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Industry: Pharmaceutical, Medical Device, and Health Care

Commercial Division Dismisses Derivative Lawsuit After Board Rejects Shareholder Demand

The decision to bring a lawsuit on behalf of a corporation is entrusted to the corporation’s board of directors.[1]  A shareholder may not maintain a derivative lawsuit on behalf of a corporation without first making a demand on the board to bring the suit or pleading that it would be futile to make such a demand.[2]  On October 18, 2017, Justice Shirley Werner Kornreich of the New York Commercial Division dismissed a derivative lawsuit because the shareholder failed to allege that the defendant corporation’s board of directors acted in bad faith or with gross negligence when it rejected the shareholder’s demand.  Reese v. Andreotti, No. 654132/2016, 2017 BL 391404, at *10 (N.Y. Sup. Ct. Oct. 18, 2017).

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