Opinion ID: 3065413
Heading Depth: 2
Heading Rank: 1

Heading: Nature of NYCERS’ Claim

Text: [1] A claim asserted under § 14(a) of the SEA may be brought either as a direct or a derivative claim. J.I. Case Co. v. Borak, 377 U.S. 426, 431 (1964). The characterization of a claim as direct or derivative is governed by the law of the state of incorporation. Lapidus v. Hecht, 232 F.3d 679, 682 (9th Cir. 2000). In the present case, California law applies, but there appears to be no difference between Delaware and California law on this issue. In 2004, the Delaware Supreme Court stated that an analysis of whether a claim is direct or derivative “must be based solely on the following questions: Who suffered the alleged harm—the corporation or the suing stockholder individually —and who would receive the benefit of the recovery or other remedy?” Tooley v. Donaldson, Lufkin & Jenrette, Inc., 845 A.2d 1031, 1035 (Del. 2004). A plaintiff’s classification of the suit is not binding. Id. To establish a direct action, “[t]he stockholder’s claimed direct injury must be independent of any alleged injury to the corporation. The stockholder must demonstrate that the duty breached was owed to the stockholder and that he or she can prevail without showing an injury to the corporation.” Id. at 1039. [2] In the pleadings, NYCERS alleges that Apple shareholders were deprived of the right to a fully informed vote. This claimed injury is independent of any injury to the corporation and implicates a duty of disclosure owed to shareholders. See In re Tyson Foods, Inc., 919 A.2d 563, 601 (Del. Ch. 2007) (“Where a shareholder has been denied one of the most NEW YORK CITY EMPLOYEES’ RETIREMENT v. JOBS 1733 critical rights he or she possesses—the right to a fully informed vote—the harm suffered is almost always an individual, not corporate, harm.”); Dieterich v. Harrer, 857 A.2d 1017, 1029 (Del. Ch. 2004) (“Dieterich’s disclosure allegations are direct claims, as they are based in rights secured to stockholders by various statutes.”). Thus, under state law, NYCERS’ claim for injury to its right to a fully informed vote is a direct claim. See also In re J.P. Morgan Chase & Co. S’holder Litig., 906 A.2d 766, 772 (Del. 2006) (“[W]here it is claimed that a duty of disclosure violation impaired the stockholders’ right to cast an informed vote, that claim is direct.” (citing In re Tri-Star Pictures, Inc., Litig., 634 A.2d 319, 330 n.12, 332 (Del. 1993))).2 Because NYCERS’ § 14(a) claim is direct, the district court erred in dismissing the consolidated complaint on the ground the claim was derivative and had to be pleaded as such.