Case Title: In re AMERCO Derivative Litigation

Citation: 127 Nev. Adv. Op. No. 17

Docket Number: 

State: nevada

Court: Nevada Supreme Court

Date: 2011-05-12T00:00:00Z

Document:
127 Nev,, Advance Opinion \7
IN THE SUPREME COURT OF THE STATE OF NEVADA

IN RE: AMERCO DERIVATIVE
LITIGATION.

 

GLENBROOK CAPITAL LIMITE
PARTNERSHIP; ALAN KAHN; RON
BELEC; AND PAUL F. SHOEN,
Appellants,
vs,
JOHN M. DODDS, AN INDIVIDUAL;
RICHARD HERRERA, AN
INDIVIDUAL; AUBREY JOHNSON, AN
INDIVIDUAL; CHARLES J. BAYER, AN
INDIVIDUAL; JOHN P. BROGAN, AN
INDIVIDUAL; JAMES J. GROGAN, AN
INDIVIDUAL; AMERCO, A NEVADA.
CORPORATION; EDWARD J. SHOEN,
AN INDIVIDUAL; JAMES P. SHOEN,
AN INDIVIDUAL; WILLIAM E. CARTY,
AN INDIVIDUAL; MARK V. SHOEN,
AN INDIVIDUAL; SAC HOLDING
CORPORATION, A NEVADA
CORPORATION; SAC HOLDING
CORPORATION II, A NEVADA
CORPORATION; THREE SAC SELF-
STORAGE CORPORATION, A NEVADA
CORPORATION; FOUR SAC SELF-
STORAGE CORPORATION, A NEVADA
CORPORATION; FIVE SAC SELF-
STORAGE CORPORATION, A NEVADA
CORPORATION; SIX SAC SELF-
STORAGE CORPORATION, A NEVADA
CORPORATION; SIX-A SAC SELF-
STORAGE CORPORATION, A NEVADA
CORPORATION; SIX-B SAC SELF-
STORAGE CORPORATION, A NEVADA
CORPORATION; SIX-C SAC SELF-
STORAGE CORPORATION, A NEVADA
CORPORATION; SEVEN SAC SELF. |

No, 51629

FILED

may 122011

 

 
one

 

SELF-STORAGE LIMITED

STORAGE CORPORATION, A NEVADA |
CORPORATION; EIGHT SAC SELF-
STORAGE CORPORATION, A NEVADA
CORPORATION; NINE SAC SELF-
STORAGE CORPORATION, A NEVADA
CORPORATION; TEN SAC SELF-
STORAGE CORPORATION, A NEVADA
CORPORATION; ELEVEN SAC SELF-
STORAGE CORPORATION, A NEVADA
CORPORATION; TWELVE SAC SELF.
STORAGE CORPORATION, A NEVADA
CORPORATION; THIRTEEN SAC
SELF-STORAGE CORPORATION, A
NEVADA CORPORATION; FOURTEEN
SAC SELF-STORAGE CORPORATION,
A NEVADA CORPORATION; FIFTEEN
SAC SELF-STORAGE CORPORATION,
‘A NEVADA CORPORATION; SIXTEEN
SAC SELF-STORAGE CORPORATION,
A NEVADA CORPORATION;
SEVENTEEN SAC SELF-STORAGE
CORPORATION, A NEVADA
CORPORATION; EIGHTEEN SAC
SELF-STORAGE CORPORATION, A
NEVADA CORPORATION; NINETEEN
SAC SELF-STORAGE LIMITED
PARTNERSHIP, A NEVADA LIMITED
PARTNERSHIP; TWENTY SAC SELF-
STORAGE CORPORATION, A NEVADA
CORPORATION; TWENTY-ONE SAC
SELF-STORAGE CORPORATION, A
NEVADA CORPORATION; TWENTY-
TWO SAC SELF-STORAGE
CORPORATION, A NEVADA
CORPORATION; TWENTY-THREE SAC
SELF-STORAGE CORPORATION, A
NEVADA CORPORATION; TWENTY-
FOUR SAC SELF-STORAGE LIMITED
PARTNERSHIP, A NEVADA LIMITED
PARTNERSHIP; TWENTY-FIVE SAC

 

 
PARTNERSHIP; TWENTY-SIX SAC
SELF-STORAGE LIMITED
PARTNERSHIP, A NEVADA LIMITED |
PARTNERSHIP; AND TWENTY-SEVEN
SAC SELF-STORAGE LIMITED |
PARTNERSHIP, A NEVADA LIMITED |
PARTNERSHIP, |

Respondents,

Appeal from a district court order dismissing a shareholder

PARTNERSHIP, A NEVADA LIMITED |

 

derivative action, Second Judicial District Court, Washoe County; Brent
T. Adams, Judge.

Affirmed in part, reversed in part, and remanded,

Lewis & Roca LLP and Daniel F. Polsenberg and Jennifer B. Anderson,
Las Vegas; Berman DeValerio and Joseph J. Tabacco, Jr., and Christopher
T. Heffelfinger, San Francisco, California; Latham & Watkins LLP and
Mare W. Rappel, Brian T. Glennon, and Gene Chang, Los Angeles,
California; Harold B. Obstfeld, New York, New York; Robbins Umeda LLP
and Brian J. Robbins, Kevin A. Seely, Kelly McIntyre, and Gregory E. Del
Gaizo, San Diego, California,

for Appellants.

Parsons Behle & Latimer and Rew R. Goodenow, Reno; Irell & Manella
LLP and David Siegel, Daniel P. Lefler, and Charles B. Elder, Los
Angeles, California,

for Respondents John M. Dodds, Richard Herrera, Aubrey Johnson,
Charles J. Bayer, John P. Brogan, and James J. Grogan,

Laxalt & Nomura, Ltd., and Daniel Hayward, Reno; Morrison & Foerster,
LLP, and Jack W. Londen, San Francisco, California,
for Respondent AMERCO.

on

 

 
McDonald Carano Wilson LLP and Thomas R.C. Wilson and Matthew C.
Addison, Reno; Pillsbury Winthrop Shaw Pittman LLP and Walter J.
Robinson, Palo Alto, California,

for Respondents Edward J. Shoen, James P. Shoen, and William E. Carty.

Law Offices of Calvin RX. Dunlap and Monique Laxalt and Calvin RX.
Dunlap, Reno; Squire, Sanders & Dempsey L.L.P. and George Brandon
and Brian A. Cabianea, Phoenix, Arizona,

for Respondents Mark V. Shoen and SAC entities.

BEFORE THE COURT EN BANC.
OPINION

By the Court, HARDESTY, J.:

AMERCO is a Nevada corporation controlled by the feuding
Shoen family. Its main operating subsidiary is U-Haul International, Inc.
AMERCO has engaged in numerous business transactions with the SAC
entities, which are real estate holding companies controlled by AMERCO.
shareholder and executive officer Mark Shoen. Based on several of those
transactions, appellants filed the underlying shareholder derivative suit in
2002 against AMERCO’s former and current directors, Mark, and the SAC
entities, primarily for breach of fiduciary duty and aiding and abetting the
breach of that fiduciary duty. However, appellants failed to make a
demand for corrective action on the AMERCO board of directors, and
subsequently, the district court granted respondents’ motion to dismiss for
failure to adequately allege demand futility. Appellants appealed that

 
decision, and this court reversed and remanded for reconsideration, after
clarifying the demand futility standards. See Shoen v, SAC Holding
Corp, 122 Nev. 621, 626, 137 P.3d 1171, 1174-76 (2006). On remand, the
district court once again granted respondents’ motions to dismiss—this
time on two grounds distinct from demand futility: (1) a settlement
agreement entered into in 1995 by AMERCO and shareholders who are
not involved in this case, referred to as the Goldwasser settlement, barred
appellants’ derivative claims; and (2) appellants could not pursue
derivative claims against the SAC entities on behalf of AMERCO based on
transactions in which AMERCO iteelf participated.

 

In this appeal, we first address whether a claim-release clause
contained in the Goldwasser settlement agreement reached by different

shareholders several years earlier bars the derivative claims now asserted

 

by appellant shareholders. We conclude that it does not. When a
settlement agreement does not contain language exhibiting a clear intent
to release future claims, the release clause is limited to the claims that
existed at the time the settlement agreement was reached,

Second, we address whether appellant shareholders could
bring their derivative claims against the corporation's alleged

coconspirators. In doing so, we examine, for the first time, the defense of

‘The lead plaintiffs in the lawsuit that resulted in the 1995
settlement were named Goldwasser, and thus, the parties and the district
court refer to it as “the Goldwasser settlement.

 

 

 
in pari delicto? in a corporate context, which first requires an analysis of
whether an agent's acts are imputed to the corporation. We also clarify
the adverse interest exception to imputation, which provides that when
the officers have totally abandoned the corporation's interests, their
actions are not imputed to the corporation. We further adopt the sole-
actor rule, which operates as an exception to the adverse interest
exception in limited circumstances. We conclude that the adverse interest
exception and sole-actor rule do not apply in this case. Therefore, without
more, the AMERCO officers’ alleged actions are imputed to the
corporation. We then address whether respondents can assert the in pari
delicto defense, concluding that this is a question that must be remanded
to the district court.

Finally, we address various arguments set forth by
respondents regarding alternative grounds for affirming the district
court's order of dismissal, including whether the district court properly
held that appellants adequately pleaded demand futility, whether
appellants sufficiently pleaded their causes of action, and whether
appellants’ claims are barred by the statute of limitations. We conclude
that appellants adequately pleaded demand futility, but the district court
must now conduct a proper evidentiary hearing regarding whether the
evidence supports appellants’ allegations; appellants sufficiently pleaded
some, but not all, of their claims; and whether the statute of limitations

*The in_paridelicto defense precludes a party who has engaged in
wrongdoing from recovering when they are at least partially at fault.

