Derivative shareholder disputes can arise in any jurisdiction, not just Illinois or Delaware, so it is wise to keep abreast of decisions issued under the law of other states. In In Re CenturyLink Sales Practices & Securities Litigation, No. 17 MD 2795 (Feb. 17, 2022), the court considered whether, in a derivative shareholder action, discovery can be obtained by the plaintiff despite a vote of director groups that such a lawsuit should not be brought.
Louisiana law provides does not especially favor derivative actions, and gives corporations protections against them. La. Rev. Stat. 12:1-744(A) requires dismissal of a derivative lawsuit if either a majority vote of all directors or of a committee of such directors—as long as they are free of conflicts of interest and proceeding in good faith—decides that such a lawsuit is not in the best interests of the corporation.
Such a vote was taken in this case and the company accordingly moved to dismiss, but the court ruled that its subjective nature favors allowing some discovery in order to decide whether the decision makers acted honestly. A limited examination of the books and records—those related to the inquiry and decision at issue and any written report related to it—was therefore allowed.
If you have a question about shareholder disputes, contact Thomas Patterson at firstname.lastname@example.org.