Opinion ID: 216284
Heading Depth: 1
Heading Rank: 3

Heading: Our Prior Panel Opinion

Text: In Halebian II, we agreed with the defendants and the district court, classifying the second and third claims asserted in the plaintiff's complaint as derivative by looking to Massachusetts law, which all agree is applicable. Halebian II, 590 F.3d at 210. We saw the gravamen of the second and third claims as Halebian's challenge to the use of echo voting. We then reasoned: There is no indication that the alleged unlawfulness of echo voting under section 15(a) of the ICA or Massachusetts law was called to the attention of the Board by Halebian or anyone else prior to the institution of this lawsuit. And the Board has consistently and strenuously denied that echo voting violates these laws. Since the Board was apparently not of the view, nor had it been told, that using a Citigroup-affiliated service agent other than a broker-dealer to echo vote shares violated the ICA or Massachusetts law, or indeed any law, its failure to inform shareholders to the contrary does not appear to us to have been potentially false and misleading so as to be cognizable under Massachusetts or federal law. Id. (footnotes omitted). We thus expressed our inclination to affirm the judgment of the district court (Naomi Reice Buchwald, Judge ) dismissing Halebian's second and third claims, but declined to resolve them at that time. We reserved decision on those claims so that we could consider any commentary or analysis that the Supreme Judicial Court of Massachusetts might offer in answering our certified question regarding Halebian's first claim. Id. As to Halebian's undisputedly derivative first claim, which alleges a breach of fiduciary duty for failure to investigate alternatives to the New Agreements between the Trust and Legg Mason, we first rejected the district court's reliance on Federal Rule of Civil Procedure 23.1 in dismissing the claim. We were of the view that Halebian's complaint satisfied this federal pleading rule for derivative claims and, accordingly, that the claim thus stands or falls on whether it was properly dismissed pursuant to Massachusetts substantive law. Id. at 211. On the state-law question, the district court had ruled that despite language in the state derivative-suit dismissal provision indicating that it applies only to derivative proceedings commenced after the rejection of a demand, Mass. Gen. Laws ch. 156D, § 7.44(a) (emphasis added), the defendants could rely on the provision irrespective of the fact that the plaintiff had filed suit before the Board's rejection of the demand, provided they rejected the plaintiff's demand after a good faith review. Halebian I, 631 F.Supp.2d at 294. Proffering an alternative reading, [2] but declin[ing] to resolve [the issue] in the first instance, Halebian II, 590 F.3d at 210, we certified to the Supreme Judicial Court of Massachusetts the following question: Under Massachusetts law, can the business judgment rule, established under Mass. Gen. Laws ch. 156D, § 7.44, be applied to dismiss a derivative complaint filed timely under section 7.42 but prior to a corporation's rejection of the demand that serves as the basis for the suit? [3] Id. at 214.