Official Committee v. RF. Lafferty & Co,, 267 F.3d 340, 354 (3d Cir.
2001),

 

 
one

 

has run is a question of fact for the district court. Accordingly, we affirm
in part, reverse in part, and remand for further proceedings.
‘ACTS

‘To put our discussion in context, we present an overview of the
factual and procedural background of this case.” AMERCO, a Nevada
corporation, is the parent company of U-Haul, which Leonard Samuel
(L.S) Shoen founded in 1945. Through wholly owned U-Haul centers and
other independent dealers, AMERCO rents trucks, trailers, and storage
units to the public. AMERCO's other subsidiary, Amerco Real Estate
Corporation (AREC), controls “the purchase, sale and lease of properties
used by AMERCO.” Several years before the instant litigation began, L.S.
transferred most of his AMERCO stock to his children, leading “to an
unfortunate and well-documented family feud between shifting factions for
corporate control.” Shoen, 122 Nev. at 627, 137 P.3d at 1175. At the
center of the feud are L.S.’s sons, appellant Paul and respondents Edward
J. Joe), James, and Mark Shoen.

Joe, James, and Mark created SAC Self-Storage Corporation
and Two SAC Self-Storage Corporation in 1993 to serve as real estate
holding corporations. The common stock issued by the two corporations
was split evenly between Joe, James, and Mark. However, in December
1994, a short time before Joe and James filed for personal bankruptey,
they sold their shares to Mark, allegedly for $100. After this transaction,
Mark Shoen owned and controlled SAC Self-Storage Corporation and Two

3A more detailed account of the factual background can be found in

our previous opinion in this matter, Shoen v. SAC Holding Corp., 122 Nev.
621, 627-31, 137 P.Sd 1171, 1175-78 (2006).

 
SAC Self-Storage Corporation. In 1996, these two entities were merged
into a new corporation called Three SAC. Since 1996, many additional
SAC corporations or partnerships have been formed under Nevada law
(oferred to here as the SAC entities), and Mark controls each one.

In 2002 and 2003, Paul and other appellant shareholders Ron
Belec, Alan Kahn, and Glenbrook Capital Limited Partnership filed
individual derivative suits, which were subsequently consolidated, against

 

Joe, James, and Mark, as well as against current and former AMERCO
directors Charles Bayer, William Carty, John Dodds, Richard Herrera,
Aubrey Johnson, John Brogan, and James Grogan, Appellants alleged
that respondents breached their fiduciary obligations to AMERCO by
engaging in improper and unfair transactions with the SAC entities to
AMERCO’s detriment. The district court dismissed the complaints on the
ground that demand futility was not pleaded adequately, Shoen, 122 Nev.
at 626, 137 P.3d at 1175, and on appeal, this court “clariffied] the pleading
requirements for shareholder derivative suits pursuant to NRCP 23.1” and
remanded the case to the district court “for further proceedings regarding
demand futility.” [d, at 644-45, 187 P.3d at 1186-87,
District court proceedings on remand

Upon reversing and remanding the matter in Shoon,
appellants were permitted to file an amended complaint. Id, at 645, 137
P.3d at 1187. In the amended complaint, appellants set forth six causes of
action. Appellants alleged: (1) breach of the fiduciary duty of loyalty by
engaging in self-dealing against all of the former directors, (2) aiding and
abetting a breach of the fiduciary duty of loyalty and unjust enrichment
against the SAC entities, and (3) usurpation of corporate opportunities
against Mark. Against all respondents, appellants also alleged: (1)
engaging in ultra vires acts, (2) wrongful interference with AMERCO's

8

 
oo 905 Se

prospective economic advantage, and (8) abuse of control. Appellants
stated that they were “seek{ing] to halt and unwind a series of self-dealing
transactions” that have resulted in the transfer of “hundreds of self-
storage properties and over $200 million of equity away from AMERCO to”
the SAC entities. Appellants contended that these were corporate
opportunities that AMERCO was deeply focused on prior to the creation of
the SAC entities

 

‘Thus, according to appellants, Joe, James, and Mark
(with assistance from the other respondents) have benefited the SAC
entities to AMERCO’s detriment,

In their amended complaint, appellants alleged that
AMERCO’s transactions with the SAC entities were improper for three

reasons. First, appellants contended that AMERCO sold properties to the

 

SAC entities at unfairly low prices and failed to seek approval for the
transactions from the AMERCO board of director

 

‘The price for most
self-storage properties was generally “calculated at ‘acquisition cost plus
capitalized expenses,” which appellants alleged was unfair because,
among other things, it failed to account for appreciation in the properties
between the time AMERCO acquired them and the time it sold them to
the SAC entities,

Second, appellants alleged that AMERCO financed the SAC
entities’ purchase of other properties by providing over $600 million in
nonrecourse loans. Appellants contended that some of the loans occurred
during financial downturns “when AMERCO was in need of capital for its
own business.”

‘Third, appellants alleged that AMERCO entered into
management agreements, pursuant to which U-Haul operates self-storage
facilities on behalf of the SAC entities. For each property that the SAC

 

 
entities acquired, they entered into a “management agreement” with U-
Haul. Under these agreements, U-Haul is responsible for running the
self-storage businesses, and in return, U-Haul receives a “management
fee,’ equal to six percent of the ‘gross revenue’ generated from the self-
storage property.” Appellants alleged that such an arrangement is
inequitable because the remaining 94 percent of revenue “is kept by [Mark
Shoen] and the SAC [e}ntities.”

Moreover, appellants alleged that AMERCO’s public filings
misled its shareholders regarding the SAC transactions. Appellants
alleged that AMERCO’s annual reports, quarterly reports, and proxy
statements for fiscal years 1995 through 2002 referred to the SAC entities
in a distorted and confusing manner, without any of the context necessary
to understand the nature or scope of the relationship between AMERCO
and the SAC entities. Additionally, appellants contended that AMERCO
never disclosed how much revenue was collected from the SAC entities or
discussed the transactions in its public filings.

Regarding demand futility, appellants set forth in the
amended complaint several reasons why demand on AMERCO's board of
directors would be futile. First, appellants alleged that “a majority of the
board has a material interest in the subject of the demand.” Second,
appellants contended that Joe, James, and Mark “dominate and control
the AMERCO Board,” and thus the board is not independent of Joe,
dames, and Mark.

‘Appellants also argue that demand is excused because they alleged
ultra vires acts. See Shoen, 122 Nev. at 642-43, 137 P.3d at 1185. While
“(djemand futility analysis is conducted on a claim-by-claim basis,” Beam

continued on next page...

10

 
ane ie
oom

AMERCO, acting through its board of directors, filed a motion
to dismiss appellants’ derivative action for failure to allege demand futility
adequately. All other respondents
amended complaint, based on the Goldwasser waiver and release in the
Goldwasser settlement agreement, the in pari delicto doctrine, failure to

 

0 filed motions to dismiss appellants’

state claims upon which relief may be granted, and the statute of
limitations. The district court denied AMERCO’s motion to dismiss,
finding that appellants “satisfied the heightened pleading requirements of
majority of the members of the AMERCO.
Board of Directors were interested parties in the SAC transactions.” The
district court also scheduled a hearing for all

demand futility by showing

 

 

ues, except demand
futility, raised in the other respondents’ motions to dismiss. Before
recounting the hearing and the district court’s subsequent ruling on the
motions to dismiss, it is necessary to examine briefly the derivative suit
that eventually resulted in the Goldwasser settlement.
‘The Goldwasser settlement,

‘The events giving rise to the Goldwasser settlement began in
1988 when several shareholders filed suit in Arizona (the Arizona
litigation), challenging a stock transaction that gave control of AMERCO
to Joe, James, and Mark. The Arizona litigation resulted in a billion-
dollar jury verdict in favor of the plaintiffs.

continued

ex rel, M, Stewart Living v. Stewart, 833 A.2d 961, 977 n.48 (Del. Ch.
2003), as discussed hereafter, appellants have failed to state a claim for
ultra vires acts.

 

uw

 

 
nee

Subsequently, in 1994, AMERCO shareholders from the
Arizona litigation, the Goldwasser plaintiffs, filed a shareholder derivative
suit on behalf of AMERCO in federal court in Nevada against AMERCO
management, including Joe, James, Mark, Bayer, Carty, Dodds, and
Herrera, The Goldwasser plaintiffs sought, in part, an injunction to
prevent Joe, James, and Mark from causing AMERCO to indemnify them
in the judgment from the Arizona litigation. During discussions between
the parties’ counsel, the Goldwasser plaintiffs questioned the propriety of
the diversion of corporate assets from AMERCO to the two SAC entities
then in existence. The parties ultimately reached a settlement agreement
in 1995. To assuage the Goldwasser plaintiffs’ concerns regarding the
SAC entities, a letter from AMERCO describing the SAC transactions was

 

included in the agreement, and the settlement agreement contained a
release clause whereby the Goldwasser plaintiffs agreed to release various
claims against the defendants, including those claims related to matters
addressed in the letter describing the SAC transactions.
District court hearing on the motions to dismiss

After the hearing on the alternative bases alleged for
dismissal, the district court granted respondents’ motions to dismiss on
‘two separate grounds. First, the district court determined that “the
Goldwasser settlement released the claims which are the subject of this
action.” The court reasoned that because the Goldwasser plaintiffs raised
derivative claims on behalf of AMERCO, the released claims, including
those related to the letter describing the SAC transactions, “were released
on behalf of [AMERCO)” and “therefore, [appellants] cannot relitigate said
claims on behalf of [AMERCO].” Second, the district court found that
appellants could not derivatively sue the SAC entities. The court reasoned
that because AMERCO “participated in the challenged transactions,”

12

 

 
 

appellants cannot file a derivative claim on AMERCO’s behalf for those
transactions. This appeal followed.
DISCUSSION

Standard of review

A district court order granting a motion to dismiss “is
rigorously reviewed.” Shoon, 122 Nev. at 634-35, 187 P.3d at 1180. To
survive dismissal, a complaint must contain some “set of facts, which, if
true, would entitle (the plaintiff] to relief” Buzz Stew, LLC v, City of N.
Las Vegas, 124 Nev. 224, 228, 181 P.3d 670, 672 (2008). Like the district
court, this court considers all factual assertions in the complaint to be true
and draws all reasonable inferences in favor of the plaintiff, Shoen, 122
Nev. at 635, 137 P.3d at 1180. This court applies de novo review to the
district court's legal determinations. Buzz Stew, 124 Nev. at 228, 181 P.3d
at 672.
The Goldwasser settlement did not release appellants’ claims

‘The first ground upon which the district court granted
respondents’ motions to dismiss was that the claim-release clause in the
Goldwasser settlement agreement precludes appellants’ present claims.
Appellants argue that the distriet court erred because the release clause
was limited to claims in existence at the time that the parties reached the
settlement agreement and did not apply to claims, like those asserted
below, arising out of future transactions. We agree.

