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Ending Media Bias Via Lawsuit - How To Topple The New York Times
multiple | 5-18-04

Posted on 05/18/2004 11:47:44 AM PDT by jmstein7

As I have posited, we should focus all of our firepower on the NYT, as it is the epicenter of the mainstream media – the NYT leads, and everyone else follows.

I have a way that we can get at them directly – and perhaps there is a taker out there.

The New York Times Company is set up in a very clever way to insulate it from outside influence. There are two classes of shares – voting and non-voting. The voting shares are privately held and cannot be acquired. This prevents any outside influence on the board of directors or the company.

The non-voting shares are available on the NYSE. However, there is a way to get at the NYT by acquiring even a small number of non-voting shares. Here is a failproof method to get at them.

1. Purchase NTY shares on the NYSE. They trade at around $50/share. The NYSE symbol is NYT.

2. The Board of the Times has a fiduciary duty to maximize shareholder value. In English, that means that anything the Board does that can be remotely seen as damaging the “bottom line” can be challenged by a shareholder.

3. Of late, the shares of the Times, and their bottom line, has suffered significantly – that is why you see them advertising so much. A large part of the problem is that people, and small vendors, have been canceling subscriptions because of the perceived bias. That is, media bias is hurting their bottom line. This is actionable by shareholder.

4. Any shareholder can sue “in the name of the company” when the Board has breached a fiduciary duty. The normal route is to send the board a demand to bring suit in the name of the company and/or investigate the claim. Obviously, the Times board would never entertain such a demand, but there is a way around that too.

5. The “Futility Doctrine” is an exception to the demand requirement. Essentially, if a majority of the Board has a monetary, family, or material interest that would be affected by the demand (a conflict of interest), then there is no need to make the demand – you can go ahead and just sue. This applied to the NYT, because the Board is family controlled – by “Pinch’s” family. There would be no need to make a demand here… you could go right to suit.

6. Once the elements of futility are met, a court will go directly to the “merits” of the case. And the standard applied to the review of the Board is “strict scrutiny,” i.e. the most stringent standard (also called “Intrinsic Fairness”). This is an extremely exacting standard imposed on the Board, and boards put in this position almost never win.

7. The bottom line is, well, “the bottom line.” Therefore, any claim with minimal proof that the editorial bias in the Times hurts the bottom line (and shareholder value) will succeed. In that case, almost any equitable remedy is available to the shareholders – e.g. removing board members, reorganizing the voting rights of the shares, etc.

This is a real lay-up, and I strongly suggest pursuing this course of action.


TOPICS: Editorial
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1 posted on 05/18/2004 11:47:48 AM PDT by jmstein7
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To: Mich0127; RightRules; MeekOneGOP; Peach; onyx; backhoe; Mia T; 68-69TonkinGulfYachtClub; ...

End Media Bias BUMP!


2 posted on 05/18/2004 11:49:15 AM PDT by jmstein7 (Real Men Don't Need Chunks of Government Metal on Their Chests to be Heroes)
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To: jmstein7

if ti is such a slam dunk, then go do it yerself.


3 posted on 05/18/2004 11:50:57 AM PDT by camle (keep your mind open and somebody will fill it with something for you))
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To: jmstein7

If only there could be a substantial amount of subscribers
cancel their subscription (ie for a week or even longer) to further hit their pocketbook.


4 posted on 05/18/2004 11:52:26 AM PDT by CharlotteVRWC
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To: camle

I wish I could, but I still have a year before I take the bar, and I can't afford a lawyer.


5 posted on 05/18/2004 11:53:04 AM PDT by jmstein7 (Real Men Don't Need Chunks of Government Metal on Their Chests to be Heroes)
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To: jmstein7

Maybe Mark Levin would do it pro bono.


6 posted on 05/18/2004 11:54:07 AM PDT by KJacob (No military in the history of the world has fought so hard and so often for the freedom of others.)
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To: jmstein7

Fastest way to hurt them is for ALL so called conservatives and or GOP voters to STOP buying the damn paper


7 posted on 05/18/2004 11:55:34 AM PDT by uncbob
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To: jmstein7

What is the current circulation of the NYT? How many hits to their website? Has their circulation dropped recently, how about add revenues?


8 posted on 05/18/2004 11:55:54 AM PDT by familyofman
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To: jmstein7

if it's such a sure thing, then you wouldn't have any trouble finding one to handle it in a contingency basis.


9 posted on 05/18/2004 11:55:55 AM PDT by camle (keep your mind open and somebody will fill it with something for you))
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To: jmstein7

Can the current shareholders be polled to see if some want to go for a class action?


