Opinion ID: 1232235
Heading Depth: 1
Heading Rank: 5

Heading: was demand legally sufficient?

Text: Section 21-2072(1) provides: No shareholder may commence a derivative proceeding until: (a) A written demand has been made upon the corporation to take suitable action; and (b) Ninety days have expired from the date the demand was made unless the shareholder has earlier been notified that the demand has been rejected by the corporation or unless irreparable injury to the corporation would result by waiting for the expiration of the ninety-day period. The statute does not address the required substantive content of the demand, and this court has not had occasion to consider the legal sufficiency of a demand made pursuant to §21-2072(1). However, the Nebraska Court of Appeals addressed this issue in Association of Commonwealth Claimants v. Hake, supra . In that case, the assignees of depositors and creditors of an insolvent industrial loan and investment company brought a derivative action against the former directors of the company, the former general counsel, and other alleged coconspirators, to recover for alleged mismanagement and other improprieties which resulted in the insolvency. The assignees appealed from a district court order dismissing the case after granting the defendant's demurrers. The demurrers were sustained on the basis that the assignees had failed to fulfill the demand requirement. Regarding the sufficiency of the demand, the Court of Appeals stated: `The demand notice and request should set forth the persons to be sued, and should describe all the causes of action which it is intended to assert. The demand must clearly state the corporate wrongs complained of and should state any facts upon which its charges were based.' Id. at 130, 507 N.W.2d at 669-70, quoting 13 William Meade Fletcher et al., Cyclopedia of the Law of Private Corporations §5968 (rev.perm. ed.1991). We agree and adopt this principle of law. The demand considered in Hake stated generally that the plaintiff had `reasonable grounds to believe' that he had `meritorious causes of action' against `members and directors.' Association of Commonwealth Claimants v. Hake, 2 Neb.App. at 130, 507 N.W.2d at 670 (1993). The Court of Appeals determined that the alleged demand was not legally sufficient because it failed to name specific persons or facts giving rise to the alleged causes of action and that the allegations in the demand were mere conclusions. Id. We agree with the determination of the district court in this case that the demand attached to the amended petition and incorporated by reference therein [did] not comport with the requirements set forth in Hake.  Although the demand identifies the specific individuals to be sued, it provides no detail regarding the specifications of alleged negligence on the part of those individuals or the date or amounts of any alleged improper disbursements made or expenses incurred. The demand fails to state specific facts `upon which its charges [are] based.' Association of Commonwealth Claimants v. Hake, 2 Neb.App. 123, 130, 507 N.W.2d 665, 670 (1993). See 13 Fletcher et al., supra, §§5963 and 5968 (rev.perm. ed.1995) (demand should provide directors with sufficient information regarding relief sought and grounds for such relief so demand can be evaluated). Like the alleged demand in Hake, Kubik's demand is based on mere conclusions. Accordingly, the district court did not err in finding that Kubik failed to allege the making of a demand which met the specificity requirements giving rise to authority to sue.