Carmen Di Giovanni v. Andrew Clark
665 F. App'x 626
| 9th Cir. | 2016Background
- Shareholder derivative suit dismissed for failure to make a pre-suit demand under Fed. R. Civ. P. 23.1; appellants appealed the dismissal.
- Central legal question: whether directors were "interested" because they allegedly stood "on both sides" of a proposed self-tender offer, which would excuse demand.
- Appellants argued Aronson and its "on both sides" language meant directors who participated in the tender were conflicted and thus interested.
- Defendants/board argued directors participated only as shareholders on the same terms as others and received no unique benefit, so they were not "interested."
- The panel relied on Delaware precedent holding directors who receive no benefit beyond other shareholders are not interested in self-tenders.
- Court affirmed dismissal, concluding Aronson’s "on both sides" concept does not render directors interested where their interests align with ordinary shareholders in a self-tender.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether directors were "interested" because they stood "on both sides" of a self-tender, excusing demand | Directors who both approve and participate in the self-tender stand on both sides and are thus interested | Directors participated only as shareholders on identical terms and got no special benefit, so they are not interested | Directors were not "interested"; demand was required and dismissal affirmed |
Key Cases Cited
- Aronson v. Lewis, 473 A.2d 805 (Del. 1984) (establishes test for director interest and demand futility under Delaware law)
- Brehm v. Eisner, 746 A.2d 244 (Del. 2000) (overrules portions of prior Delaware law on related issues)
- Pfeffer v. Redstone, 965 A.2d 676 (Del. 2009) (director participation in a self-tender on same terms does not make director "interested")
- Unocal Corp. v. Mesa Petroleum Co., 493 A.2d 946 (Del. 1985) (addresses director conflict and when board action is scrutinized)
- Nixon v. Blackwell, 626 A.2d 1366 (Del. 1993) (interprets "on both sides" to require a benefit beyond that received by other shareholders)
- eBay Domestic Holdings, Inc. v. Newmark, 16 A.3d 1 (Del. Ch. 2010) (distinguishable; involved non-self-tender transaction and disparate effects on shareholders)