Because settlement agreements are contracts, they are
“governed by principles of contract law.” Mack v, Estate of Mack, 125 Nev.
80, 95, 206 P.3d 98, 108 (2009). Under contract law generally, when a
release is unambiguous, we must construe it from the language contained
within it. Chwialkowski v. Sachs, 108 Nev. 404, 406, 834 P.2d 405, 406
(1992). Our ultimate goal is to effectuate the contracting parties’ intent,

13.

 
or

 

however, when that intent is not clearly expressed in the contractual
language, we may also consider the circumstances surrounding the
agreement. Sheehan & Sheehan v. Nelson Malley & Co,, 121 Nev. 481,
487-88, 117 P.3d 219, 223-24 (2005). ‘Typically, “[eJontractual release
terms...do not apply to future causes of action unless expressly
contracted for by the parties.” Clark v, Columbia/HCA Info. Servs,, 117
Nev. 468, 480, 26 P.3d 215, 223-24 (2001). We apply de novo review to
contract interpretation issues. May v. Anderson, 121 Nev. 668, 672, 119
P.3d 1254, 1267 (2008).

‘The Goldwasser settlement agreement's definition of released
claims refers to those “that have been or that could have been asserted in
the Litigation or in the securities actions with which the Litigation is
consolidated.” (Emphasis added.) The released claims thus include
unknown claims, which are “any Released Claims which AMERCO or any
Plaintiff does not know or suspect to exist in his, her or its favor, or
derivatively in favor of AMERCO, at the time of the release.” (Emphasis
added.) The agreement then states that “AMERCO and the
Plaintiffs . . . shall be deemed to have... fully, finally and forever settled
and released any and all Released Claims, known or unknown, suspected
or unsuspected, contingent or non-contingent, whether or not concealed or
hidden, which now exist or heretofore have existed.” (Emphasis added.)

We conclude that these clear and explicit terms limit the
release to claims that were in existence at the time the Goldwasser
settlement agreement was reached, including any claims related to the
transactions with the two SAC entities that existed at that time, even if
the facts giving rise to those claims had not yet been discovered. However,
we conclude that claims arising out of any SAC transactions that occurred

4

 
after the date of the release are not included in the release. Even if, as
respondents contend, AMERCO indicated to the Goldwasser plaintiffs that
future SAC transactions would occur, we reject the notion that claims
arising from those prospective transactions were released. Not only does
the agreement lack language that indicates any intent to release such

future claims, but the expres

 

language refers to claims that existed at the
time of the settlement agreement. Accordingly, we conclude that
appellants’ derivative claims, which arose out of SAC transactions that
occurred post-Goldwasser, were not released in the gettlement agreement.
‘Thus, we affirm the district court's dismissal of appellant's derivative
claims related to AMERCO’s transactions with the two SAC entities, but
we reverse that portion of the district court's order finding that the
Goldwasser settlement agreement precludes appellants from pursuing the
derivative claims on behalf of AMERCO pertaining to post-Goldwasser
SAC transactions.

Appellants’ claims against the SAC entities are not necessarily barred by
the in pari delicto doctrine

‘The district court granted respondents’ motions to dismiss
appellants’ claims against the SAC entities on the ground that appellants
lacked standing. As a preliminary matter, the district court's perception
of this defense as a standing issue is somewhat flawed. ‘The district court
apparently imputed respondents’ actions to AMERCO and relied on the in
pari delicto doctrine to find that appellants’ derivative claims filed on
behalf of AMERCO were precluded because AMERCO “participated in the
challenged transactions and, therefore, cannot bring a claim against the
SAC entities based on the transactions.”

Although some courts conflate the concepts of standing and in
pari delicto, we conclude that they are subject to separate analyses. The

16

 
Second Circuit Court of Appeals has treated claims against a third party
where wrongdoing was imputed to the corporation a8 an issue of standing,
concluding that the corporation cannot bring a claim under those
circumstances. Shearson Lehman Hutton, Inc. v, Wagoner, 944 F.2d 114,
117-20 (2d Cir, 1991), However, this approach has been criticized, even
within the Second Circuit, for mischaracterizing the in pari delicto defense
as part of the standing analysis, See In re Senior Cottages of America,
LLG, 482 F.3d 997, 1003 (8th Cir. 2007). Generally, “[sJtanding consists
of both a “case or controversy” requirement stemming from Article III,
Section 2 of the Constitution, and a subconstitutional “prudential”
element.” Official Committee v. RLF, Lafferty & Co,, 267 F.8d 340, 346 (3d
Cir, 2001) (alteration in original) (quoting The Pitt Nows v. Fisher, 215
F.3d 854, 359 (Sd Cir. 2000)). This analysis does not include consideration
of equitable defenses, such as in pari delicto, as these issues are “two
" Id.

Although state courts do not have constitutional Article IIT

 

separate questions, to be addressed on their own term:

standing, “Nevada has a long history of requiring an actual justiciable
controversy as a predicate to judicial relief” Doe v, Bryan, 102 Nev. 523,
525, 728 P.2d 443, 444 (1986). In Nevada, as in the federal courts, this
standing analysis is separate from the existence of an equitable defense,
such as in.pari delicto. Therefore, “the collusion of corporate insiders with
third parties to injure the corporation does not deprive the corporation of
standing to sue the third parties, though it may well give rise to a defense
that will be fatal to the action.” In re Senior Cottages of America, LLC.
482 F.3d at 1004; see also In re American Intern. Group, Inc., 965 A.2d
763, 824 n.234 (Del. Ch. 2009) (recognizing that standing and in_pari
delicto are separate rules); Reneker v. Ofiill, 2009 WL 804134, at *6 n.6

16

 
(N.D. Tex. Mar. 26, 2009) (noting that in pari delicto is a defense to the
merits of a claim but does not preclude a party's standing to bring that
claim in the first place and that standing and the existence of equitable
defenses are two separate issues). Thus, we conclude that the district
court improperly concluded that AMERCO could not bring its claims
because AMERCO's alleged participation in wrongdoing does not divest it

 

of standing.
‘The in pari delicto doctrine

We have previously recognized the in pari delicto doctrine as
Shimrak v. Garcia-
‘Mendoza, 112 Nev. 246, 251-52, 912 P.2d 822, 826 (1996); Magill v, Lewis,
74 Nev. 381, 386, 333 P.2d 717, 719 (1958). However, we have not
previously addressed the in pari delicto doctrine as it applies to
corporations and shareholder derivative suits, and we take this

 

an equitable defense in actions between individu:

opportunity to do so.

When a party suffers injury from wrongdoing in which he
engaged, the doctrine of in pari delicto often prevents him from recovering
for his injury. Lafferty. 267 F.3d at 354; American Intern, Group, Consol.
Deriv. Lit,, 976 A.2d 872, 883 (Del. Ch. 2009). The rationale underlying
the doctrine “is that there is no societal interest in providing an
accounting between wrongdoers.” American Intern, Group, 976 A.2d at
882. Permitting corporations to sue their coconspirators would not only
force courts to apportion blame between wrongdoers, but it would also
“diminish{] corporate boards’ incentives to supervise their own agents.”
Id. at 889; see also Shimrak, 112 Nev. at 251, 912 P.2d at 825
(Traditionally neither courts of law nor equity will interpose to grant
relief to parties to an illegal agreement.”).

7

 
os

In assessing whether the in pari delicto doctrine applies to a
derivative action against a corporation, we must first determine whether
acts of a director or officer are imputed to the corporation and then
address the elements of the in pari delicto defense. Under basic corporate
agency law, the actions of corporate agents are imputed to the corporation.
Strohecker v, Mut B. & L. Assn,, 55 Nev, 350, 355, 34 P.2d 1076, 1077
(1934), In Strohecker, we noted that

‘A corporation can acquire knowledge or receive
notice only through its officers and agents, and
hence the rule holding a principal, in case of a
natural person, bound by notice to his agent is
particularly applicable to corporations, the general
rule being that the corporation is affected with
constructive knowledge, regardless of its actual
knowledge, of all the material facts of which its
officer or agent receives notice or acquires
Knowledge while acting in the course of his
employment and within the scope of his authority,
and the corporation is charged with such
Knowledge even though the officer or agent does
not in fact communicate his knowledge to the
corporation.

