Securities Law Daily provides daily coverage of developments in the regulation of federal, state, and international securities and futures trading, with objective coverage of the...
July 22 — Wal-Mart Stores Inc. escaped a shareholder derivative suit July 22 alleging that it covered up pervasive bribery by its Mexico subsidiary ( Cottrell v. Duke, 8th Cir., No. 15-01869, 7/22/16 ).
The shareholders should have asked Wal-Mart's board to bring a lawsuit on behalf of the corporation before they filed suit, Judge William Jay Riley of the U.S. Court of Appeals for the Eighth Circuit affirmed. The shareholders' reasoning for not doing so isn't detailed or particular enough to show that demand on the board would have been futile, the court said.
Shareholders sued Wal-Mart and its board of directors in April 2012 after a newspaper's investigative report detailed an alleged bribery scheme involving Wal-Mart’s Mexico subsidiary and Mexican government officials. The news report suggested that Wal-Mart had violated the Foreign Corrupt Practices Act by handing out bribes to facilitate Mexican real estate deals. It also criticized the sufficiency of Wal-Mart management's response to the situation.
In March 2015, the U.S. District Court for the Western District of Arkansas dismissed the claims on the ground that the shareholders didn't make a presuit demand or establish that doing so would have been futile (63 SLD, 4/2/15).
The shareholders' allegations “fall short,” the Eighth Circuit said, affirming the lower court's decision to toss the case. The shareholders' position requires the court to assume that directors knew about the problem because the chair of the board's audit committee was supposed to tell them about it, the court said.
“We refuse to assume so much,” the appeals court said.
The plaintiffs were represented by Scott & Scott, Crowder & McGaha, Emerson & Scott, Jigarjian Law, Murray & Frank, Steel & Wright and Wyly & Rommel.
The defendants were represented by Kutak Rock LLP and Gibson Dunn & Crutcher LLP.
Attorneys Donald Broggi of Scott & Scott and Jess Askew of Kutak Rock didn't immediately respond to an e-mailed request for comment.
To contact the reporter on this story: Cameron Finch in Washington at firstname.lastname@example.org.
To contact the editor responsible for this story: Phyllis Diamond at email@example.com.
To view the court's opinion, visit: http://www.bloomberglaw.com/public/document/John_Cottrell_et_al_v_Michael_Duke_et_al_Docket_No_1501869_8th_Ci.
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
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 firstname.lastname@example.org.
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 email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)