Nelson Gomes v. American Century Companies
710 F.3d 811
8th Cir.2013Background
- Gomes, an investor in the Fund, asserts Maryland common-law and federal RICO claims against the Fund's fiduciaries.
- The complaint includes derivative claims on behalf of the Fund for breach of fiduciary duty, negligence, waste, and RICO violations.
- Fiduciaries allegedly caused the Fund to invest in two offshore internet gambling sites that were illegal under U.S. law.
- Government actions in 2006 caused the sites to forfeit funds and cease U.S. operations, reducing the Fund’s net asset value.
- The Fund incurred millions in losses when it sold its shares; Gomes did not make a pre-suit demand on the Fund’s board, and district court dismissed.
- Appellate court reviews the dismissal de novo and must apply Maryland law to determine whether demand was excused.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Maryland’s demand requirement applies to a derivative RICO claim. | Gomes—Maryland demand not required due to RICO’s remedial purpose. | Fiduciaries—Maryland demand applies to determine excusal under state law. | Maryland demand applies; not inconsistent with RICO. |
| Whether demand was excused under Maryland law. | Demand excused due to potential director liability and post-filing events. | Demand not excused; futility limited; post-filing events irrelevant to starting point. | Demand was required; futility not shown. |
| Whether the district court correctly dismissed the derivative claims for failure to make demand. | Demands could have been considered; possible relief if demand excused. | Demand not excused; proper to dismiss. | Affirmed district court’s dismissal. |
Key Cases Cited
- Kamen v. Kemper Fin. Servs., Inc., 500 U.S. 90 (1991) (demand question is federal law; state law governs if not inconsistent with federal policy)
- Burks v. Lasker, 441 U.S. 471 (1979) (remedial purposes do not bar director termination of nonfrivolous derivative suits)
- Werbowsky v. Collomb, 766 A.2d 123 (Md. 2001) (demand required; participation by directors is not by itself excusal)
- Parish v. Md. & Va. Milk Producers Ass'n, 242 A.2d 512 (Md. 1968) (early futility concept; later limited by Werbowsky)
- Lewis v. Graves, 701 F.2d 245 (2d Cir. 1983) (timing of reliance on pre-suit demand; demand must be evaluated at filing)