Id, (internal quotations omitted). The rationale for imputing an agent's

 

acts to the corporation is to encourage corporate managers to carefully
select and monitor those who are acting on the corporation's behalf, In re
American Intern, Group, Inc,, 965 A.2d at 825 n.237, However, if'an agent
is acting on his own behalf, the agent's acts will not be imputed to the
corporation. Keyworth v, Nevada Packard Co., 43 Nev. 428, 439, 186 P.
1110, 1113 (1920). This exception is known as the “adverse interest”
exception and, although we recognized the exception in Keyworth, we have
not previously set forth its proper application. We do so now.

18,

 
We now hold that the agent's actions must be completely and
totally adverse to the corporation to invoke the exception. See Kirschner
v. KPMG LLP, 938 N.E.2d 941, 952 (NY. 2010). Requiring total
abandonment of the corporation's interest renders the exception very
narrow. “This rule avoids ambiguity where there is a benefit to both the
insider and the corporation, and reserves this most narrow of exceptions
for those cases—outright theft or looting or embezzlement—where the
insider’s misconduct benefits only himself or a third party.” Id. If the
agent's wrongdoing benefits the corporation in any way, the exception does
not apply. Id, (“Where the agent
his principal, the] rationale [of not imputing the agent's acts] does not
make sense.”); see also American Intern, Group, 965 A.2d at 824 (holding

that the adverse interest exception only applies when the agent acts

perpetrating a fraud that will benefit

 

completely for his own purpose). Simply because an agent has a conflict of
interest or is acting mostly for his own self-interest will not invoke the
exception. Id.5

We also recognize a limited exception to the adverse interest

exception whereby an agent's actions are imputed to the corporation even

5At least one court has concluded that the adverse interest exception
is either an exception to the general rule of imputation or an exception to
the in pari delicto defense because the outcome is the same in either case.
American Intern. Group, Consol. Deriv. Lit., 976 A.2d 872, 891 n.50 (Del.
Ch. 2009). While we recognize that the distinction may indeed be
irrelevant, we conclude that the appropriate analysis requires courts to
consider the adverse interest exception as a means of rebutting the
presumption that an agent’s acts are imputed to the corporation.
Tmputation is the first step in analyzing whether a defendant has an in

pari delicto defense.

19.

 
ene

if the agent totally abandons the corporation's interest. Pursuant to the
“sole actor” rule, the adverse interest exception will not preclude
imputation if the agent is the sole agent or sole shareholder of a
corporation. In re Mediators, Inc, 105 F.8d 822, 827 (2d Cir. 1997);
vafferty, 267 F.3d at 369 (‘The general principle of the ‘sole actor’
exception provides that, if an agent is the sole representative of a
principal, then that agent's fraudulent conduct is imputable to the
principal regardless of whether the agent's conduct was adverse to the
principal's interests."). ‘The rule also applies when there are multiple
owners and managers who are each engaged in fraud against the
corporation. In re CBI Holding Co, Inc., 311 B.R. 350, 373 (S.D.N.Y.
2004), reversed in_part on other grounds by In re CBI Holding Co., Inc.
529 F.3d 432, 438 (2d Cir. 2008). Pursuant to this rule, an agent's
knowledge is imputed to the corporation because the “principal and agent
are one and the same.” In.re Mediators, Inc,, 105 F.3d at 827.

In applying the sole-actor rule, other courts have considered
the presence of innocent decision-makers. Some have determined that the
existence of innocent decision-makers is irrelevant, Baena v, KPMG LLP,
453 F.3d 1, 8-9 (Ist Cir. 2006), while others examine the amount of
authority bestowed on the corporate agent, Breeden _v. Kirkpatrick &
Lockhart. LLP, 268 B.R. 704, 709-10 (S.D.N.Y. 2001). Still others look to
‘the control the innocent decision-maker had to thwart the fraud,

concluding that when an innocent party had the power to stop the

wrongdoing, the corporation and the agency are not one and the same. In
re 1031 Tax Group, LLC, 420 B.R. 178, 202-08 (Bankr. 8.D.N.Y 2009); CBI
Holding Co., 311 B.R. at 373. Because the sole-actor rule operates to

impute conduct otherwise subject to the adverse interest exception when

 

 
the corporation and its agent are indistinguishable from each other, we
conclude that the presence of innocent decision-makers is only relevant to
assess whether there is indeed a sole actor. If some corporate decision-
makers are unaware of wrongdoing then there exists no unity between the
agent and the corporation such that the agent's complete adversity will
impute to the corporation,

Application of the in pari delicto doctrine in the instant case

In evaluating the pleadings in this case to determine whether
the actions of AMERCO’s officers are imputed to AMERCO, we “recognize
all factual allegations in [the] complaint as true and draw all inferences in
[the plaintiffs] favor.” Buzz Stew, LLC v. City of N, Las Vegas, 124 Nev.
224, 228, 181 P.3d 670, 672 (2008). Applying basic corporate agency law,
the respondents’ actions are imputed to AMERCO unless the adverse
interest exception applies. However, the plaintiffs did not allege that any
respondent totally abandoned AMERCO’s interests. Instead, they allege
that respondent AMERCO's officers and directors initiated and
participated in a variety of actions that clearly benefited them. But the
corporation was not completely harmed by the transactions, as it acquired
a management interest in the self-storage facilities, and the corporation
retained a fee for its role in the operation of those facilities. Furthermore,
it is not alleged that the respondent officers and directors acted solely for
their own benefit. In light of our narrow construction of the adverse
interest exception, we conclude that these allegations show less-than-total
abandonment of AMERCO’s interests. Because the adverse interest

exception does not apply, we need not address the sole-actor rule.
Having determined that the acts of AMERCO’s agents are
imputed to AMERCO does not end our inquiry into the in_pari delicto

 

 
defense. To assess whether the in_pari delicto defense precludes a
derivative suit here requires application of the factors set forth in
Shimrak, 112 Nev. at 252, 912 P.2d at 826. In that case, we noted that

“the courts should not be so enamored with the
latin phrase “in pari delicto’ that they blindly
extend the rule to every case where illegality
appears somewhere in the transaction, The
fundamental purpose of the rule must always be
kept in mind, and the realities of the situation
must be considered. Where, by applying the rule,
[1] the public cannot be protected because the
transaction has been completed, [2] where no
serious moral turpitude is involved, [3] where the
defendant is the one guilty of the greatest moral
fault, and [4] where to apply the rule will be to
permit the defendant to be unjustly enriched at
the expense of the plaintiff, the rule should not be
applied.”

Shimrak, 112 Nev. at 252, 912 P.2d at 826 (alterations in original)
(quoting Magill, 74 Nev. at 386, 333 P.2d at 719), Other courts have

 

similarly noted that there are public policy grounds for not applying in
paridelicto as a bar to an action among wrongdoers. See Bateman

Eichler, Hill Richards, Inc, v, Berner, 472 U.S. 299, 310 (1986) (holding
that, in the context of a federal securities law, public policy must be
considered before allowing an in pari delicto defense); American Intern.
Group, 976 A.2d at 883. We determine that whether the defense of in pari
delicto should apply here is an issue for the district court to decide

following necessary discovery and briefing that properly evaluates the

 

 

factors to be considered for the defense. Thus, we remand this matter to

the district court for further proceedings.

22.

 
uments regarding rounds for affirm:

 

Although the district court dismissed appellants’ amended
complaint based solely on the Goldwasser settlement and its
determination that appellants could not pursue claims against the SAC

entities, respondents also argued other grounds for dismissing appellants!

amended complaint, which they now offer on appeal as alternate

 

rationales for affirming the district court's order. Since these alternate
grounds were raised in the district court below, we have elected to address

these issues on appeal. See Nevada Power Co, v, Haggerty, 115 Nev. 353,
365 n.9, 989 P.2d 870, $7 n.9 (1999).
Appellants adequately pleaded demand futility
In 2003, the district court granted respondents’ motion to
dismiss on the ground that appellants had not adequately pleaded demand

futility pursuant to NRCP 23.1. See Shoen v, SAC Holding Corp., 122
Nev. 621, 631, 137 P.3d 1171, 1178 (2006). On appeal, we clarified the
requirements for pleading demand futility and reversed and remanded the

On appeal, respondents also claim that dismissal is proper because
the AMERCO shareholders ratified the SAC transactions. Ratification
was the subject of a motion to dismiss in 2007, but the district court
denied it because there were genuine issues of material fact regarding the
sufficiency of the disclosure regarding those transactions. The district
court did not again consider this ratification defense. However,
respondents now request that we take judicial notice of public filings filed
in 2008, after the district court's latest dismissal order, which they claim
cure the earlier factual issues. We decline to consider this ratification
issue as it was not properly before the district court, and we decline to
address an issue raised for the first time on appeal. See Mainor v, Nault,
120 Nev. 750, 770 n.42, 101 P.34 308, 321 n.42 (2004),

 

23

 
matter to the district court. Id, at 644-45, 137 P.3d at 1186-87.
Appellants filed an amended complaint, and nominal defendant AMERCO
filed a motion to dismiss, arguing that appellants still had not met NRCP
28.1’s pleading requirements. In denying the motion, the district court
determined that appellants “satisfied the heightened pleading
requirements of demand futility by showing a majority of the members of
the AMERCO Board of Directors were interested parties in the SAC
transactions.”

Respondents argue that the district court applied the wrong
demand futility test and, thus, an alternate ground upon which we should
affirm the district court's subsequent order granting the motions to
dismiss is that appellants failed to meet the pleading requirements set
forth in Shoen. We disagree.

