demand requirement in New York

2016However, plaintiffs here, who made pre-suit demands but then filed the complaint without giving the board a reasonable opportunity to investigate and respond to the demands, did not satisfy the demand requirement and cannot satisfy the Business Corporation Law § 626 (c) pleading standards based on their allegations of their efforts to obtain board action (see Barr v Wackman, 36 NY2d 371, 381 [1975]; MacKay v Pierce, 86 AD2d 655 [2d Dept 1982]).

2003The demand requirement rests on “basic principles of corporate control— *9 that the management of the corporation is entrusted to its board of directors, who have primary responsibility for acting in the name of the corporation and who are often in a position to correct alleged abuses without resort to the courts” (Barr v Wackman, 36 NY2d 371, 378 [1975] [citation omitted]; see also Auerbach v Bennett, 47 NY2d 619, 630-631 [1979]).

2009Therefore, the demand requirement is excused only when the complaint’s specific allegations support the conclusion that “(1) a majority of the directors are interested in the transaction, or (2) the directors failed to inform themselves to a degree reasonably necessary about the transaction, or (3) the directors failed to exercise their business judgment in approving the transaction” (Marx v Akers, 88 NY2d 189, 198 [1996]).

2007Business Corporation Law § 626 (c) provides that the plaintiff in a shareholders’ derivative action “shall set forth with particularity the efforts of the plaintiff to secure the initiation of such action by the board [of directors] or the reason for not making such effort.” This demand requirement “is futile, and excused, when the directors are incapable of making an impartial decision as to whether to bring suit” on the specific claim (Bansbach v Zinn, 1 NY3d 1, 9 [2003]; see Marx v Akers, 88 NY2d 189, 200-201 [1996]).

2018The motion court correctly dismissed the complaint, as plaintiffs failed to adequately plead, with particularity, that the demand requirement, pursuant to Business Corporation Law § 626(c), was excused ( see Bansbach v Zinn , 1 NY3d 1, 8 [2003]).

2011Shareholders may avoid the demand requirement by establishing that demand is futile (Bansbach v Zinn, 1 NY3d 1 [2003], rearg denied 1 NY3d 593 [2004]; MacKay v Pierce, 86 AD2d 655 [2d Dept 1982]).

2021Buechel v Bain, 97 NY2d 295, 303 [2001], cert denied 535 US 1096 [2002]), namely, "Once performance of the demand requirement in the no-action clause is excused, performance of the entire provision is excused, including the requirement that demand be made by 25% of the certificate holders" ( Blackrock, 165 AD3d at 528).

2021Buechel v Bain, 97 NY2d 295, 303 [2001], cert denied 535 US 1096 [2002]), namely, "Once performance of the demand requirement in the no-action clause is excused, performance of the entire provision is excused, including the requirement that demand be made by 25% of the certificate holders" ( Blackrock, 165 AD3d at 528).THIS CONSTITUTES THE DECISION AND ORDER OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.

2014The demand requirement is based on the “ ‘bedrock’ principle” of Delaware law that a corporation’s directors, and not its shareholders, manage the corporation’s business (Levner v Saud, 903 F Supp 452, 456 [SD NY 1994], affd sub nom Levner v Prince Alwaleed, 61 F3d 8 [2d Cir 1995] [quoting Levine v Smith, 591 A2d 194, 200 (1991)]).

2014The demand requirement is based on the “ ‘bedrock’ principle” of Delaware law that a corporation’s directors, and not its shareholders, manage the corporation’s business (Levner v Saud, 903 F Supp 452, 456 [SD NY 1994], affd sub nom Levner v Prince Alwaleed, 61 F3d 8 [2d Cir 1995] [quoting Levine v Smith, 591 A2d 194, 200 (1991)]).

2014The demand requirement is based on the “ ‘bedrock’ principle” of Delaware law that a corporation’s directors, and not its shareholders, manage the corporation’s business (Levner v Saud, 903 F Supp 452, 456 [SD NY 1994], affd sub nom Levner v Prince Alwaleed, 61 F3d 8 [2d Cir 1995] [quoting Levine v Smith, 591 A2d 194, 200 (1991)]).

2014The demand requirement is based on the “ ‘bedrock’ principle” of Delaware law that a corporation’s directors, and not its shareholders, manage the corporation’s business (Levner v Saud, 903 F Supp 452, 456 [SD NY 1994], affd sub nom Levner v Prince Alwaleed, 61 F3d 8 [2d Cir 1995] [quoting Levine v Smith, 591 A2d 194, 200 (1991)]).

2013Kamen v Kemper Financial Services, Inc., 500 US 90, 96-97 [1991]) — a point plaintiffs do not dispute.

2013Kamen v Kemper Financial Services, Inc., 500 US 90, 96-97 [1991]) — a point plaintiffs do not dispute.