10 posted on 05/18/2004 12:00:53 PM PDT by Eastbound
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To: camle

You can only get the to do it on a contingency basis when you are seeking a legal -- i.e. monetary -- remedy. The remedy here is equitable, and NO lawyer would do that on a contingency basis because there is no money in it for them.


11 posted on 05/18/2004 12:00:58 PM PDT by jmstein7 (Real Men Don't Need Chunks of Government Metal on Their Chests to be Heroes)
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To: jmstein7
The Board of the Times has a fiduciary duty to maximize shareholder value. In English, that means that anything the Board does that can be remotely seen as damaging the “bottom line” can be challenged by a shareholder.

This just isn't true. I hope you like defending 12(b)(6) motions.

12 posted on 05/18/2004 12:03:43 PM PDT by Clobbersaurus
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To: CharlotteVRWC

I think we need a big advertising campaign against them. We need to inform those not paying attention that their are being lied to. Remind the public just how leftist their endorsements are year after year, and do it just before their endorsements come out. As long as the public realizes the NYT is an arm of the DNC, then they can consider the source in context. It's the lying about it that harms us.


13 posted on 05/18/2004 12:04:22 PM PDT by The Ghost of FReepers Past (Legislatures are so outdated. If you want real political victory, take your issue to court.)
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To: jmstein7

I think it's a great idea and I'd love to see the NYT body-slammed. But there may be a hole in your reasoning. What proof is there that the drop-off in NYT revenue is a direct result of media bias? As a lawyer, how would you create an argument for that premise that an opposition lawyer couldn't laugh off? Opposition possibilities: Bad economy? More people getting news on the internet? Bad publicity following the Jayson Blair scandal? If you can make an airtight argument you can probably find someone with the $$$ to bring the case.


14 posted on 05/18/2004 12:05:05 PM PDT by Bernard Marx (In theory there's no difference between theory and practice. But in practice there is.)
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To: Clobbersaurus

A 12(b)(6) MTD would fail -- there is a viable claim upon which relief can be granted. The D would have to move for summary judgment, but they would lose because there are disputable issue of material fact.


15 posted on 05/18/2004 12:05:48 PM PDT by jmstein7 (Real Men Don't Need Chunks of Government Metal on Their Chests to be Heroes)
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To: Bernard Marx

Agreed, but that is a "discovery" issue.


16 posted on 05/18/2004 12:06:51 PM PDT by jmstein7 (Real Men Don't Need Chunks of Government Metal on Their Chests to be Heroes)
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To: jmstein7

I don't think so. You would get 12(b)(6)ed right out of court because no court is going to tell a company how to run its business. About the ONLY time you can sue the company's executives for a violation of fiduciary duty is in a case of fraud.

They are running the business in good faith. Unless you allege wrongdoing, you will lose a 12(b)(6) motion.


17 posted on 05/18/2004 12:07:55 PM PDT by Clobbersaurus
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To: uncbob

"Fastest way to hurt them is for ALL so called conservatives and or GOP voters to STOP buying the damn paper"

Coffee spills at newstands. I'm such a clutz. Funny how it happens everytime I get near the NYT.



18 posted on 05/18/2004 12:10:04 PM PDT by Fenris6
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To: Clobbersaurus

You're wrong, in a way. As you know, the Business Judgment Rule only applies if you make a demand on the board. Here, you don't have to because of futility.

The only way the NYT would get the deferential "Business Judgment" standard would be to appoint a "Special Litigation Committee." And that would cost the BIG TIME and give them all sorts of bad press.


19 posted on 05/18/2004 12:10:04 PM PDT by jmstein7 (Real Men Don't Need Chunks of Government Metal on Their Chests to be Heroes)
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To: mhking; Travis McGee; dyed_in_the_wool; MeekOneGOP; tiamat; MEG33; 4mycountry; Sabertooth; ...

I don't know enough about stocks and lawsuits to evaluate the merits of this proposal, but damn me if I am not going "hrmn..." all the same.


20 posted on 05/18/2004 12:10:46 PM PDT by King Prout (the difference between "trained intellect" and "indoctrinated intellectual" is an Abyssal gulf)
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Comment #21 Removed by Moderator

To: Clobbersaurus
...because no court is going to tell a company how to run its business...

where was the "sarcasm" tag?
Courts have been gleefully doing just that for at least my entire lifetime.