Persons filing shareholder derivative suits face a heightened
pleading requirement pursuant to NRCP 23.1. Shoen, 122 Nev. at 633,
137 P.3d at 1179. NRCP 23.1 requires shareholders to “state, with
particularity, the demand for corrective action that the shareholder made
on the board of directors . .. and why he failed to obtain such action, or his
reasons for not making a demand.” Id, at 633-34, 137 P.9d at 1179
(emphasis added). Failure to satisfy the heightened pleading requirement
“justifies dismissal of the complaint for failure to state a claim upon which
relief may be granted.” Id, at 634, 137 P.3d at 1180.

‘To determine whether demand upon the board is excused, we
apply standards articulated by the Delaware Supreme Court in Aronson v.
Lewis, 473 A.2d 805, 814 (Del. 1984), overruled on other grounds by
Brehm v. Eisner, 746 A.2d 244, 254 (Del. 2000); and Rales v, Blasband,
634 A.2d 927, 936 (Del. 1993). See Shoen, 122 Nev. at 644, 137 P.3d at

24

 
ne

1186. The Aronson test applies “[w]hen the alleged wrongs constitute a
business decision by the board of directors.” Shoen, 122 Nev. at 636, 137
P.3d at 1181 (emphasis omitted). The Rales test, on the other hand, is the
appropriate “demand futility analysis for when the board considering a
demand is not implicated in a challenged business transaction.” Shoen,
122 Nev. at 638-39, 137 P.3d at 1183, As we previously recognized,
appellants in this case “do not challenge any board-considered business
decision, ‘Therefore, the Rales test applies.” Id, at 641, 137 P.d at 1184-
85,

Under the Rales test, we evaluate whether particularized facts
in the shareholder derivative complaint “raise[ ] a reasonable doubt that
the current board of directors would be able to exorcise its independent
and disinterested business judgment in responding to a demand.” Id, at

642, 137 P.dd at 1185. Directors’ impartiality can be shown through

 

allegations demonstrating “that the majority is beholden to’ directors who
would be liable.” [d, at 639, 137 P.3d at 1188 (quoting Ralos, 634 A.2d at
936). Additionally, director interestednoss can be demonstrated through
alleged facts indicating that “a majority of the board members would be
‘materially affected, either to [their] benefit or detriment, by a decision of
the board, in a manner not shared by the corporation and the
stockholders.” Id, (alteration in original) (quoting Seminaris v. Landa,
662 A.2d 1350, 1354 Del. Ch. 1995)). A shareholder's “[aJllegations of
mere threats of liability through approval of the wrongdoing or other
participation” is not enough to satisfy the demand futility pleading
requirements. [d, at 639-40, 137 P.3d at 1183.

At the time that appellants filed their shareholder derivative
suit, eight persons composed AMERCO’s board of directors: Joe, James,

26

 

 
Bayer, Carty, Dodds, Brogan, Grogan, and M. Frank Lyons.’ We
previously determined that “it is clear that [Joe and James] are interested
for demand futility purposes.” Id. at 643 n.65, 187 P.3d at 1185 n.65.
Consequently, now we must evaluate whether appellants have adequately

 

alleged that at least two additional directors lack independence and
impartiality. See Beneville v. York, 769 A.2d 80, 86 (Del. Ch. 2000)
(holding that demand is not required when half of the members of an
even-numbered board are interested).

Additional directors are allegedly interested and lack

independence

We conclude that appellants adequately alleged that three
other directors—Bayer, Carty, and Dodds—lack disinterestedness and
independence.* In the amended complaint, appellants alleged that when
Bayer served as the president of AMERCO’s real estate subsidiary AREC,
he gave approval for the sale of approximately 100 properties to the SAC
entities at unfair prices. Also as AREC's president, appellants alleged
that Bayer “used AREC’s human resources and offices to help Mark Shoen
and the SAC entities locate, obtain and develop valuable self-storage

properties without compensation, without disclosing these arrangements

“Lyons is not a party to this case.

“Our dissenting colleague acknowledges that the parties do not
address whether demand futility should be assessed based on the
composition of the board in place in 2002 when the original complaint was
filed, or in 2006 when the amended complaint was filed, citing Braddock v.
Zimmerman, 906 A.2d 776, 786 (Del. 2006). However, the parties did not
address this issue, and we will not discuss an issue not raised on appeal.
See NRAP 28; see also Bongiovi v. Sullivan, 122 Nev, 556, 569 n.5, 138
P.3d 433, 444 n.5 (2006).

 

 
i
eormanmeara

to AMERCO's stockholders.” Moreover, appellants alleged that Bayer was
a director of another AMERCO subsidiary, and he “approved over $100
million in non-recourse loans” from that subsidiary to the SAC entities,
which were then used to purchase the properties from AREC. Appellants
further asserted that Bayer “knowingly signed incomplete and misleading
annual reports” that “concealed the nature and scope of AMERCO's
dealings with the SAC [e]ntities.”

 

With regard to Carty and Dodds, appellants alleged in their
amended complaint that while acting as directors of U-Haul, the two
board members authorized millions of dollars in nonrecourse loans to the
SAC entities, and, in their roles as directors of AREC, they consented to
the sale of hundreds of properties to the SAC entities. Additionally,
appellants alleged that, like Bayer, Carty and Dodds signed false annual
AMERCO reports.

Appellants further alleged that Carty is not impartial because
he is Joe and Mark’s uncle, even becoming like a “father figure” to them.
See Harbor Finance Partners v. Huizenga, 751 A.2d 879, 889 (Del. Ch.
1999) (stating that “[cllose familial relationships between directors can
create a reasonable doubt as to impartiality"). Appellants also contended
that Carty “repeatedly encouraged [Joe, James, and Mark] to ‘funnel’
money out of AMERCO on a pre-tax basis.” Throughout the family feud
for control over AMERCO, appellants alleged, Carty consistently aligned
himself with Joe and Mark. In fact, according to appellants, Joe placed
Carty back on the AMERCO board of directors after a different Shoen
brother had fired him.

27

 

 
one
EE

Regarding Dodds, appellants further alleged that he has a

“close, bias-producing relationship with [Joe Shoen].” According to

 

appellants, Dodds fervently supported Joe during the Shoen family feud
and, when Joe attempted to take over AMERCO by issuing stock to
trustworthy employees who then allowed him to vote their shares, he
selected Dodds as one of the employees to purchase stock. However,
appellants alleged, Dodds could not afford to purchase the stock, so Joe
and the AMERCO board loaned him the money.

Further allegations in the amended complaint included that
Joe, James, and Mark “dominate and control the AMERCO Board” and
that they have “pack{ed] the AMERCO Board with loyal subordinates.”
Appellants also alleged that Joe, James, and Mark were in a position to
manipulate Bayer, Carty, and Dodds because the former group of men
have the power to fire the latter group and discontinue their salaries and
pension benefits. Appellants contended that in the past, Joe retaliated
against directors that took positions adverse to his.

In accepting appellants’ allegations as true, see Shoen, 122
Nev. at 635, 137 P.3d at 1180, it appears that Joe and James have
considerable influence over Bayer, Carty, and Dodds, raising reasonable
doubts as to their ability to exercise independent and disinterested
business judgment in responding to a demand. Construing the amended
complaint liberally with all fair inferences made in favor of appellants, see
id, we conclude that appellants have alleged sufficient facts
demonstrating that demand upon the board would have been futile, as at

28

 

 
 

J

least five directors were interested or lacked impartiality—James, Joe,
Bayer, Carty, and Dodds.

Respondents request this court to take judicial notice of a
bankruptcy court’s findings “that ‘the appointment [of AMERCO’s officers
and directors] is consistent with the interests of the creditors and the
‘equity security holder{s] and with public policy.” Respondents argue that
this finding demonstrates the independence of the AMERCO board of
directors, Respondents also contend that the bankruptcy court addressed
the fairness of the SAC transactions.

We may take judicial notice of facts that are “[glenerally known
within the territorial jurisdiction of the trial court,” as well as those that
are “[cJapable of accurate and ready determination .... [and] not subject to
reasonable dispute.” NRS 47.1302). Several courts have concluded that
“fa] court may take judicial notice of a document filed in another court ‘not
for the truth of the matters asserted in the other litigation, but rather to
establish the fact of such litigation and related filings.” Liberty Mut. Ins,
Co, v, Rotches Pork Packers, Inc., 969 F.2d 1384, 1388 (2d Cir. 1992)
(quoting Kramer v. Time Warner Inc., 937 F.2d 767, 774 (2d Cir. 1991));
accord Lee_v. City of Los Angeles, 250 F.3d 668, 690 (9th Cir. 2001);
Southern Cross Overseas v. Wah Kwong Shipping, 181 F.3d 410, 426 (8d
Cir. 1999). However, generally, this court will not take judicial notice of
facts in a different case, even if connected in some way, unless the party
seeking such notice demonstrates a valid reason for doing so. Mack v.
Estate of Mack, 125 Nev. 80, 91, 206 P.3d 98, 106 (2009) (holding that this
court will generally not take judicial notice of records in other matters);
Carson Ready Mix v, First Natl Bk., 97 Nev. 474, 476, 635 P.2d 276, 277
(1981) (providing that this court will not consider evidence not appearing
in the record on appeal); Occhiuto v. Occhiuto, 97 Nev. 143, 145, 625 P.2d
568, 569 (1981) (recognizing general rule but holding that the close
relationship between the case and a previous divorce proceeding justified
the district court taking judicial notice of the prior proceeding). We
conclude that the bankruptcy court's alleged findings that the AMERCO.
board was independent and that the SAC transactions were fair are not
appropriate matters of which this court may take judicial notice.

 

continued on next page...

29

 
In Shoen, we noted that “[iJf the district court should find the
pleadings provide sufficient particularized facts to show demand futility, it
‘must later conduct an evidentiary hearing to determine, as a matter of
law, whether the demand requirement nevertheless deprives the
shareholder of his or her standing to sue.” Id. at 645, 137 P.3d at 1187.
‘Thus, on remand, this matter should be scheduled for an evidentiary

 

hearing to determine whether demand was, in fact, futile.”

