North Carolina Business Litigation Report

Egelhof v. Szulik, 2006 NCBC 4 (N.C. Super. Ct. Mar. 13, 2006)(Tennille)

The Court considered yet another derivative action plaintiff who had failed to make the demand required under Delaware law. The Court held that the plaintiff had failed to establish demand futility based on his claim that the outside directors were insufficiently disinterested to have properly considered a demand.

Plaintiff's claim that one of the outside directors had engaged in insider trading did not establish that the director faced a "substantial likelihood" of liability. Membership on the company's audit committee did not impair the ability of other directors to consider a derivative claim. The disinterest of the directors was also not impeached by their receipt of compensation from the company. The Court also rejected claims that the directors were interested because they had approved, permitted, or participated in the alleged wrongs" as well as other arguments which it rejected in its opinion in the Pozen case.

The Court ended its opinion by chastizing the plaintiff for not making a books and records inspection request before filing his complaint.

Full Opinion

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Mack Sperling
Brooks Pierce, LLP
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