22 posted on 05/18/2004 12:13:05 PM PDT by King Prout (the difference between "trained intellect" and "indoctrinated intellectual" is an Abyssal gulf)
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To: Clobbersaurus

And, you are wrong on the law as well. See the following cases:

e.g.,
Eisenberg v. Flying Tiger Line, Inc.
Grimes v. Donald
Marx v. Akers
Auerbach v. Bennett
Zapata Corp. v. Maldonado


23 posted on 05/18/2004 12:14:04 PM PDT by jmstein7 (Real Men Don't Need Chunks of Government Metal on Their Chests to be Heroes)
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To: jmstein7

BTTT!!!!!!!


24 posted on 05/18/2004 12:14:11 PM PDT by E.G.C.
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To: jmstein7
I hate the NYT, and the role it plays in leading the propaganda wing of the Fifth Column within our country, but....the business model they have chosen is a very viable one from the economic standpoint, IMHO. They have obviously made a conscious decision to carve out that less-than-majority but still huge portion of the populace which craves the leftist bent to their news.

Who can deny that they don't dominate their chosen niche?

Though admittedly the market contains a much larger middle, middle-right and right wing component, the NYT is an INTERNATIONAL publication, and the niche they have chosen to pursue IS THEIR STRENGTH, they would sink like a rock if they were to lurch rightward.

We have all witnessed the Washington Post turn slightly rightward in recent times, no doubt because they are being squeezed from the left by the NYT, AND competition on the right from the Washington Times. The WaPo doesn't have the international presence which the NYT does, nor does it proliferate NATIONALLY like the NYT. Unfortunately, for this stockholder suit to be successful, we might have to show that the economic model is faulty, and it is not, as niche marketing is an accepted and viable model throughout the economy.

25 posted on 05/18/2004 12:14:17 PM PDT by wayoverontheright (Hidetheweeniespeak-the native tongue of liberals.)
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To: jmstein7

No no, the business judgment rule applies in a run-of-the-mill lawsuit. See subsection (d).

SECTION 8.30. GENERAL STANDARDS FOR DIRECTORS
(a) A director shall discharge his duties as a director, including his duties as a member of a committee:

(1) in good faith;
(2) with the care an ordinarily prudent person in a like position would exercise under similar circumstances; and
(3) in a manner he reasonably believes to be in the best interests of the corporation.


(b) In discharging his duties a director is entitled to rely on information, opinions, reports, or statements, including financial statements and other financial data, if prepared or presented by:

(1) one or more officers or employees of the corporation whom the director reasonably believes to be reliable and competent in the matters presented;
(2) legal counsel, public accountants, or other persons as to matters the director reasonably believes are within the person's professional or expert competence; or
(3) a committee of the board of directors of which he is not a member if the director reasonably believes the committee merits confidence.


(c) A director is not acting in good faith if he has knowledge concerning the matter in question that makes reliance otherwise permitted by subsection (b) unwarranted.

(d) A director is not liable for any action taken as a director, or any failure to take any action, if he performed the duties of his office in compliance with this section.


26 posted on 05/18/2004 12:16:59 PM PDT by Clobbersaurus
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To: take
"We are grateful to the Washington Post, The New York Times, Time Magazine and other great publications whose directors have attended our meetings and respected their promise of discretion for almost forty years.
It would have been impossible for us to develop our plan for the world if we had been subject to the bright lights of publicity during those years.

But, the world is now more sophisticated and prepared to march toward a world government.

The super-national sovereignty of an intellectual elite and world bankers is surely preferable to the national auto-determination practiced in past centuries."

citation, please: speaker/author, venue, audience, and date.

27 posted on 05/18/2004 12:17:21 PM PDT by King Prout (the difference between "trained intellect" and "indoctrinated intellectual" is an Abyssal gulf)
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To: holdonnow; jmstein7; KJacob

Clever idea jms.

KJ suggests: "Maybe Mark Levin would do it pro bono."

Not looking for pro bono, but let's see if he
answers this ping...


28 posted on 05/18/2004 12:17:21 PM PDT by onyx (Rummy's job is winning the war, not micro-managing some damn prison.)
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To: abner; DoughtyOne; Nick Danger; Bob J; Seeking the truth; MinuteGal; diotima; Libertina; ...

BUMP to end bias!


29 posted on 05/18/2004 12:17:31 PM PDT by jmstein7 (Real Men Don't Need Chunks of Government Metal on Their Chests to be Heroes)
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To: jmstein7
I think that's a clever law school argument. However, look at a chart of NYT over the last five years. The price is roughly the same as it was one and two years ago, and higher than three years ago, four years ago, and five years ago. I will also point out the sheer improbability being able to show that "media bias" is hurting their circulation, and the unlikelihood of finding a jury in New York or Delaware or wherever they are incorporated that would buy your argument.

