More on In re F5 Networks, Inc.
Kris Tefft of the Association of Washington Business has offered his opinion on this morning's ruling, saying it makes Washington a corporate law outlier.
The issue involves the standard by which shareholders may commandeer control of a corporation to sue in its name in what is called a shareholder derivative lawsuit. Such suits are a limited and disfavored exception to the rule that corporate governance is vested in the business judgment of officers and directors. Before taking the reins of a company in a lawsuit, must a shareholder first make demand of the corporation to take action itself, and then only proceed if the corporate leaders refuse the demand? Or could shareholders excuse themselves from the requirement by claimint demand would be "futile"? Far from an esoteric journey through the business law textbook, the question has real consequences for current and potential Washington companies because shareholder derivative suits are very susceptible to a form of lawsuit abuse called the "strike suit."
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Unfortunately, after recognizing the national trend against which it was deciding, and admitting it was adopting a pro-plaintiff standard, the court answered AWB's questions above with a resounding "No"
I cannot comment on whether the Court's decision goes against a national trend.
The opinion makes it perfectly clear that if the Legislature doesn't like the rule articulated by the Court, the Legislature is free to reverse it.
It also seems fairly clear, based on the facts described by the court, that any demand on the corporation would indeed have been futile.