FLI Deep Marine, LLC v. McKim, No. 4138-VCS (Del. Ch. March 24, 2009), read opinion here.
This Chancery Court decision explains the importance of determining whether or not pre-suit demand is appropriate prior to filing a derivative suit. In this case, for reasons unexplained, demand was made on the board prior to a derivative suit being filed. The court explained that once demand on the board was made, the plaintiff was barred from claiming that pre-suit demand was excused, and once a special committee was appointed, the court was required to dismiss the case without prejudice pending the findings of the special committee.
The court also explained that there was no specific time-period for a special committee to complete its investigation. Once a shareholder makes a demand on a board, it must allow a reasonable time for the board to investigate and respond to a claim prior to a shareholder filing suit. The problem is that there is no predetermined deadline that can be imposed on the special committee regarding the amount of time that it may take in order to complete its investigation and reply to the demand.