Derivative suits rarely arrive alone. When something goes awry, directors and officers can be expected to see multiple suits based on demand futility as well as wrongful demand refusal. Often, suits will be filed at different times and in different fora. It is important to remember, however, that the "real" plaintiff in these suits is the corporation itself.
When one suit is dismissed, does that have any effect on other pending or subsequently filed suits? This is a topic that I first discussed two years ago in Delaware Court of Chancery “Overrules” Federal Court. That post was critical of Vice Chancellor Laster's refusal to give preclusive effect to a federal court's dismissal of a parallel derivative action. Pyott v. Louisiana Municipal Police Employees' Retirement System, 46 A.3d 313 (Del. Ch. 2012). The Delaware Supreme Court subsequently reversed V.C. Laster in Pyott v. Louisiana Municipal Police Employees' Retirement System, 74 A.3d 612 (Del. 2013). See Delaware Supreme Court Upholds Federalism, Comity & Finality. Then, U.S. District Judge Kent J. Dawson rejected V.C. Laster's privity analysis in Pyott as a matter of Nevada law. In re MGM Mirage Derivative Litig., 2014 U.S. Dist. LEXIS 88967 (D. Nev. 2014).
This brings me to yesterday's holding in Arduini v. Hart, Case No. 12-15750 (9th Cir. Dec. 17, 2014). This case involved a derivative suit alleging demand futility that was filed after a previous demand futility suit had been dismissed. Writing for the panel, Judge Consuelo M. Callahan concluded:
Defendants in derivative suits should be cheered by this ruling. Ironically, however, they should hope that their initial adversaries prove worthy opponents.