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Outline

  • justification for demand
    • board mediation
    • centralized governance
    • filter for shareholder opportunism
  • approaches
    • pleading requirement
      • FRCivP 23.1
      • Former NC rule: Alford v. Shaw
    • required, unless futile
      • Delaware: definition of futility
        • Current board not independent OR
        • Challenged action not protected by BJR
      • Structural bias - how show?
      • Effect of making demand
    • universal demand requirement
      • MBCA § 7.42
        • 90-day waiting period
        • reasons for requirement
        exceptions

Daily Thoughts

You know you're in a dot.com company when --

  • You hear most of your jokes via email instead of in person. 
  • You've sat at the same desk for four years and worked for three different companies. 
  • Your company's welcome sign is attached with Velcro. 
  • Your resume is on a diskette in your pocket. 
  • You really get excited about a 1.7% pay rise. 
  • Your biggest loss from a system crash was when you lost all of  your best jokes.

Problems

Datapoint Corp. is publicly-held, its stock listed on the NYSE. In 1985 Asher Edelman led a proxy insurgency to drive out the incumbent board. Eventually the insurgents reached a negotiated settlement, and Edelman and four others were named to the nine-person Datapoint board. The board then approved the reimbursement of Edelman's proxy expenses totalling $1.1 million. A Datapoint shareholder seeks to challenge this reimbursement as a waste of corporate assets.

Party A (shareholder) Outline a strategy to pursue this claim (1) if Datapoint is incorporated in Delaware, and (2) if incorporated in an MBCA jurisdiction.

Party B (management) Outline a strategy to avoid this claim (1) if Datapoint is incorporated in Delaware, and (2) if incorporated in an MBCA jurisdiction.

Readings