NY Commercial Division Blog

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Patterson Belknap’s Commercial Division Blog covers developments related to practice and case law in the Commercial Division of the New York State Supreme Court.  The Commercial Division was formed in 1993 to enhance the quality of judicial adjudication and to improve efficiency in the case management of commercial disputes that are litigated in New York State courts. Since then, the Division has become a leading venue for judicial resolution of high-stakes and every-day commercial disputes.  This Blog reviews key developments in the Commercial Division, including important decisions handed down by the Commercial Division, appellate court decisions reviewing Commercial Division decisions, and changes and proposed changes to Commercial Division rules and practices.  Our aim is to provide you with thoughtful and succinct analysis of these issues.  The Blog is written by experienced commercial litigators who have substantial practices in the Commercial Division. It is edited and managed by Stephen P. Younger and Muhammad U. Faridi, who spearheaded the publication of the New York Commercial Division Practice Guide, which is part of Bloomberg Law's Litigation Practice Portfolio Series.

Business Judgment Rule Applies to a Board’s Response to Take “All Necessary Actions”

What legal standard applies to assess a corporate board’s refusal to pursue litigation in response to a shareholder’s demand to take “all necessary actions” to correct alleged director misconduct?  In Solak v. Fundaro,[i] Commercial Division Justice Charles Ramos applied the business judgment rule to such a situation, holding that a request to take “all necessary actions” constitutes as a shareholder demand under Rule 23.1 of the Delaware Chancery Court Rules and that a derivative plaintiff must plead particularized facts showing gross negligence or bad faith to proceed with a derivative claim following a board’s refusal to take the demanded action.

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Stealing Data Without Depriving the Owner of Access Does Not Amount to Conversion

New York recognizes conversion claims based on intangible property, such as electronically stored information or trade secrets.[1]  But does a conversion claim exist when the theft of the intangible property does not deprive the rightful owner of unfettered access to the property (i.e., when the owner retains an original or accurate duplicate of the information)?  This was the question presented to the Commercial Division recently in MLB Advanced Media, L.P. v. Big League Analysis, LLC.[2]  In that case, Justice Shirley Werner Kornreich held that a conversion claim is not available unless the plaintiff’s use of or access to the property is disturbed.

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Preliminary Hurdle for Cayman Derivative Claims Does Not Bar Suit in New York

A shareholder bringing a contested derivative claim in the Cayman Islands must seek leave from the court before proceeding.  This litigation prerequisite -- imposed by Rule 12A of the Rules of the Grand Court of the Cayman Islands (“Rule 12A”) -- requires a prima facie factual showing, with the aim of protecting corporations from “vexatious or unfounded litigation.”  But when a Cayman Islands-related derivative claim is brought in New York’s Commercial Division, does the same rule apply?  The New York Court of Appeals recently answered “No,” holding in Davis v. Scottish Re Group Ltd. that Rule 12A is a procedural rule that does not apply to matters litigated in New York courts.

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