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. §48-56-401(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 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.
The Rule of Nullification - Exceptions for Unlicensed Brokers
In a recent decision, the Tennessee Court of Appeals addressed the rule of nullification in the context of unlicensed brokers’ commission contracts. The Court held that a contract was not necessarily unenforceable as contrary to public policy merely because the broker was unlicensed. See Christenberry Trucking & Farm, Inc. v. F & M Marketing Services, Inc., 2010 WL 1254374 (Tenn. Ct. App. 2010).
Litigation Privilege Applies to Claims of Inducement to Breach
Unarco Material Handling, Inc. and Kerry Steel, Inc. had been involved in litigation that settled between the two parties. After settlement, the president of Kerry Steel began to suspect that Unarco had misled Kerry Steel in inducing it to settle. Through its attorney, Kerry Steel approached a former officer of Unarco and requested information regarding Unarco. This officer had signed a confidentiality agreement with Unarco. Kerry Steel’s attorney negotiated an indemnification agreement with the officer in which Kerry Steel agreed to indemnify the officer from any loss resulting from his giving a statement to Kerry Steel regarding actions of Unarco. The attorney also helped procure a statement from the former Unarco officer.
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