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Sept. 25 — Nordstrom Inc. directors won't have to face claims that they breached their fiduciary duties and committed corporate waste by approving the expansion of the company's “flight department” to include aircraft owned by Nordstom family members and misleading investors about its financial impact, a federal district court ruled.
In dismissing the shareholder derivative lawsuit, Judge John C. Coughenour of the U.S. District Court for the Western District of Washington Sept. 24 concluded that the plaintiff-investor lacked standing because she failed to show that a pre-suit demand on the company's board would have been futile.
In doing so, the court found that a majority of the company's board didn't face a substantial likelihood of liability for approving the “related-party transactions” at issue or by issuing misleading proxy statements in connection with them.
Specifically, the court found that only three of the company's 13-member board—directors who were Nordstrom family members—weren't disinterested for the purposes of responding to a pre-suit demand.
The plaintiff alleged that the board members on the company's governance committee, who approved the “related-party transactions,” were not disinterested because they breached their fiduciary duties by failing to meaningfully assess the cost of the transactions.
However, the court found that under Washington state law, the directors were shielded from liability related to these claims by relying on a report prepared by ARGUS International, an independent industry expert.
“The report compiled by ARGUS constitutes the very type of information upon which directors could reasonably rely,” Coughenour wrote. “Accordingly, the Governance Committee Members do not face a substantial likelihood of liability for their role in approving the related-party transactions.”
The court also concluded that an exculpation provision in the company's charter made it highly unlikely that the director defendants would face liability for the other claims.
Additionally, the court found that the plaintiff's pleading was inadequate to make the directors liable for the alleged misleading proxy statements.
“While it is possible to consider these proxy statements to be misleading in hindsight, the Complaint does not plead sufficient, particularized facts to render Defendants” liable for their existence, Coughenour said.
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The opinion is available at http://www.bloomberglaw.com/public/document/JUDITH_BURBRINK_Plaintiff_v_PHYLLIS_J_CAMPBELL_et_al_Defendant_No.
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