adopt the Delaware Court of Chancery's recommendation that, as a matter of federal due process, a judgment in one derivative action should not bind the corporation or its stockholders in another derivative action unless either (1) the first action has survived a motion to dismiss because a presuit demand on the corporation's board of directors would have been futile or (2) the board has given the plaintiff authority to proceed on the corporation's behalf by declining to oppose the derivative suit....

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