Stay current on changes and developments in corporate law with a wide variety of resources and tools.
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.
To contact the reporter on this story: Michael Greene in Washington at email@example.com
To contact the editor responsible for this story: Yin Wilczek at firstname.lastname@example.org
The opinion is available at http://www.bloomberglaw.com/public/document/JUDITH_BURBRINK_Plaintiff_v_PHYLLIS_J_CAMPBELL_et_al_Defendant_No.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)