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An Introduction to the Law of Corporations: Cases and Materials, Fall 2017

Ted Spiegel, Plaintiff Below, Appellant, v. Dean L. Buntrock, Jerry E. Dempsey, Peter H. Huizenga, James E. Koenig, Alexander Trowbridge, Lee L. Morgan, Peer Pedersen, Olin N. Emmons, James R. Peterson, Donald F. Flynn, Phillip B. Rooney and Waste Management, Inc., Defendants Below, Appellees.

If a board receives and then refuses demand, the stockholder may not bring a derivative claim on behalf of the corporation. Of course, if a board could just refuse demand without regard to the merits of the demand, the demand requirement would devolve into a toothless exercise. Consequently, when a board refuses demand, the good faith and reasonableness of the board's refusal may still be examined by the courts. 

However, a board's decision to refuse demand is a business decision, like any other. As a result, such decisions receive the protection of the business judgment presumption.  In challenging a demand refusal, a stockholder will have to plead particularized facts with respect to the board's decision to refuse demand as to overcome the business judgment presumption.