In Ongoing Wal-Mart Bribery Lawsuit, Arkansas Defendants Notice Mass. Case

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By Michael Greene

March 20 — The defendants in a federal derivative lawsuit alleging that Wal-Mart Stores Inc. executives covered up FCPA violations at its subsidiary in Mexico have filed an additional supplemental authority notice in support of their bid to dismiss the plaintiffs' claims for failure to establish demand futility under Delaware law.

The defendants March 19 filed a notice of additional supplement authority with the U.S. District Court for the Western District of Arkansas, citing a recent Massachusetts federal district court decision—Liang v. Berger—to support its position that under Delaware law, allegations that directors lacked independence must be pled with specificity as to each director. According to the defendants, the plaintiffs' complaint should be dismissed for failure to plead demand futility because it only makes broad allegations as to a group of the defendant directors.

Since September 2014, the defendants have filed several notices of supplemental authority, including one that cited a recent Delaware Chancery Court opinion—Higher Education Management Group Inc. v. Mathews.

The plaintiffs, however, have asserted that demand on the board would be futile because at least eight members of Wal-Mart's 15-member board knew about the alleged bribery scheme and can face liability for “turning a blind eye to this criminal conduct.”

Books and Records

Meanwhile, while the Arkansas derivative litigation has been ongoing, the plaintiff in a fiercely contested DGCL §220 books and records action in the chancery court has filed a contempt motion against Wal-Mart for failing to comply with a production order requiring the retailer to turn over internal documents related to what directors may have known about the bribery claims.

Recently, Wal-Mart has sent a letter to the chancery court asserting that it has provided the plaintiff with all the responsive documents that were inadvertently omitted from its earlier production.

In an earlier court filing, the plaintiff had complained about Wal-Mart's rate of production compared with the pending derivative litigation in Arkansas and has warned of a scenario in which Arkansas courts could render a judgment that would be binding on the underlying derivative lawsuit in Delaware.

To contact the reporter on this story: Michael Greene in Washington at mgreene@bna.com

To contact the editor responsible for this story: Ryan Tuck at rtuck@bna.com

The March 19 notice of additional supplemental authority is available at http://op.bna.com/car.nsf/r?Open=mgre-9usrn8.