Now, if you REALLY want to go after the heart of evil, CBS and Dan Rather is much more tempting....

30 posted on 05/18/2004 12:17:32 PM PDT by KellyAdmirer
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To: Clobbersaurus

Which state's law are you quoting? DE?


31 posted on 05/18/2004 12:18:56 PM PDT by jmstein7 (Real Men Don't Need Chunks of Government Metal on Their Chests to be Heroes)
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To: jmstein7
A better way to me (I'm not a lawyer nor do I intend to be one!), would be if thousands of conservatives who actually subscribed to the Slimes who have canceled their subscriptions due to the bias/lies plus more to come filled a class action suit.

Their suit could be simple. They subscribed to the Slimes to get Real News from supposedly best newspaper in the World.

What they got was lies (Jason Blair and others) and DNC political spin/lies posing as news.

So the Class Action Suit would be for fraud. The NY Slimes committed Fraud by lying and posting DNC BS instead of real news.
32 posted on 05/18/2004 12:19:15 PM PDT by Grampa Dave (What left wing lies of the media, the DNC and foreign enemies will we expose today?)
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To: Grampa Dave; Clobbersaurus
GD... you are 100% correct.  There is actually a legal theory floating around out there to do EXACTLY that.  Check it out here.
33 posted on 05/18/2004 12:21:39 PM PDT by jmstein7 (Real Men Don't Need Chunks of Government Metal on Their Chests to be Heroes)
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To: jmstein7
I had a similar discussion with an 'armchair lawyer' friend of mine. He said that probably the best way to go after media bias is to sue them for producing a faulty product, kinda like how Judas Priest got sued because one of their songs made a couple of kids blow their heads off.

I'll leave it at that and let you legal eagles mull it over.

34 posted on 05/18/2004 12:22:43 PM PDT by randog (Everything works great 'til the current flows.)
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To: jmstein7

A better way, if the Bush Administration has testosterone, would be for the Department of Justice to investigate print and electronic media for discrimination against Chritians in their hiring and promotion practices. But of course, that would require courage and conviction.


35 posted on 05/18/2004 12:22:53 PM PDT by rcofdayton
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To: jmstein7

Well, I'm looking at your cases in order, and so far, they are completely off point. Eisenberg has to do with whether a plaintiff is required to post a bond to sue..."We are called on to decide, assuming Eisenberg's complaint is sufficient on its face, only whether he should have been required to post security for costs as a condition to prosecuting his action." 451 F.2d 267, 268.

I'll check the others, but let's hope they are more relevant.


36 posted on 05/18/2004 12:23:42 PM PDT by Clobbersaurus
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To: jmstein7

RMBCA 8.30


37 posted on 05/18/2004 12:25:18 PM PDT by Clobbersaurus
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Comment #38 Removed by Moderator

To: Baynative

Well if one buys the NY Slimes and most other lefty fish wraps for news, that person was defrauded.

If the publishers stated that what they print has little if no relevance to reality and real news, that would be different. They still push the lie that they are in the news business.

Apparently, a conservative discussed this tactic with our local fish wrap publisher/editor during our removal of Herr Davis. Immediately their lies and attacks on Arnold decreased in number and tone. It was mentioned again during the 9/11 mess, and a balanced editorial came out.


39 posted on 05/18/2004 12:37:37 PM PDT by Grampa Dave (What left wing lies of the media, the DNC and foreign enemies will we expose today?)
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To: Clobbersaurus
Here are my personal notes/briefs on the relevant cases.  Check it out:

1.      Eisenberg v. Flying Tiger Line, Inc.

a.       Originally, there was no action that could be brought against faithless directors: ones that were not acting in the best interest of the corporation

b.      Mechanism of the Shareholder Derivative case, where the SH steps into the shoes of the corporation and brings suit in the name of the corporation.  This makes these suits more tenable as a matter of economic interest, largely because it gives rise to the possibility of class actions, and gives attorneys an incentive to bring these cases.

c.       Objective served: enhances directorial accountability vindicating duties owed by directors to SHs to the extent that the mechanism facilitates suits for breach of fiduciary duty

d.      Efficiency: centralizing challenges to such duties to the extent that a SH steps into the shoes of a corporation

e.       Without derivative suits, one would face the prospects of SHs lining up and bringing individual suits

f.        Per share basis, the stakes involved in these cases would diminish the likelihood that the suits would be brought in the first place.

g.       But, there is a concern that the mechanism will facilitate “strike suits”-suits merely brought to secure settlements for P attorneys via “go away” money.

h.       Here, you have FT, a freight corporation.  Through reorganization it forms a wholly owned subsidiary,  FTC, which organizes another subsidiary, FTL by way of assets, and the FT SH is left holding shares of FTC (a holding company)

i.         Eisenberg claims that his power as a SH has been diluted by the reorganization

j.        Why might a SH prefer to be a shareholder in the business and not the holding company?

