Supreme Court Adopts "Validly In Litigation" Rule
Braddock v. Zimmerman, C.A. No. 489 (Del. Sup. September 12, 2006).
The Delaware Supreme Court has clarifed the rules as to when a plaintiff in a derivative suit must make a demand upon filing an amended complaint. The Court holds that if the derivative litigation has been properly instituted an amendment to the complaint does not need to be the subject of a demand on the board of directors as to those claims already "validly in litigation". Thus, even if the majority of the board has changed and is now independent under Rule 23.1 standards, no demand need be made in those circumstances.
This decision is noteworthy in other respects. First, the Court has clarified when under the special Delaware version of Rule 15(aaa) an amended complaint may be filed. Now the order dismissing the derivative complaint must provide that an amended complaint may be filed. Otherwise, the ruling is final and no such amendment may be made.
Second, the Court held that a dismissal without prejudice is a final order, but may lack res judicata