The Plaintiff shareholders in this case sued the defendants, directors and officers for usurping corporate opportunities.
The shareholders also sued the defendant investment bank for allocating shares of initial public offerings.
The Plaintiff's alleged that the shares of the IPOs should have been offered to the corporation, to the directors and to the officers.
The Defendants moved to dismiss for failure to state a claim and failure to make a pre-suit demand on the corporation's board of directors under Delaware law.
-It was alleged that the bank offered the directors and officers lucrative initial public offering shares in appreciation for past business and to obtain future business.
-The shareholders showed a pre-suit demand on the corporation's directors to sue, under Delaware law, was futile as three of the seven directors benefited from the transactions giving rise to the suit, and the independence of a fourth director, given the value of stock options he received by being a director and the ability of the three to decide if he would remain a director, was found to be reasonably questionable.
-A claim of usurping a corporate opportunity was stated by the court as (1) the corporation could exploit the bank's share offers; (2) investing was "a line of business" of the corporation; and (3) investing was a significant part of the corporation's business.
It did not matter if the share offers were risky. The corporation had no chance to turn down the investments as being too risky.
The complaint's aiding and abetting claim had adequately alleged a fiduciary relationship, the individual executives' breach of their fiduciary duty, and that the shareholders were damaged by the actions of both the executives as well as the bank.
OUTCOME: The court denied the motions to dismiss.
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