‘Volunteer' Shareholder Not Entitled to Fees, Failed to Articulate Breach of Fiduciary Duty

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June 20 — A mere “volunteer” shareholder who points out how his or her corporation could benefit from some action is not thereby entitled to attorneys' fees paid by the company, according to a June 20 Delaware Court of Chancery decision .

In Raul v. Astoria Financial Corp., Vice Chancellor Sam Glasscock III granted the defendant's motion to dismiss, finding that only a valid claim merits a fee award and that the claim must assert some actionable wrongdoing, not just a better way to do business.

In 2012, shareholder plaintiff David Raul demanded that Astoria Financial make certain disclosures relating to a May 2011 say-on-pay vote that he said were required by the Securities and Exchange Commission and the Dodd-Frank Wall Street Reform and Consumer Protection Act. The company responded by making further disclosures, but it refused to pay Raul's attorneys' fees related to the demand.

Raul filed suit to collect, but Glasscock held that Raul's pleadings failed to explain which fiduciary duties the Astoria Financial board violated or how they were violated.

Glasscock further noted that “where a volunteer stockholder (or non-stockholder, for that matter) notifies directors, not that they are in breach of their duties, but simply that they have missed a corporate opportunity or should avoid a corporate loss, the consideration of such a notification is a board, not a Court, affair.”

The plaintiff “fails in briefing to articulate the basis of the underlying fiduciary duty claim” asserted in his demand, and a mere showing of wrongdoing is not sufficient to imply a breach of duty, Glasscock concluded.

The opinion is available at http://www.bloomberglaw.com/public/document/Raul_v_Astoria_Fin_Corp_Civil_Action_No_9169VCG_2014_BL_173740_De.