A Ropes & Gray litigation team secured an important victory for Sequoia Fund, Inc., a mutual fund managed by Ruane, Cunniff & Goldfarb, and three independent members of the Fund’s board of directors when the New York Supreme Court, Appellate Division, First Department affirmed the dismissal of a shareholder derivative suit filed against them.
On July 5, 2018, the First Department affirmed a 2017 decision by the Supreme Court, New York County, stating that the shareholders failed to allege sufficient facts to establish that a pre-suit demand on the board to pursue potential claims on behalf of the Fund would have been futile under applicable Maryland law. The appellate court rejected all of the plaintiffs’ arguments that the independent directors could not impartially consider a demand. The plaintiffs had argued that the independent directors could not be impartial because, among other reasons, they allegedly approved or participated in the conduct the plaintiffs sought to have investigated, served on the Fund’s board for many years and had longstanding relationships with the Fund’s portfolio managers, and because they were compensated for their board service by the adviser. Relying heavily on the arguments advanced by Ropes & Gray in its brief and oral argument, the First Department unanimously affirmed the lower court’s decision.
The Ropes & Gray team representing Sequoia is led by Boston-based litigation & enforcement partners Rob Skinner and Amy Roy, and New York-based litigation & enforcement counsel Lee Gayer.
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