                                                   i.      Now that FTC is the sole shareholder of FTL, the SH of FTC has only an indirect say exercised through the holding company, meaning that the SH will lose his say in business operations, losing control over the business themselves.

k.      How do we distinguish between the derivative claim or a direct claim

                                                   i.      The reorganization is all paper, there is no injury to the business itself.  E is making a claim with respect to HIS position within the corporation.  It is an injury to him individually as a SH. 

                                                 ii.      This is about power within the corporation, and it is brought as a derivative claim, not a direct claim.

l.         Why does this make a difference whether a claim is direct or derivative

                                                   i.      The issue litigated: the extent that it was a derivative claim, he would have to post a bond and might have to pay legal fees if the claim was not sustained.

                                                 ii.      Demand requirement that attaches to derivative cases: before being able to pursue the claim in the name of the corporation, the SH must make a demand of the board to bring a claim in the name of the corporation

                                                iii.      Important to know to whom the remedy would be extended to

                                               iv.      If the remedy is directed to the corp.-derivative; SH individually-direct

                                                 v.      Derivative: Corporate purpose cases-Wrigley, Duty of Care: Caremark, Eisner, Camen; Duty of Loyalty: Bayer, Fliegler; Proxy expense: Levin, Rosenfeld

                                               vi.      Direct Cases: Involving Voting Rights: Stroh, SH proposal cases, Inspection Rights cases-cases about the SHs place within the corporation

                                              vii.      Merger-tend to be derivative in nature, alleging that defensive tactics harm the corporation

1.      The exception is Unocal-Mesa claimed that it was treated worse than other SHs

                                            viii.      Closed corporation: doesn’t matter whether it was derivative or not

1.      Ex. Looting case in a two person corporation-The looting presents a harm to the corporation, but in this case the harm to the corporation is also a harm to the other SH in the same magnitude

                                               ix.      If I own 100 shares of Disney and there is millions in corporate waste, I can’t recover the millions by myself-this is why in derivative actions, the recovery goes to the corporation

                                                 x.      Case on 240-weird case where there is  a personal recovery in a derivative action-not the norm

                                               xi.      Alaska Plastics-court sustains as a direct claim unequal treatment vis a vie other SHs

                                              xii.      SH actions are either direct or derivative, which makes it important to understand which is which

                                            xiii.      Relates to the requirement of demand on the directors.

1.      Demand which before a SH can pursue a derivative action, the SH has to go to the board and demand that the corporation bring the action

2.      Directors undertake the suit on behalf of the corporation

m.     Why not allow SHs to go into court whenever they see a harm to the corporation whenever they see a harm to the corporation

                                                   i.      Rationale: harms posed by allowing SHs on an unconstrained basis to bring claims against the corporation

                                                 ii.      Immediate costs of defending against the action

                                                iii.      Social cost: flood the courts and meritous claims might not be heard in a timely manner

                                               iv.      Bad publicity

                                                 v.      Sometimes, it is not in the best interest of the corporation to have a suit go forward-demand requirement brings a problem to the attention to the directors on the assumption that the directors will act in the corporation’s best interest to decide whether the complaint merits a claim

n.       Demand requirement brings the problem to the attention of the directors

o.      When are we concerned about the directors not acting in the corporation’s best interest

                                                   i.      When they have a self interest-then we get back to basic principles of duty of loyalty

                                                 ii.      Issues when the claim involves some interest on the part of the directors, especially when the claim seeks damages against directors

p.      Black Letter Law: A cause of action that is determined to be personal, rather than derivative, cannot be dismissed because the plaintiff fails to post security for the corporation’s costs.

2.      Grimes v. Donald

a.       Challenges an employment agreement between the corporation and Founder/CEO where the CEO is entitled to declare constructive termination without cause where there is unreasonable interference by the board or substantial SH in the company in carrying out the CEO’s good faith duties.

b.      The problem

                                                   i.      Potentially restrain the company from terminating him

                                                 ii.      Constraining the board from engaging in their fiduciary duties, because it may be in the corporate interest from firing him or interfering in his function as a CEO-restraining the board from the oversight of the corporation

                                                iii.      Imposing a penalty of the board’s exercise of independent judgment

c.       What does the court do with the substantive claim, which is addressed as a direct claim?

