Simmonds v. Credit Suisse Securities LLC, 638 F.3d 1072

Simmonds filed fifty-four related derivative §16(b) complaints alleging short-swing profits by Underwriters coordinating with insiders during 1999–2000 IPOs of 54 issuing Delaware corporations.
District court granted 12(b)(1) and 12(b)(6) dismissals: 30 cases for inadequacy of pre-suit demand letters under state law; 24 cases dismissed as time-barred under §16(b)’s two-year statute of limitations.
Simmonds appealed consolidated with cross-appeals from Moving Issuers seeking dismissal with prejudice; district court’s rulings were partly affirmed, partly reversed.
Panel held Delaware law governs the adequacy of demand letters under Kamen v. Kemper, unless federal objectives require a different approach; court applied Delaware demand standards to the thirty Moving Issuers’ letters.
Court concluded the thirty demand letters were inadequate under Delaware law, the 24 remaining suits were not time-barred due to Whittaker v. Whittaker Corp. tolling, and the district court should dismiss the thirty Delaware cases with prejudice while remanding the remaining twenty-four for appropriate challenge to demand adequacy under applicable law.
The opinion also addresses third-party standing to challenge demand adequacy and directs remand with guidance on applying Delaware, California, Washington, and Bermuda law to the remaining cases.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Simmonds’ pre-suit demand letters met Delaware’s adequacy standard	Simmonds argues letters sufficiently identified wrongdoers and sought board action	Moving Issuers argue letters were inadequate to enable investigation and did not demand the correct relief	Demand letters inadequate under Delaware law
Whether the thirty Moving Issuers’ suits were time-barred by §16(b)	N/A (plaintiff contends demand tolling applies)	Time bar applies regardless of tolling complexities	Not time-barred for those claims where Whittaker tolling applies; Whittaker applies to toll the two-year period until 16(a) disclosure
Whether the district court should dismiss the thirty Delaware cases with prejudice	N/A	N/A	Yes; dismissals should be with prejudice for failure to satisfy Delaware’s demand requirement
Whether third-party defendants may challenge the plaintiff’s demand adequacy	Underwriters may raise the defense	N/A	Yes; third parties may challenge demand adequacy under Kaplan v. Peat, Marwick, Mitchell & Co.
Choice of law for demand adequacy in remand of remaining cases	Apply Delaware law where appropriate per Kamen	N/A	Follow Delaware law for demand adequacy; apply California, Washington, Bermuda where appropriate to avoid conflicts with §16(b)

Aronson v. Lewis, 473 A.2d 805 (Del. 1984) (Delaware demand requirements safeguard intrapersonal remedies and governance)
Whittaker v. Whittaker Corp., 639 F.2d 516 (9th Cir. 1981) (§16(b) tolling begins when insider discloses in §16(a) reports; disclosure rule governs statute of limitations)
Litzler v. CC Investments, L.D.C., 362 F.3d 203 (2d Cir. 2004) (discusses tolling and notice principles in §16(b) context)
Kamen v. Kemper Fin. Servs., Inc., 500 U.S. 90 (U.S. 1991) (state law governs internal corporate questions under Erie where not inconsistent with federal policy)
Kaplan v. Peat, Marwick, Mitchell & Co., 540 A.2d 726 (Del. 1988) (third-party standing to challenge shareholder demand under Delaware law)
Shlensky v. Dorsey, 574 F.2d 131 (3d Cir. 1978) (demand letters must be specific; directors’ better knowledge does not excuse failure to demand)
Whittaker v. Whittaker Corp., 639 F.2d 516 (9th Cir. 1981) (non-repose tolling ruling for §16(b) timeliness; supports Whittaker framework)
Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, 501 U.S. 350 (U.S. 1991) (discusses period of repose in securities actions)
Dreiling v. Am. Online Inc., 578 F.3d 995 (9th Cir. 2009) (explains §16(b) purpose and state-law integration)
In re Silicon Graphics Inc. Sec. Litig., 183 F.3d 970 (9th Cir. 1999) (demand-futility and pleading standards in derivative actions)