 

the context of analyzing demand futility. However, the dissent overlooks
provision in the bankruptcy plan that expressly allowed appellants’
derivative claims to proceed after the plan was approved:

 

Notwithstanding anything in this Plan to the
contrary, the Confirmation of this Plan shall not
(@ enjoin, impact or affect the prosecution of the
Derivative Actions .

“Derivative Actions,” as defined by the reorganization plan, specifically
include the matters that resulted in this appeal. As a consequence, it is
clear that the bankruptcy court order provides no basis for resolving
whether the directors were interested for purposes of demand futility.

 

Respondents contend that this court should affirm the district
court's order because appellants have not overcome the presumption that
respondents acted in good faith. Pursuant to Nevada's business judgment
rule set forth in NRS 78.138, directors and officers benefit from the
“presumption that in making a business decision [they]... acted on an
informed basis, in good faith and in the honest belief that the action taken
was in the best interests of the company.” Shoen, 122 Nev. at 632, 137
P.8d at 1178-79 (quoting Aronson, 473 A2d at 812). However, the
business judgment rule cannot be invoked by directors, where, as alleged
here, they were not asked to consider the issue, Aronson, 473 A.2d at 812,
nor can respondents rely on the business judgment rule as to directors
Bayer, Carty, and Dodds when the board was not asked to consider the
continued on next page ..

 

 
‘Some of appellants’ causes of action wore pleaded aufficiently

Respondents contend that an additional alternate ground
upon which this court should affirm the district court’s order is that
appellants failed to state claims upon which relief can be granted, The
claims against all of the respondents are: (1) engaging in ultra vires acts,
(2) wrongful interference with AMERCO’s prospective economic
advantage, and (8) abuse of control.!!_ The appellants also claimed: (1)
breach of the fiduciary duty of loyalty by engaging in self-dealing against
all of the former directors, (2) aiding and abetting a breach of the fiduciary
duty of loyalty against the SAC entities, (3) usurpation of corporate
opportunities against Mark, and (4) unjust enrichment against the SAC
entities.

Before addressing each cause of action, we necessarily note
that appellants’ claims are subject to different pleading standards.
Pursuant to NRS 78.138(7), to show that a director breached his or her

~ continued

SAC entity transactions. [d, at 816. Thus, we determine that the business
judgment rule does not provide this court an alternative ground upon
which to affirm the district court's dismissal.

§UNevada does not recognize a cause of action for abuse of control,
and in the cases to which appellants cite, claims for abuse of control are
essentially claims for breach of the fiduciary duty of loyalty. See
Weinberger v, UOP, Inc, 457 A2d 701, 710 (Del. 1983) (stating that
directors owe “shareholders an uncompromising duty of loyalty”); see also
Jones v. H.F, Ahmanson & Company, 460 P.2d 464, 471 (Cal. 1969)
(acknowledging that majority shareholders “have a fiduciary responsibility
to the minority and to the corporation”). Accordingly, we conclude that
appellants’ claim of abuse of control is duplicative of their claim of breach
of the fiduciary duty of loyalty and need not be separately addressed,

31

 
fiduciary duty, a shareholder must prove that the director's “act or failure
to act constituted a breach of his or her fiduciary duties” and that the
“breach of those duties involved intentional misconduct, fraud or a
knowing violation of the law.” NRCP 9(b) provides, in pertinent part, that
“fiIn all averments of fraud{,]...the circumstances constituting
fraud , .. shall be stated with particularity.” Because appellants’ claims of
breach of the fiduciary duty are, in this instance, allegations of fraud
committed by respondent officers and directors, for those causes of action,
appellants must satisfy the heightened pleading requirement of NRCP
9(b). For all other causes of action, appellants need only satisfy the more
liberal pleading requirements of NRCP 8(a) (‘a claim for relief. . shall
contain... a short and plain statement of the claim showing that the
pleader is entitled to relief’).

opportunities

Appellants’ first and second causes of action in the amended
complaint contained allegations that respondents breached the fiduciary
duty of loyalty by self-dealing and usurping corporate opportunities, and,
with regard to the SAC entities, aiding and abetting a breach of fiduciary
duty. “[TJhe duty of loyalty requires the board and its directors to
maintain, in good faith, the corporation's and its shareholders’ best
interests over anyone else's interests.” Shoen, 122 Nev. at 632, 137 P.3d
at 1178. As noted, to hold “a director or officer . . . individually liable,” the

 

shareholder must prove that the director's breach of his or her fiduciary
duty of loyalty “involved intentional misconduct, fraud or a knowing
violation of law.” NRS 78.138(7)(b); see also Shoen, 122 Nev. at 640, 137
P.8d at 1184, Appellants’ allegations can be divided into four groups of

 

defendants.

 

 
Ss

thoen

In the amended complaint, appellants first alleged that Mark,
one of AMERCO’s executive officers, was materially self-interested in the
transfer of AMERCO assets and opportunities to the SAC entities due to

 

is ownership and control of the SAC entities. Appellants contended that
Mark breached his fiduciary duty of loyalty, placing his own interests
above those of AMERCO, when he caused AMERCO to sell property to
SAC entities at below-market prices and usurped corporate opportunities
that he had learned about as an officer of AMERCO, “by causing the SAC
[e]ntities ... to buy [self-storage] properties’ despite his knowledge that
AMERCO would have been interested in the properties and without
obtaining disinterested director approval. Considering the accusations to
be true, we determine that appellants have set forth claims upon which
relief can be granted, based on a breach of the fiduciary duty of loyalty by
Mark,
Joe and James Shoen

Appellants further alleged in the first cause of action in the
amended complaint that Joe and James retained an undisclosed pecuniary
interest in the SAC entities and that their self-interest in the SAC
transactions was increased through their familial ties to Mark. However,
appellants offered no explanation as to why or how Joe and James
personally benefited from the diversion of AMERCO’s assets to a company
owned by Mark, other than to suggest that the sale of their SAC-entity
shares to Mark was below-market, which infers that they secretly retained
an interest in the entities. We conclude that merely alleging that Joe and
James benefited because they had an interest in aiding their brother and
might have a continued pecuniary interest of some sort fails to meet the
heightened pleading standard in NRCP 9(b). ‘Thus, respondents are

33

 

 
correct that the claim in the first cause of action in the amended complaint
was properly dismissed as to Joe and James, albeit for incorrect reasons.
See LYCVA v, Secretary of State, 124 Nev. 669, 689 n.58, 191 P.3d 1138,
1151 n.58 (2008) (“[W]e will affirm the district court if it reaches the right
result, even when it does so for the wrong reason.”).

Bayer, Carty, Dodds, Herrera, Johnson, Brogan, and
Grogan

Appellants alleged that Bayer, Carty, Dodds, Herrera,
Johnson, Brogan, and Grogan breached their duty of loyalty “by knowingly
orchestrating, participating, facilitating and aiding and abetting the self-
dealing transactions.” In particular, appellants alleged that these
respondents “knowingly signed misleading and incomplete public filings”
that failed to include the details of the SAC transactions. Appellants
contended that Bayer, Carty, Dodds, Herrera, Johnson, Brogan, and
Grogan knew the filings were false because, as members of the boards of
various AMERCO subsidiaries, they approved loans to the SAC entities
and were aware of the details of the transactions. However, simply
alleging that the public filings did not contain enough information about
the SAC entities does not demonstrate that respondents engaged in
intentional misconduct or fraud. Given the statutory requirements of
NRCP 9(b), we determine that appellants’ claim in the first cause of action
in the amended complaint of a breach of the fiduciary duty of loyalty by
Bayer, Carty, Dodds, Herrera, Johnson, Brogan, and Grogan was not
pleaded with sufficient particularity and was correctly dismissed.

‘The SAC entities

The SAC entities allegedly aided and abetted the other
respondents’ breaches of fiduciary duty. Although we have not previously
recognized a claim for aiding and abetting the breach of a fiduciary duty,

34

 
 

we take this opportunity to do so, We adopt the standard applied by

 

Delaware courts, which requires that four elements be shown: (1) a
fiduciary relationship exists, (2) the fiduciary breached the fiduciary
relationship, (3) the third party knowingly participated in the breach, and
(A) the breach of the fiduciary relationship resulted in damages. Malpiede
v Townson, 780 A.2d 1075, 1096 (Del. 2001).

‘The extent of appellants’ allegation was that “[t]he SAC
[elntities (acting through Defendant [Mark Shoen]) knowingly
participated in the breaches of fiduciary duties by facilitating the transfer
of AMERCO’s assets at below-market prices.” However, because Mark
owns and controls the SAC entities, we conclude that appellants have
sufficiently satisfied the elements enunciated in Malpiede. Thus the
appellants’ claim against the SAC entities for aiding and abetting

 

 

respondents’ breach of the fiduciary duty of loyalty was improperly
dismissed.

Appellants failed to adequately plead a cause of action for
ultra vires acts

Appellants’ third cause of action pleaded in their amended
complaint was based on respondents engaging in ultra vires acts. We
previously stated that “a corporate act is said to be ultra vires when it goes
beyond the powers allowed by state law or the [corporation's] articles of
incorporation.” Shoen, 122 Nev. at 643, 137 P.3d at 1185. However,

“{iJf... the {corporation's} act was within the corporate powers, but was

 

performed without authority or in an unauthorized manner, the act is not
ultra vires.” Id, at 643, 137 P.3d at 1186 (alterations in original) (quoting
Sammis v. Stafford, 56 Cal. Rptr. 2d 689, 693 (Ct. App. 1996).

