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Volume XI, Number 133

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Dismissal Of State Court Derivative Action Yields Dismissal Of Parallel Federal Action

I first wrote about the preclusive effect, if any, of a dismissal of a parallel derivative action some nine years ago when I wrote about Vice Chancellor J. Travis Laster's ruling in La. Mun. Police Emples. Ret. Sys. v. Pyott, 46 A.3d 313, (2012).  See Delaware Court of Chancery Overrules Federal Court.  A year later, the Delaware Supreme Court reversed that ruling in Pyott v. La. Mun. Police Emples.' Ret. Sys., 74 A.3d 612.  See Delaware Supreme Court Upholds Federalism, Comity & Finality.

Pyott involved the effect of a dismissal of a derivative action by a federal court on a pending derivative action in state court.  Earlier this month, U.S. District Court Judge Yvonne Gonzalez Rogers considered the converse situation - the effect of a California state court's dismissal of a derivative action on a pending derivative action in federal court.  Hamilton v. Advanced Micro Devices, 2021 U.S. Dist. LEXIS 66929.  Citing Pyott and Ardui v. Hart, 774 F.3d 622 (9th Cir. 2014), Judge Rogers found that the plaintiffs in the federal action could not relitigate the question of demand futility.  In reaching this conclusion, she found: (i) the plaintiffs' allegations in both actions, while not identical, were so; (ii) demand futility was actually litigated  and necessarily decided; (iii) the prior decision was on the merits; and (iv) the parties are in privity.

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© 2010-2021 Allen Matkins Leck Gamble Mallory & Natsis LLP National Law Review, Volume XI, Number 106
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Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm
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Keith Bishop works with privately held and publicly traded companies on federal and state corporate and securities transactions, compliance, and governance matters. He is highly-regarded for his in-depth knowledge of the distinctive corporate and regulatory requirements faced by corporations in the state of California.

While many law firms have a great deal of expertise in federal or Delaware corporate law, Keith’s specific focus on California corporate and securities law is uncommon. A former California state regulator of securities and financial institutions, Keith has decades of...

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