Howard M. Cooper and Heidi A. Nadel successfully defeated motions to dismiss derivative and direct claims brought by shareholders and directors of closely-held companies.
Todd & Weld's clients are plaintiffs who are fifty percent owners and fifty percent of the directors of two closely-held family companies. Plaintiffs made demand on the companies under chapter 156D to investigate corporate wrongdoing by the acting officers, one of whom is also a director and shareholder, and duly noticed directors' meetings to address the demand for investigation. After the other members of the board of directors refused to attend the meetings, Todd & Weld's clients filed suit on behalf of the companies against the acting officers. Defendants filed motions to dismiss. In opposition, Todd & Weld argued on behalf of the plaintiffs that by refusing to attend the duly noticed meeting and making it impossible for a quorum to be present to vote on the derivative demand to investigate allegations of corporate wrongdoing, the defendants effectively rejected the demand. Despite the 2004 amendment to chapter 156D eliminating the futility exception to the derivative demand requirement and requiring demand in every case followed by a 90-day waiting period before a suit could be filed, the Superior Court agreed and held that the complaint alleged “the equivalent of a demand rejection.” The Superior Court also rejected defendants' arguments that the agreed upon dismissal of a lawsuit in 2007 by the plaintiffs to enforce their rights to obtain records under chapter 156D, sections 16.04 and 16.05, constituted res judicata with respect to the claims raised in plaintiffs' later case. The Court found that although plaintiffs had outlined some of defendants' wrongdoing in the 2007 lawsuit as the basis for their request for records, the purpose of the earlier lawsuit was only to obtain records and the “policies underlying res judicata are inapplicable here.”