In the amended complaint, appellants alleged that AMERCO

acted in violation of its articles of incorporation when it transacted

36

 
business with the SAC entities without obtaining shareholder approval
prior to consummating the transactions. Because AMERCO’s articles of
incorporation permit such actions as long as shareholder approval is
obtained, such actions were “unauthorized” but not ultra vires. Appellants
failed to demonstrate otherwise. Thus, we conclude that appellants’ cause
of action for ultra vires acts must be dismissed.

Wrongful interference with prospective economic advantage

Appellants next allege wrongful interference with prospective
economic advantage, against all respondents. Interference with
prospective economic advantage requires appellants to demonstrate the
following five factors:

(1) a prospective contractual relationship between
the plaintiff and a third party; (2) knowledge by
the defendant of the prospective relationship; (3)
intent to harm the plaintiff by preventing the
relationship; (4) the absence of privilege or
justification by the defendant; and (6) actual harm
to the plaintiff as a result of the defendant's
conduct,
Wichinsky v. Mosa, 109 Nev. 84, 87-88, 847 P.2d 727, 729-30 (1993).

In their amended complaint, appellants alleged that

 

“AMERCO had prospective economic or contractual relationships with
customers who would have rented self-storage units in U-Haul facilities,”
as well as “with third parties who owned and sold properties which could
be used as self-storage locations.” Appellants further alleged that
respondents were aware of these prospective economic relationships and
“acted for the benefit of the SAC [elntities, with the intent to harm
AMERCO.” Also, appellants pointed to the sale of AMERCO properties to
the SAC entities at allegedly unfairly low prices, which prevented
AMERCO from realizing the amount of profit it would have obtained from

36

 

 
one
Een

selling to outsiders. Finally, appellants

 

leged that AMERCO and its
shareholders have suffered irreparable harm as a result.

Unlike the claims of breach of fiduciary duty, appellants’ claim
for wrongful interference with prospective economic advantage is not
based on fraud; thus, it is not subject to the heightened pleading
requirement in NRCP 9(b). Accepting as true each of the appellants’
particularized factual allegations and drawing every fair inference in their

favor, appellants satisfied the general pleading requirement of NRCP

 

8(@).!? Therefore, we determine that appellants have set forth a claim in
the fourth cause of action of the amended complaint of wrongful
interference with prospective economic advantages upon which relief could
be granted.

Unjust enrichment

Appellants’ next cause of action is for unjust enrichment
against the SAC entities. “Unjust enrichment occurs whenever a person
has and retains a benefit which in equity and good conscience belongs to
another.” Nevada Industrial Dev. v. Benedetti, 103 Nev. 360, 363 n.2, 741
P.2d 802, 804 n.2 (1987).

“Our dissenting colleague argues that because we dismissed the
breach of fiduciary duty claims against the directors, we must also dismiss
the wrongful interference claims. In reaching this conclusion, the
dissenting justice contends that a wrongful interference claim fails if the
plaintiff does not present sufficient evidence that the director's actions
overcome the business judgment presumption. While we do not dismiss
this analysis, the parties did not brief this argument on appeal, and it is
thus not properly before this court. See NRAP 28; see also Bongiovi v.
Sullivan, 122 Nev. 556, 569 n.5, 138 P.3d 433, 444 n.5 (2006).

ar

 

 
ane a

 

Appellants alleged in the amended complaint that “the SAC
[eIntities have received, and they retain, money and property of
AMERCO,” The SAC entities allegedly accomplished this through
transactions that they entered into with AMERCO, Under the more
liberal pleading requirements of NRCP 8(a), we conclude that appellants’
‘unjust enrichment claim was pleaded sufficiently.
Whether appellants’ claims are barred by the statute of limitations

‘The final ground upon which respondents urge this court to
affirm the district court's order is that the statute of limitations for
appellants’ claims has expired, If the allegations contained in the
amended complaint demonstrate that the statute of limitations has run,
then dismissal upon the pleadings is appropriate. See Shupe & Yost, Inc.
vy. Fallon Nat'l Bank, 109 Nev. 99, 100, 847 P.24 720, 720 (1993).

Appellants’ initial two causes of action alleged a breach of the
fiduciary duty. A breach of fiduciary duty is analogous to fraud, and thus,
Nevada applies the three-year statute of limitation set forth in NRS
11.190(3)(d). Nevada State Bank v. Jamison Partnership, 106 Nev. 792,
799, 801 P.2d 1377, 1382 (1990). The statute of limitations for a claim for
breach of fiduciary duty does not begin “to run until the aggrieved party
knew, or reasonably should have known, of the facts giving rise to the
breach.” Id, at 800, 801 P.2d at 1382. When a fiduciary “fails to fulfill his
obligations” and keeps that failure hidden, the statute of limitations will
not begin to run until the failure of the fiduciary is “discovered, or should
have been discovered, by the injured party.” Golden Nugget, Inc. v. Ham.
95 Nev. 45, 48-49, 589 P.2d 173, 175 (1979). “Mere disclosure of a
transaction by a director, without disclosure of the circumstances
surrounding the transaction, is not sufficient, as a matter of law, to
‘commence the running of the statute." Id. at 48, 589 P.2d at 175.

38

 
Appellants’ claim for wrongful interference with prospective
economic advantage is subject to a four-year statute of limitations, See

NRS 11,190(2)(0); Orr v, Bank of America, NT & SA, 285 F.3d 764, 781
(Sth Cir. 2002) (applying Nevada law and concluding that a claim for

 

“intentional interference with prospective business relations [is] subject to
Nevada’

unjust enrichment claim is four yea

 

four-year limitations period”). The statute of limitation for an
 NRS 11.190(2)(0).
A determination of “[wJhen the plaintiff knew or in the

 

exercise of proper diligence should have known of the facts constituting
the elements of his cause of action is a question of fact for the trier of
fact.” Nevada State Bank, 106 Nov. at 800, 801 P.2d at 1382 (quoting
Oak Grove Inv, v, Bell & Gossett Co., 99 Nev, 616, 623, 668 P.2d 1075,
1079 (1983), overruled on other grounds by Calloway v, City of Reno, 116
Nev. 250, 264, 993 P.2d 1259, 1268 (2000), overruled on other grounds by
Olson v, Richard, 120 Nev. 240, 89 P.3d 31 (2004)). Because, here, the
pleadings are sufficient to create a question of fact regarding whether the
statute of limitations had run, and the district court never reached this
issue, we conclude that the question of whether the statute of limitations
has run against all of appellants’ viable claims must be considered on
remand.!3

 

"Appellants request that this court reassign the matter to a
different judge upon remand, arguing that “Judge Adams’ successive
dismissals demonstrate that he has prejudged this case.” However,
appellants fail to cite any basis for disqualification under the Nevada Code
of Judicial Conduct, and thus, we conclude that reassignment is not
warranted.

 

 
one
a

CONCLUSION

In conclusion, the Goldwasser settlement did not release
claims that arose after the agreement because the claim release clause
only released those claims that existed at the time of the settlement.
Additionally, while the acts of AMERCO's agents are imputed to
AMERCO, the in pari delicto defense may not preclude appellants from
bringing claims against respondents. We remand to the district court to
examine the factors in Shimrak and determine whether the in pari delicto
defense applies. We also remand to the district court to conduct an
evidentiary hearing to determine whether demand was futile,

As to the alternative grounds for affirming the district court,
we affirm in part and reverse in part. As to Mark, we conclude that the
appellants sufficiently pleaded a breach of the fiduciary duty of loyalty,
usurpation of corporate opportunities, and wrongful interference with
prospective economic advantage. Appellants also sufficiently pleaded
breach of the fiduciary duty of loyalty for aiding and abetting a breach,
wrongful interference with prospective economic advantage, and unjust
enrichment against the SAC entities. As to the other respondents,
appellants sufficiently pleaded wrongful interference with prospective
economic advantage. Therefore, we reverse the district court's dismissal of
these claims. As to all other claims, we conclude that appellants did not
sufficiently plead them and the district court correctly dismissed them.

40

 

 
Accordingly, we affirm in part and reverse in part the district
icourt’s order and remand this matter for proceedings consistent with this

opinion. NO

Hardesty

 

mn

 

 
PICKERING, J., concurring in part and dissenting in part:

In Shoen v, SAC Holding Corp., 122 Nev. 621, 137 P.3d 1171
(2006) (Shoen 1), this court reversed an order dismissing this case for not
adequately pleading demand futility and remanded with specific
instructions: (1) to the plaintiffs to file an amended complaint; and (2) to
the district court to decide whether, under Shoen I, the amended
complaint adequately pleaded demand futility. Now the case returns, this
time on an order dismissing the claims in the amended complaint as
precluded by the Goldwasser settlement and the in pari delicto doctrine. I
agree with the majority that neither the Goldwasser settlement nor the in
pari delicto doctrine precludes this suit at the pleading stage as a matter
of law. I also agree with its NRCP 12(b)(5) dismissal of certain claims for
relief and with its direction to the district court to conduct further
proceedings with respect to demand futility. However, I write separately
to address the claims remaining in the case and the scope of the
proceedings on remand with respect to demand futility and related issues.
1. Dismissal of the wrongful interference claims

‘The majority dismisses under NRCP 9(b) and NRCP 12(b)(5)
all of the claims asserted against the individual directors except the

wrongful interference with prospective economic advantage claim. I would

 

go further and dismiss the wrongful interference claim as well. “It is
hornbook law that the actions complained of in a claim for intentional
interference with prospective advantage must be wrongful.” Panter v,
Marshall Fields & Co,, 646 F.2d 271, 298 (7th Cir. 1981), Indeed, the very
name of the tort is “wrongful interference with prospective economic
advantage.” Leavitt v. Leisure Sports, Inc, 103 Nev. 81, 88, 734 P.2d
1221, 1225-26 (1987). The “wrongfulness” alleged in the amended

 

 
complaint to sustain this claim against the individual directors derives
entirely from their alleged breaches of fiduciary duty in connection with
the SAC transactions. If, as the majority concludes, the amended
complaint fails to plead sufficient facts to overcome the presumption of the
business judgment rule as to the breach of fiduciary duty claims—
appropriately, given the broadly exculpatory provisions in AMERCO's
organizational documents, see Wood v. Baum, 953 A.2d 136, 140-41 (Del.
2008); see also NRS 78.138(7)—the wrongful interference claims also fail.
Cf, Panter, 646 F.2d at 299 (“In the absence of sufficient evidence that the

 

directors acted improperly to overcome the presumption of the business
judgment rule, a case cannot proceed to the jury on an interference with
prospective economic opportunity theory.”).
2, Proceedings on remand
T cannot agree with the majority that the amended complaint

adequately alleges demand futility and would instead remand with
instructions to the district court to conduct the analysis ordered in Shoen
L! In my opinion, it is imprudent for this court to conduct that analysis in
the first instance under the unique circumstances presented here.

