Tagged: Collateral Estoppel

Delaware Supreme Court Gives Preclusive Effect to Federal Court Dismissal of Derivative Suit for Failure to Show Demand Futility

In its highly anticipated opinion in California State Teachers’ Retirement System v. Alvarez, the Delaware Supreme Court unanimously affirmed the dismissal of a group of Delaware shareholders’ derivative actions, holding that a previous dismissal by a federal court for failure to plead demand futility precluded other shareholders from pursuing additional derivative actions so long as the other shareholders were adequately represented in the earlier suit. Following the New York Times 2012 exposure of Wal-Mart executives’ alleged mishandling of bribery allegations, Wal-Mart shareholders brought derivative suits in the Western District of Arkansas and the Delaware Court of Chancery. In May 2015, the Arkansas court dismissed the case before it, because the shareholders had failed to adequately plead demand futility. Prompted by the Arkansas dismissal, the Delaware Court of Chancery initially dismissed the Delaware action, but, after some ping-ponging back and forth between the Court of Chancery and the Delaware Supreme Court, the Court of Chancery issued a supplemental opinion, recommending that the Supreme Court adopt a rule proposed in EZCORP Inc. Consulting Agreement Deriv. Litig., which held that constitutional Due Process permits a derivative suit to have a preclusive effect on a subsequent derivative suit only if the plaintiff in the first suit has been authorized by the corporation to pursue the litigation, either by express authorization...

Wrap Up of United States Supreme Court’s 2014-2015 Term

With the close of the United States Supreme Court’s 2014-15 term, we offer this wrap up of the Court’s term, focusing on the Court’s most important business and commercial cases (excluding patent cases). Omnicare, Inc. v. Laborers Dist. Council Constr. Indus. Pension Fund: It is widely known that if the registration statement an issuer files with the SEC contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements therein not misleading, then a purchaser of securities sold pursuant to the registration statement may sue the issuer for damages.

New Jersey Appellate Division Holds That the Entire Controversy Doctrine Does Not Reach Tangentially-Related Claims Pending in Another Court, Despite Common Facts

In Alpha Beauty Distributors, Inc. v. Winn-Dixie Stores, Inc. the New Jersey Appellate Division reversed a trial court’s dismissal of an action under the Entire Controversy Doctrine, finding that the dismissed action was not part of the same “core controversy” as a related federal-court proceeding. Plaintiff Alpha Beauty Distributors is owned by Bebert Azran. After purchasing Alpha from Noel and Reid Kleinman, Azran discovered fraud and breaches of fiduciary duty, and sued the Kleinmans in Federal District Court on behalf of himself and Alpha . The federal action centered on allegations that the Kleinmans had damaged Alpha and Azran “through a course of self-dealing and conversion of corporate assets.” Among other things, the federal complaint alleged that the Kleinman’s had given certain of Alpha’s customers improper credits, but it did not encompass any claims against such customers for the improper credits.