For those readers who are students of Delaware corporate law and are interested in how Delaware corporate law is viewed by other courts in different parts of the world, we present an interesting decision recently issued by the High Court of the Republic of the Marshall Islands (located in the South Pacific) where the Court granted the defendants’ motion to dismiss a derivative litigation based on failure to make a demand on the company.  What makes this case particularly interesting to students of Delaware corporate law is that the Marshall Islands follows Delaware corporate law. The Court’s opinion is available here.

Kevin F. Brady of Connolly Bove Lodge & Hutz LLP provided this summary.  He found out about this case from his friend, Marc Sonnenfeld of Morgan Lewis, who participated in this litigation on behalf of the defendants.    

The plaintiff brought the derivative action against certain members and a former member of the board of directors of Danaos for breaches of duties of loyalty and good faith and waste of assets.  The plaintiff did not make a demand on the board of directors before filing the action and as a result the defendants moved to dismiss for failure to show demand was excused.  In granting the motion to dismiss the Marshall Islands Supreme Court found that, among other things, demand was not excused based on the test for futility set out in Aronson v. Lewis as adopted by the Marshall Islands Supreme Court.