Dale L. Miesen v. John D. Munding, et al.

“The derivative form of action permits an individual shareholder to bring ‘suit to enforce a corporate cause of action against officers, directors, and third parties.’ . . . But although Rule 23.1 clearly contemplates both the demand requirement and the possibility that demand may be excused, it does not create a demand requirement of any particular dimension. On its face, Rule 23.1 speaks only to the adequacy of the shareholder representative’s pleadings.” Kamen v. Kemper Fin. Servs., Inc., 500 U.S. 90, 95-96 (1991) (emphasis in original) (citation omitted). However, certain Circuit Courts of Appeals have created confusion regarding the pleading requirements of Fed. R. Civ. P. 23.1 (“Rule 23.1”), the standard of review for dismissals of derivative actions, and the substantive law which applies to determine the adequacy of derivative demands. The questions presented here are:

1. Whether the plaintiff in a derivative action, brought under diversity jurisdiction, must plead and prove the adequacy of its derivative demand letter as part of Rule 23.1’s pleading requirements and whether the court must apply the law of the state of incorporation to determine the letter’s adequacy.

2. Whether a de novo or an abuse of discretion standard applies to the review of dismissals of derivative actions under Rule 23.1.