NY Shareholder Litigation Dismissal Raises Bar For Plaintiffs

In derivative shareholder actions, New York law requires a plaintiff shareholder seeking to vindicate the rights of a corporation to plead, with particularity, either that before filing suit a request was made on the corporation's board of directors to initiate the action or that any such demand, if made, would have been futile.

This presuit demand requirement may seem straightforward in theory, but a March 19 New York Supreme Court Commercial Division decision by Justice Andrea Masley serves as a cautionary reminder of tricky nuances in its application.

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