Practice point: The Appellate Division affirmed dismissal, as plaintiff failed to make a presuit demand or adequately allege that a demand was excused. Pursuant to Business Corporation Law § 626(c), a plaintiff shareholder must plead, with particularity, the attempt to secure the initiation of such action by the board, or the reasons for not making such effort.
Demand is excused due to futility when a complaint alleges with particularity that: (1) a majority of the board of directors is interested in the challenged transaction; or (2) the board of directors did not fully inform themselves about the challenged transaction to the extent reasonably appropriate under the circumstances; or (3) the challenged transaction was so egregious on its face that it could not have been the product of the directors' sound business judgment.
Student note: The demand requirement also applies to members of New York limited liability companies.
Case: Barone v. Sowers, NY Slip Op 04195 (1st Dept. 2015)
Here is the decision.
Tomorrow's issue: A contract action involving an online business promotion.