2009Since the hearing had been indefinitely postponed and the defendant did not serve a subsequent demand, the plaintiffs’ failure to appear for a hearing did not warrant dismissal of the complaint (see General Municipal Law § 50-h [5]; October v Town of Greenburgh, 55 AD3d 704 [2008]; Southern Tier Plastics, Inc. v County of Broome, 53 AD3d 980 [2008]; Belton v Liberty Lines Tr., 3 AD3d 334 [2004]; Page v City of Niagara Falls, 277 AD2d 1047, 1048 [2000]; McCormack v Port Washington Union Free School Dist., 214 AD2d 546 [1995]).

2008When, however, the hearing has been postponed indefinitely beyond 90 days after service of the demand and the municipality does not reschedule the hearing, a plaintiffs failure to appear for a hearing will not warrant dismissal of the complaint (see General Municipal Law § 50-h [5]; Southern Tier Plastics, Inc. v County of Broome, 53 AD3d 980 [2008]; Belton v Liberty Lines Tr., 3 AD3d 334 [2004]; Page v City of Niagara Falls, 277 AD2d 1047, 1048 [2000]; McCormack v Port Washington Union Free School Dist., 214 AD2d 546 [1995]).

2016However, plaintiffs here, who made pre-suit demands but then filed the complaint without giving the board a reasonable opportunity to investigate and respond to the demands, did not satisfy the demand requirement and cannot satisfy the Business Corporation Law § 626 (c) pleading standards based on their allegations of their efforts to obtain board action (see Barr v Wackman, 36 NY2d 371, 381 [1975]; MacKay v Pierce, 86 AD2d 655 [2d Dept 1982]).

2011Shareholders may avoid the demand requirement by establishing that demand is futile (Bansbach v Zinn, 1 NY3d 1 [2003], rearg denied 1 NY3d 593 [2004]; MacKay v Pierce, 86 AD2d 655 [2d Dept 1982]).

2026Contrary to defendant's further contention, a waiver of the right to appeal is not unconscionable per se ( see People v Barr , 192 AD3d 1571, 1571 [4th Dept 2021], lv denied 37 NY3d 954 [2021]; see generally Thomas , 34 NY3d at 557), nor was it unconscionable for the court to demand a waiver of the right to appeal as a condition of a favorable plea bargain ( see e.g.

2026Similarly, any perceived finality for the court derived from the appeal waiver following its denial of defendant's suppression motion does not constitute a distinct and proper reason for the demand of the waiver because, "unlike the People, the trial court does not participate in an appeal, and thus does not have the same interest in achieving finality to the case" ( People v Sutton , 184 AD3d 236, 244 [2d Dept 2020], lv denied 35 NY3d 1070 [2020]).

2026Similarly, any perceived finality for the court derived from the appeal waiver following its denial of defendant's suppression motion does not constitute a distinct and proper reason for the demand of the waiver because, "unlike the People, the trial court does not participate in an appeal, and thus does not have the same interest in achieving finality to the case" (<i>People v Sutton</i>, 184 AD3d 236, 244 [2d Dept 2020], <i>lv denied</i> 35 NY3d 1070 [2020]).</p> <p>Upon our review of the record here, including defense counsel's unrefuted assertion that the court unilaterally demanded an app

2019However, because the amended complaint indicates that the plaintiff is suing derivatively in his capacity as a shareholder, and not in his capacity as an officer and director, the demand requirement applies ( see Galasso v Pioneer Home Improvement Corp. , 52 AD2d 901 , 902; see also Abrams Donati , 66 NY2d 951, 953 ; Bertoni v Catucci , 117 AD2d 892, 894 ).

2016But, compliance may be found in these circumstances where the complaint alleges “demand futility” (see Marx v Akers, 88 NY2d 189, 198 [1996]) with adequate particularity (MacKay, 86 AD2d at 655; see also Soho Snacks Inc. v Frangioudakis, 129 AD3d 636 [1st Dept 2015]).

2015The demand requirement of Business Corporation Law § 626 (c) also applies to members of New York limited liability companies (see Najjar Group, LLC v West 56th Hotel LLC, 110 AD3d 638, 639 [1st Dept 2013]).

2012Under New York’s choice of law rules, the substantive law of the state of incorporation governs compliance with the demand requirement (Hart v General Motors Corp., 129 AD2d 179, 182-183 [1st Dept 1987], lv denied 70 NY2d 608 [1987]; David Shaev Profit Sharing Account v Cayne, 24 AD3d 154 [1st Dept 2005]).

2012Under New York’s choice of law rules, the substantive law of the state of incorporation governs compliance with the demand requirement (Hart v General Motors Corp., 129 AD2d 179, 182-183 [1st Dept 1987], lv denied 70 NY2d 608 [1987]; David Shaev Profit Sharing Account v Cayne, 24 AD3d 154 [1st Dept 2005]).