Arnold & Porter Defends Directors and Officers of iStar Financial Inc. in Shareholder Derivative Actions
Arnold & Porter LLP's Securities Enforcement & Litigation attorneys successfully defended current and former directors and officers of iStar Financial Inc., a real estate investment trust (REIT), in a shareholder derivative lawsuit, Kautz v. Sugarman, filed in the US District Court for the Southern District of New York.
On March 31, 2011, Judge Richard Sullivan granted Arnold & Porter's motion to dismiss the Kautz complaint for failure adequately to plead "demand futility" with particularity as required by Federal Rule of Civil Procedure 23.1 and Maryland law -- that is, why Kautz should be exempted from the normal requirement to make demand on the board of directors prior to filing a shareholder derivative suit. Addressing an issue of first impression under Maryland law, the court agreed with Arnold & Porter's argument that Kautz could not rely on iStar's refusal of a demand by another shareholder as a basis for alleging demand futility. The court also rejected Kautz's other purported grounds for demand futility. Kautz appealed. On November 21, 2011, the US Court of Appeals for the Second Circuit affirmed, unanimously holding that a board's response to one derivative plaintiff cannot form the basis for an assertion of demand futility by another.
The case is Kautz v. Sugarman, 2d Cir., No. 11-1767-cv, 11/21/11. A copy of the decision can be found here.
Our Securities Enforcement & Litigation Practice has a prominent reputation representing corporations and their directors and officers in shareholder derivative actions involving claims of fraud, breach of fiduciary duty, mismanagement, and negligence. The Arnold & Porter team representing the iStar directors and officers included Scott Schreiber, Andrew Karron, Kavita Kumar Puri and Kevin Henley.