Opinion ID: 895120
Heading Depth: 1
Heading Rank: 5

Heading: Is Mandamus Available?

Text: If a trial court fails to enforce the demand requirements of article 5.14, there is no interlocutory appeal. [35] But that of course does not preclude mandamus review. [36] Mandamus may be available upon a showing that (1) a trial court clearly abused its discretion by failing to correctly apply the law, and (2) the benefits and detriments of mandamus render appeal inadequate. [37] Dillingham concedes that if her demand was inadequate, dismissal was the appropriate remedy. [38] Thus, the only remaining question is whether an appeal could adequately address the error. In balancing the benefits and detriments of delaying or interrupting a particular proceeding, we must consider the purposes the Legislature was trying to accomplish. [39] Article 5.14 was adopted to preserve the principle that a corporation should be run by its board of directors, not a disgruntled shareholder or the courts. [40] In some cases, this goal will not be defeated merely because a trial court proceeds with a shareholder derivative suit despite an inadequate demand. For example, if one shareholder is entitled to proceed with a derivative action based on a proper demand, a board gains little by mandamus review of an improper demand by someone else. The parties in a closely-held corporation may have various claims between them that require litigation, regardless of whether a derivative claim is added to the mix. [41] And a corporation's interests may be adequately protected by article 5.14's provision for recovery of expenses if a shareholder suit is prosecuted without reasonable cause or for an improper purpose. [42] But this case involves a multi-million dollar merger proceeding on an expedited schedule. As the merger has now been completed, Lancer Corporation no longer exists. It is thus too late for its board to entertain a new analysis of the competing merger offers, or authorize an inquiry by independent and disinterested directors. Assuming as we must that the board would have given proper consideration to this matter had it received a proper demand, that possibility is now foreclosed because the demand fell so woefully short. The most frequent use we have made of mandamus relief involves cases in which the very act of proceeding to trial  regardless of the outcome  would defeat the substantive right involved. [43] Allowing this case to proceed to trial would effectively allow a shareholder to sue for damages connected with a merger without giving the corporation's board an opportunity to make such a decision for itself. As that would defeat the substantive right the Legislature sought to protect, we hold mandamus relief is warranted. Accordingly, we conditionally grant the writ of mandamus and order the respondent to vacate its order and enter a new order dismissing the plaintiff's suit. We are confident the trial court will comply, and our writ will issue only if it does not. Chief Justice JEFFERSON did not participate in the decision.