Cottrell v. Duke

Plaintiffs, owners of shares of Wal-Mart, filed suit against the corporation's directors and officers, alleging that they violated state and federal law by permitting and then covering up pervasive bribery committed on behalf of Wal-Mart’s Mexican subsidiary, Wal-Mex. Federal Rule of Civil Procedure 23.1 required plaintiffs to explain why they did not first ask the board of directors to cause the corporation to pursue the suit itself because the shareholders sought to enforce rights belonging to Wal-Mart. Plaintiffs claimed that it would have been futile to go to the board first. In this case, the specific facts alleged in plaintiffs’ complaint do not give rise to a reasonable inference that Wal-Mart’s board of directors learned of the suspected bribery by Wal-Mex while the alleged bribery was being covered up and the internal investigation quashed. Therefore, the allegations do not establish “with particularity” that the threat of personal liability rendered a majority of Wal-Mart’s 2012 board incapable of fairly considering whether to pursue the corporate causes of action the shareholders seek to enforce in this case, as required by Rule 23.1 and Delaware’s heightened pleading threshold for derivative lawsuits. Accordingly, the court affirmed the judgment. View "Cottrell v. Duke" on Justia Law