Delaware High Court Dismisses Shareholder Suit Based on Preclusive Effect of Other Court’s Ruling
The Delaware Court of Chancery initially found Wal–Mart stockholders who were attempting to prosecute derivative claims in Delaware could no longer do so because a federal court in Arkansas had reached a final judgment on the issue of demand futility first, and the stockholders were adequately represented in that action. Before the Delaware court the derivative plaintiffs asserted that applying issue preclusion in this context violates their Due Process rights. Considering the “complex questions of law and policy, including: the relationship among competing derivative plaintiffs (and whether they may be said to be in ‘privity’ with one another); whether failure to seek board-level company documents renders a derivative plaintiff's representation inadequate; policies underlying issue preclusion, such as preventing duplicative litigation and promoting judicial economy; and our obligation to respect the judgments of other jurisdictions,” the Delaware Supreme Court gave preclusive effect to the other courts' decision on demand futility. Consequently, the court affirmed dismissal citing as its primary reason that there was no Due Process violation.