                                                   i.      This is not an unusual type of constraint, but the court said that this is an unusual way of articulating obligations in an employment agreement

                                                 ii.      Case points to the fact that the founders of the corporation want to retain control

d.      Google case: considering two classes of shares; voting and non-voting.  The investment bankers are concerned because lack of voting shares gets priced into the shares (a substantial discount).  The founders of Google are also concerning I-bankers with their wacky project ideas

e.       The court here finds that the abdication claim, the claim that the directors abdicated their responsibility as directors in entering into this agreement – properly styled as a direct claim

f.        Court allows the claim to go to the merits, but rejects the merits

g.       Claims for damages were derivative-owed to the corporation, not to the SHs bringing the suit

h.       We start with a presumption that demand is required, except where it would be futile to do so

i.         Purposes of the Demand requirement-bottom 246

                                                   i.      Require demand of the board unless it is futile to do so

                                                 ii.      Futility Doctrine: basis for claiming excusal from demand requirement

1.      Majority of the board has a monetary, family, or material interest, etc.-see 246

j.        In this case, the SH did make the demand

                                                   i.      Once the demand has been made, you cannot claim futility

                                                 ii.      If the demand is made and the board refuses to proceed with the claim, the SH may have a claim for wrongful refusal of the demand, but at that point, the board’s refusal to reject the claim is only subject to review under the BJR

                                                iii.      You get an extreme deference to the board

                                               iv.      Duty of care: check it out and go through the motions and make sure you have all of the material information in front of you to show that you made an attempt to hear the demand out

1.      This will insulate a decision of the board from review

k.      If you make a demand, you are waiving any futility argument, and if they refuse the claim, they will be subject to the BJR

                                                   i.      You want to tell P not to make a demand

                                                 ii.      By making a demand, you are conceding a conflict of interest claim

l.         If the court considers the failure to make a claim under the BJR, the court will never get to the merits of your claim.

                                                   i.      The litigation then becomes why the claim was not made, not the claim itself

                                                 ii.      As a litigating strategy, you do not want to make a demand, because you are in business judgment land

                                                iii.      A lot of litigation over whether the demand is required

                                               iv.      If SH 1 makes a demand, is refused, and the claim is thrown out, all other SHs are estopped from bringing the claim

m.     Black Letter Law: If a shareholder demands that the board of directors take action and that demand is entitled to the presumption that the rejection was made in good faith unless the stockholder can allege sufficient facts to overcome the presumption.

3.      Marx v. Akers

a.       Claim by SH-related to allegations of corporate waste by board of directors in awarding excessive compensation to IBM execs and outsiders directors

b.      NY approach to the demand: have to show with particularity by way of alleged facts that the demand would be futile

c.       If demand would be futile, the court will proceed to the merits of the claim

d.      Delaware approach is different-251

e.       Duty of loyalty inquiry-does the board suffer a conflict of interest

                                                   i.      3 directors are also executives

1.      Those 3 do not constitute the majority of the board

2.      Demand was required here

3.      With respect of outside directors, there is a conflict of interest, because they get compensation, so the demand would be futile

f.        Court gets to the merits and rejects the claim

                                                   i.      With respect to the outside directors, they are all buddies-so they will do what is best for the others

g.       Black Letter Law: Demands on boards of directors are futile if a complaint alleges with particularity that: (1) a majority of the directors are interested in the transaction; (2) the directors failed to inform themselves to a degree reasonably necessary about the transaction; (3) the directors failed to exercise their business judgment in approving the transaction.

4.      The Rule of Special Committees

a.       Many SH claims will involve conduct on behalf of the B of D

5.      Auerbach v. Bennett

a.       Bribes paid to foreign officials-majority of the board was implicated

b.      Demand would be futile, because the majority of the board suffered a conflict of interest

c.       Tactic adopted by D boards is to appoint committees of the board of disinterested directors

d.      The board here adopted a resolution developing a committee after the bribes were undertaken with 3 non-interested directors

e.       To this special committee, the board delegated all of its powers concerning the derivative claim

f.        Special litigation committee comes back and decides the claim should not be pursued-none of the directors were benefited directly, and the claim would be a waste of resources

g.       This is a creative way to in effect resuscitate the board’s authority and the demand requirement

h.       What does the P argue about that?  Why are we going to be suspicious by a decision of the special litigation committee not to pursue the claim

                                                   i.      The rest of the board appointed the litigation committee, including the interested directors, after the alleged incident, so they will appoint people who will decide not to pursue a claim against them

                                                 ii.      Court rejects this argument against the disinterestedness of the special committee, and finds the board to have the power to delegate the power to a committee of the board

i.         Proceeds to examine the decision of the special committee not to pursue the action

