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Futility of Demand on Board of Directors in Derivative Suit
The U.S. District Court for the Eastern District of Tennessee recently rejected an argument that might have given shareholders an end run around the demand requirements for derivative suits. See Lay v. Burley Stabilization Corp, 2010 WL 2639931 (E.D. Tenn. Jun. 28, 2010). In Tennessee, plaintiffs in a derivative action must “allege with particularity the demand made, if any, to obtain action by the directors and either why the plaintiffs could not obtain the action or why they did not make the demand.” Tenn. Code Ann. ยง48-56-401(c). The demand requirement is typically excused if the plaintiff establishes that demand would be futile. However, to establish futility, plaintiffs must demonstrate that: (1) that the board is interested and not independent and (2) that the challenged transaction is not protected by the business judgment rule.
By Service of Process: You Must Actually Serve the Defendant
In the “master of the obvious” category of legal opinions, we have Profitt v. Smoky Mountain Woodcarvers Supply, Inc., 2010 WL 1240975 (Tenn. Ct. App. Mar. 31, 2010). Here, the Tennessee Court of Appeals ruled that, absent service of process on the defendant pursuant to Rule 4 of the Tennessee Rules of Civil Procedure, the trial court did not have personal jurisdiction over the defendant. The Court reaffirmed the principle it stated in Watson v. Garza, 2008 WL 4831300 — there is “no authority in support of [the] contention that . . . ’second-hand’ or ‘passed along’ service of process is authorized under the Rules of Civil Procedure.”
An Interactive Website Can Constitute Purposeful Availment for Purposes of Specific Jurisdiction
A recent case points out that, while the internet may be shrinking the world, in doing so it is broadening concepts related to jurisdiction. Braille, LLC (”Braille”) is a limited liability company formed in Florida that sells batteries for automotive use. Braille has no physical presence in the State of Tennessee in the way of office space or other place of business. The company is physically located in Sarasota, Florida. Braille does not have dealers or authorized distributors in Tennessee that maintain an inventory of Braille products.
When Is a Guaranty Limited and When Is It Unconditional?
Guaranties generally come in two flavors: limited and unconditional. At the outset of a loan, one of the topics for negotiation is the guaranty. First, will there be a guaranty? Second, if there is a guaranty, will it be unconditional and unlimited or will it be limited in some way? A recent case reminds us that even if a guaranty does not have a specific dollar amount as a limiting factor, it may not necessarily be interpreted as unlimited and unconditional.
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