Marx v. Akers

The plaintiff commenced a shareholder derivative suit against IBM without first demanding that the board initiate a lawsuit. The issue is whether the Appellate Division abused its discretion by dismissing plaintiff's complaint for failure to make a demand and whether plaintiff's complaint fails to state a cause of action.

When a plaintiff does not go through the demand process, the plaintiff must prove the futility of demand. To prove the futility of demand, the plaintiff must allege particularized facts which create a reasonable doubt that, "(1) the directors are disinterested and independent and (2) the challenged transaction was otherwise the product of a valid exercise of business judgment." The court held that a director who voted for a raise in a directors' compensation is always interested.

Fiduciary Duties & Shareholder Litigation | Shareholder Suits for Breach of Fiduciary Duties