                                                   i.      Here we have the court finding the substantive decision falls within the grace of BJR

                                                 ii.      We will defer to even a stupid decision on behalf of the board

j.        With respect to the process, here we have the court imposing the requirement that the board chose their investigative requirements in good faith, and the areas examined are examined completely and in good faith.  This is BJR

k.      Not looking at the merits of the claim, but looking at the decision of the board gets us to the BJR

l.         This mechanism is a way for the board to resurrect the demand requirement where otherwise the demand would be found futile, enhancing the chance that questionable conduct by the board will be insulated

m.     Black Letter Law: A court may properly inquire as to the adequacy and appropriateness of a special litigation committee’s investigative procedures and methodologies, but may not consider factors under the domain of business judgment.

6.      Zapata Corp. v. Maldonado

a.       SH claim filed derivatively listing all of the directors as defendants.  No demand was made, because P argues it was futile.

                                                   i.      You can’t establish futility just by listing all of the board members as Ds

b.      After the suit was filed, a special litigation committee was created

c.       The question is whether once you have a case in court filed by the SH, whether the decision of a special litigation committee can cause the suit to be dismissed.

                                                   i.       The court here finds that a special litigation committee may have the power to cause dismissal of a suit already filed

d.      The Delaware court here applies a more stringent standard of review to the decision of the special committee not to pursue the action

e.       Even when we talk about disinterested directors in a special committee, they are passing judgment on fellow directors for whom they might have empathy

f.        Court put the burden of proof on the committee to demonstrate independence, good faith, and reasonable investigation.

                                                   i.      With respect to the process used to decide not to seek the claim, the burden is on the board

                                                 ii.      Otherwise, the test stays the same

g.       With respect to the substance of the claim, the court purports to apply its own independent business judgment with respect to whether a claim should be pursued by the corp.

                                                   i.      There is a little more evidence that there should not be deference to the special committee

                                                 ii.      Maybe we should not defer under standard BJR to those decisions, at least where we are talking about a derivative suit that already has been filed

h.       This heightened standard only applies to demand excused cases

                                                   i.      Not extended to cases where demand has been required

i.         Black Letter Law: When assessing a special litigation committee’s motion to dismiss a derivative action, a court must: (1)determine whether the committee acted independently, in good faith, and made a reasonable investigation, and; (2) apply the court’s own independent business judgment.

40 posted on 05/18/2004 12:38:14 PM PDT by jmstein7 (Real Men Don't Need Chunks of Government Metal on Their Chests to be Heroes)
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To: jmstein7

From Brehm v. Eisner, 746 A.2d 244, which overruled Grimes v. Donald in part.

This isn't exactly on point, since it involves cases in which the board was advised by an expert, but it is an example of the difficultly, perhaps nigh on impossible, of surviving a 12(b)(6) motion on such a lawsuit.

To survive a motion to dismiss shareholder derivative suit in a due care case where an expert has advised the board in its decisionmaking process, the complaint must allege particularized facts (not conclusions) showing, for example, that: (a) the directors did not in fact rely on the expert; (b) their reliance was not in good faith; (c) they did not reasonably believe that the expert's advice was within the expert's professional competence; (d) the expert was not selected with reasonable care by or on behalf of the corporation, and the faulty selection process was attributable to the directors; (e) the subject matter that was material and reasonably available was so obvious that the board's failure to consider it was grossly negligent regardless of the expert's advice or lack of advice; or (f) that the decision of the board was so unconscionable as to constitute waste or fraud. 8 Del.C. § 141(e); Chancery Court Rule 23.1.

Again, from Brehm v. Eisner (regarding an extraordinarily large golden parachute for Michael Ovitz, who served a very short time and very badly): "One can understand why Disney stockholders would be upset with such an extraordinarily lucrative compensation agreement and termination payout awarded a company president who served for only a little over a year and who underperformed to the extent alleged. That said, there is a very large-- though not insurmountable--burden on stockholders who believe they should pursue the remedy of a derivative suit instead of selling their stock or seeking to reform or oust these directors from office." Id. at 267.

I really understand these cases to require that fraud (or illegality) must be alleged to survive a MTD. Of course, nothing is black and white and reasonable people can disagree, but I think you have a major-league uphill battle here. Good luck.


41 posted on 05/18/2004 12:43:07 PM PDT by Clobbersaurus
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To: jmstein7
A large part of the problem is that people, and small vendors, have been canceling subscriptions because of the perceived bias. That is, media bias is hurting their bottom line

Proof? (Not of the bias but, rather, that it's the reason for declining circulation).

