The Delaware Supreme Court recently issued a significant decision on issue preclusion with regard to derivative actions. See California State Teachers’ Ret. Sys. v. Alvarez, 2018 WL 547768 (Del. Jan. 25, 2018). The court held that the dismissal of a shareholder derivative action for lack of demand futility can preclude later derivative actions, as long as the plaintiffs in the dismissed case adequately represented the corporation’s interests. The court rejected a standard proposed by the Delaware Court of Chancery, under which a judgment in one derivative action would bind later plaintiffs only if the first action survived a motion to dismiss for lack of demand futility, or if the board gave the plaintiff authority to proceed on behalf of the corporation. In recognition of the important issues involved, this column covered an earlier decision in this case; we now report on the final chapter. See Mark D. Harris & Margaret A. Dale, “Due Process Rights in Multi-Jurisdiction Shareholder Derivative Actions, N.Y.L.J. Feb. 15, 2017.
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