WThe district court's determination that being named defendants in

this suit makes the directors sufficiently “interested” as to excuse demand
is clearly erroneous and contrary to the law of this case. Shoen I, 122 Nev.

 

at 640, 187 P.3d at 1184 (“interestedness because of potential liability can
be shown only in those rare cases... where defendants’ actions were so
egregious that a substantial likelihood of director liability exists”
(quotations omitted). Particularly is this so given the dismissal of most, if
not all, of the claims asserted in the amended complaint against the
individual directors.

 

 
“Demand futility analysis is conducted on a claim-by-claim
basis.” Beam ex rel. M. Stewart Living v. Stewart, 833 A.2d 961, 977 n.48
(Del, Ch. 2003). The dismissal of most, if not all, of the claims against the
individual directors has a large potential impact on the demand futility
analysis. The briefing that was done on demand futility was filed in the
district court in 2006 and 2007 and in this court in 2009. Although not
addressed by the parties, it is not even clear whether, given the dismissal
and subsequent amendment in 2006 of the complaint, demand futility
should be assessed as of 2002, when the original complaint was filed, or
2006, when the amended complaint was filed. See Braddock v.
Zimmerman, 906 A.2d 776, 786 (Del. 2006) (‘Where a complaint is
amended with permission following a dismissal without prejudice, even if
the act or transaction complained of in the amendment is essentially the
same conduct that was challenged in the original dismissed complaint, the
Rule 23.1 demand inquiry must be assessed by reference to the board in
place at the time when the amended complaint is filed.”).

It appears from the amended complaint that this is a type of

double-derivative suit? where, to excuse demand, the complaint must

“The amended complaint alleges indirect injury to the parent,
AMERCO, in which the plaintiffs have an interest, as a result of alleged
direct injuries to its subsidiaries, AREC and U-Haul. Recent Delaware
cases, on whose demand futility law we relied in Shoen J, holds that “in a
double derivative action involving a wholly owned subsidiary, a
stockholder plaintiff only must plead demand futility (or otherwise satisfy

Rule 23.1) at the parent level.” Hamilton Partners, L.P. v. England, 11
A.3d 1180, 1207 (Del. Ch. 2010) (discussing Lambrecht v, O'Neal, 3 A.3d

277 (Del. 2010)).

 
allege facts that create “a reasonable doubt that a majority of the Board
would be disinterested or independent in making a decision on a demand.”
Rales v. Blasband, 634 A.2d 927, 930 (Del. 1993) (emphasis added). The
focus in this type of case is not on “the challenged transaction or the
directors’ interest in that transaction, but rather on the directors’ interest
in the decision about whether to sue.” Waber v. Dorman, 2011 WL
814992, at *4 (ND. Ill. Feb. 23, 2011) (applying Delaware law and
discussing Rales).

“(I]t is a fundamental principle of corporate governance that

 

the directors of a corporation and not its shareholders manage the
business and affairs of the corporation.” 13 William Meade Fletcher,
Eletcher Cyclopedia of the Law of Private Corporations § 5963, at 60 (West
2004). Among the matters entrusted to a corporation's directors is the
decision to litigate—or not to litigate—a claim by the corporation against
third parties. Id.; In re Citigroup, Inc. Shareholder Derivative Litigation,
964 A.2d 106, 120 (Del. Ch. 2009). Allowing a derivative suit to proceed
without demand reallocates the authority to decide whether to sue from
the board to the individual shareholder or shareholders who sue

 

derivatively. To justify this reallocation of decision-making authority, a
derivative action complaint must comply with NRCP 23.1 and “allege with
particularity the efforts, if any, made by the plaintiff to obtain the action

the plaintiff desires from the directors or comparabl

 

authority and, if

 

 

necessary, from the shareholders or members, and the reasons for the
plaintiff's failure to obtain the action or for not making the effort.” While
“{pllaintiffs are entitled to all reasonable factual inferences that logically

flow from the particularized facts alleged, . .. conclusory allegations are

 
not considered as expressly pleaded facts or factual inferences.” Brehm v.
Bisner, 746 A.2d 244, 255 (Del. 2000).

Although Shoen I obviously did not address the yet-to-be-filed
amended complaint, its suggestion that demand futility be determined

  

 

under the test articulated in Rales remains appropriate. Shoen I, 122
Nev. at 641-42, 137 P.3d at 1185. “Rales requires that a majority of the
board be able to consider and appropriately to respond to a demand ‘free of
personal financial interest and improper extraneous influences,’ Demand
is excused as futile [only] if the Court finds that there is ‘a reasonable
doubt that a majority of the Board would be disinterested or independent
in making a decision on demand.” Beam, 833 A.2d at 97 (quoting Rales,
634 A.2d at 930, 935). A director is not “disinterested” if “he or she will

 

receive a personal financial benefit from a transaction that is not equally
shared by the shareholders” or “a corporate decision will have a materially
detrimental impact on a director, but not on the corporation and the
stockholders.” Rales, 634 A2d at 936, Lack of independence can be
shown by alleging particular facts that support a reasonable inference that

 

a director is so beholden to an interested party that his “discretion would
be sterilized.” Id. While a close family relationship can disqualify a
director—here, Joe Shoen and James Shoen,
‘against their brother, Mark Shoen, 122 Nev. at 642. n.65, 137 P.3d at 1185

to the derivative claims

 

1n,65—business, social, and more remote family relationships are not
disqualifying, without more. See Beam, 833 A.2d at 981; 1 Principles of
Corp. Governance § 1.26 (1994) (an uncle/nephew relationship does not
establish the parties

  

members of one another's immediate families, a

 

child/parent or sibling relationships do).

 

 
‘The main claims that survive dismissal are those against
Mark Shoen and the SAC entities. As to those claims, none of the
directors except Joe Shoen and James Shoen appear disqualified by
personal interest from fairly judging the suit demand. The issue that I
would remand to the district court, therefore, is whether, as to those
claims, the amended complaint pleads particularized facts sufficient to
overcome the presumption that, in assessing that suit demand, the
directors charged with doing so can be faithful to their fiduciary duties to
AMERCO, Beam, 845 A.2d at 1048-49; see In re Bear Stearns Cos,, __F.
Supp. 2d __, 2011 WL 223540, at “103 (S.D.N-Y. 2011) (applying
Delaware law).

‘The surviving claims in the amended complaint, at their core,
challenge the structural relationship between AMERCO, its subsidiaries,
and the SAC special purpose entities. This structure and these
relationships have been examined repeatedly, first by the United States
District Court for the District of Arizona in Goldwasser, and more recently
and much more comprehensively by the United States Bankruptey Court
for the District of Nevada in In_re: AMERCO, No. BR-03-52103-GWZ
(Bankr. D, Nev. 2004). They have also, according to the briefs presented

2After plaintiffs filed the original complaint but before the amended
complaint was filed, the United States Bankruptey Court for the District
of Novada entered its 11 U.S.C. § 1129(a)(5) order in In xe AMERCO, No.
BR-03-52103-GWZ (Bankr. D. Nev. 2004), approving AMERCO’s plan of
reorganization. In this order, the Bankruptey Court specifically found
that the AMERCO board's composition “is consistent with the interests of
creditors and equity security holders and with public policy,” including,
presumably, the requirements of applicable state and federal corporate
law, to include the independence requirements under the Sarbanes-Oxley
continued on next page...

 

 
anes <a

on appeal, been presented to and ratified by the company’s shareholders.‘
‘The principal named plaintiff, Paul Shoen, served on the AMERCO board
when some of the transactions he complains about in this derivative action
occurred and, more importantly, when the business model the amended
complaint challenges was set. While these facts do not establish elaim or
issue preclusion, they are significant, because they make it fair to expect
considerably more particularity than the rote conclusory language from
the demand futility caselaw that the amended complaint provides.

Given the unique and incontestable record facts, I would set
the pleading bar higher than my colleagues do before subjecting this entity
and its shareholders to derivative litigation. I am unconvinced that the
conclusory, though prolix, allegations in the amended complaint clear that
bar. There have been enough changes to the playing field, with the
majority's dismissal of many claims in the amended complaint,
AMERCO’s reorganization, and the 2008 shareholder ratification, that I
would remand for further briefing and argument on demand futility on the

issues,

 

imong others, outlined above
Pickering
continued

Act of 2002, 16 U.S.C. § 7213, and the entity's listing stock exchange rules.
ld,

‘As the majority recognizes, this issue is potentially dispositive in
this case but cannot be resolved by this court because it depends on the
adequacy of disclosures not included in the record on appeal.