In a November 22, 2010, decision by Justice Kornreich in connection with a derivative action on behalf of an investment fund by plaintiff-shareholders against the fund’s board of directors for wrongfully commencing a lawsuit that allegedly caused the fund to incur substantial legal fees and exposed it to potential liabilities, and on defendant-directors’ motion to dismiss for lack of standing, the court granted the motion and dismissed the complaint with costs and disbursements to defendants. As the fund was incorporated in the Cayman Islands, the court took judicial notice of and applied English common law, which defers to “the principle of majority rule with respect to matters of ordinary corporate governance,” and found that plaintiffs lacked standing to bring the action derivatively because 1) a simple majority of the fund’s shareholders could ratify defendants’ conduct in commencing the allegedly-unnecessary suit; and 2) defendants’ conduct did not rise to the requisite level of self dealing to constitute fraud on the minority.
CMIA Partners Equity Ltd. v O’Neill, Sup Ct, New York County, November 22, 2010, Kornreich, J., Index No. 603622/09