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

Special Litigation Committees

In situations where demand is futile, stockholders can file derivative litigation without making demand. Does that mean that boards have forever lost control over the derivative litigation? In some circumstances the answer is no.

The following cases lay out the doctrine with respect to how a board can retake control over derivative litigation in later stages.

Unlike in the case of demand and demand futility, at this stage of the litigation, boards bear the burden of proving that notwithstanding the fact that demand was previously futile, the board is now in a position to fairly consider the facts of the complaint.  As you will see, this is a heavy burden for a board to bear.