This case concerned the right of a limited partner to bring a derivative action against two partnerships. As one partnership was a North Carolina entity, and the other a Delaware entity, the Court considered the law of both states. The law of both states excuses demand in the event of futility in the case of a partnership.
Corporate management is entitled to the opportunity to pursue alternative remedies and to avoid unnecessary litigation. The reasons that demand would be futile must be alleged with particularity. The argument by the plaintiffs was that there was no general partner on which to make a demand, because the general partner had filed for bankruptcy.
The Court held, however, that the plaintiffs were required to invoke the provisions of the partnership agreement to have new management appointed, and to then make demand on that new management. The Court dismissed the case without prejudice.