Lewis Lazarus, Chair of the firm’s Corporate Litigation Group, discusses with Bloomberg Law the Delaware Court of Chancery case Solak v. Welch, a shareholder derivative dispute. At issue is whether a letter constitutes a “demand” that would generally prohibit shareholder derivative lawsuits under Delaware law.
Lewis commented, “The case addresses the circumstances under which a stockholder can proceed with claims in the name of the company against the officers and directors. Under Delaware law, the board has the first responsibility to manage the business and affairs of the corporation.” Rule 23.1 requires a stockholder seeking change “either to make a demand on the board for legal action or to plead facts with particularity showing that demand would be futile,” Mr. Lazarus said. Stockholders can’t do both, he added. “It appears that the plaintiff is trying to have it both ways.”