Couldn't one just as easily argue that such factors as the Internet (free news), an overall declining readership of newspapers, etc would have just as much effect, if not more?

42 posted on 05/18/2004 12:47:16 PM PDT by gdani (letting the marketplace decide = conservatism)
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To: jmstein7

If I buy some stock will you procure a a pro bono attorney?

I will also agree to be part of a class action for the FReeper class and the CCRM.

This is an excellent piece of work and is the sort of media vunerability that needs to be exploited.

NY Times first. AP next.


43 posted on 05/18/2004 12:50:03 PM PDT by bert (Don't Panic !)
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To: jmstein7

If I buy some stock will you procure a a pro bono attorney?

I will also agree to be part of a class action for the FReeper class and the CCRM.

This is an excellent piece of work and is the sort of media vunerability that needs to be exploited.

NY Times first. AP next.


44 posted on 05/18/2004 12:50:14 PM PDT by bert (Don't Panic !)
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To: bert

Yes, gladly :)


45 posted on 05/18/2004 12:52:46 PM PDT by jmstein7 (Real Men Don't Need Chunks of Government Metal on Their Chests to be Heroes)
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To: jmstein7

IANAL.

Allowing a suit for "journalistic malpractice" would be a horribly effective blow against the First Amendment and for totalitarianism in the US. For one thing, "journalistic malpractice" would seem to fly in the face of the freedom of the press. Yet, let's look into it more deeply.

As the article you linked to says, the First Amendment allows suits for fraud and misrepresentation. In those cases, however, an identifiable victim brings the suit. This victim usually has some kind of monetary loss.

If the NYT deliberately distorts the truth about Iraq, for example, how does that affect you financially? There may indeed be a link between the distortion and your net worth, but any link would be so tenuous that it would not be a proximate cause. If the NYT deliberately distorts the truth, who is the victim? Assuming they aren't actually defaming someone, the only cognizable victim is "society." And society can't sue a private company to enforce politically correct speech codes. This is America and we have freedom here.

In defamation law, there is no recovery for "group libel," or "group defamation." As a result, if someone says "liberals are idiots," they cannot be sued by non-idiot liberals for defamation.

The EU, Canada, the UK, and other countries that have little respect for freedom of speech all criminalize group defamation. If you say something negative about gay people there ("gay people have loose morals," for example), you may find yourself in prison.

There is a need to protect group libel. The need is identical to free speech. To disallow wide-ranging vague characterizations except those which are enthusiastic and non-critical in nature would be to crumple the freedom of speech and the freedom of press into a useless ball of paper.

Suits for "journalistic malpractice" must never be allowed to disgrace American courts of law.

As for the "futility doctrine" suit mentioned in the opener, the idea for the lawsuit is wrong.

Want to take on the NYT and its deliberate distortions of the truth? Set up a media watchdog group like Accuracy in Media or FAIR, or just whip up an expose document yourself.

If you just put the data in front of the American people to expose the NYT's deliberate distrotions of the truth, the public will do the job. They will stop buying and reading the NYT. Isn't that what you really want?

Lawsuits don't solve every problem.

I am not a lawyer.


46 posted on 05/18/2004 12:56:49 PM PDT by rogueleader
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To: rogueleader; Grampa Dave; All

IMHO... the fact that the NYT subsidiary, the Boston Globe, was caught faking photos of "prisoner abuse" and reporting them as "hard news" makes the NYT very, very vulnarable to suit right now.


47 posted on 05/18/2004 1:19:04 PM PDT by jmstein7 (Real Men Don't Need Chunks of Government Metal on Their Chests to be Heroes)
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To: jmstein7

I'm no lawyer, but I play one on TV...anyway, it seems to me a new shareholder would have very little chance of success. Somebody mentioned earlier getting established shareholders to file a class-action suit. That seems like the only real chance of success.


48 posted on 05/18/2004 1:20:15 PM PDT by BJClinton
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To: BJClinton

That's the beauty here... there is no "holding" requirement. I could buy today and sue tomorrow. Left-wing groups use this tactic all the time as PR stunts.


49 posted on 05/18/2004 1:25:58 PM PDT by jmstein7 (Real Men Don't Need Chunks of Government Metal on Their Chests to be Heroes)
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To: jmstein7

The Jayson Blair fiasco and other out in the open messes as well as the Globe phony sex abuse pictures to me are open cases of fraud. They used this bs instead of real news reporting to harm GW and dared to call it news until they were caught.


50 posted on 05/18/2004 1:30:06 PM PDT by Grampa Dave (What left wing lies of the media, the DNC and foreign enemies will we expose today?)
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