Narrative Opinion Summary
In the consolidated CytRx Corporation Stockholder Derivative Litigation, lead plaintiff status was contested between the Niedermayer Plaintiffs and Taylor. The litigation stemmed from allegations that CytRx engaged in undisclosed paid promotions, with particular accusations against its CEO and VP. Following publication of these allegations, the company instituted a forum selection bylaw requiring certain legal actions to be litigated in Delaware. Various legal claims were filed, including Caremark claims, federal securities law violations, and spring-loaded options, with settlements reached for some claims. The Niedermayer Plaintiffs, through Section 220 demands, collected evidence linking board decisions to alleged misconduct, strengthening their position. The court evaluated standing under Delaware law, affirming the Niedermayer Plaintiffs' standing for certain claims based on their share purchase timeline. The court applied the Hirt v. U.S. Timberlands multi-factor test, favoring the Niedermayer Plaintiffs due to their detailed and original pleadings, vigorous prosecution, and reliance on Section 220 findings, appointing them as lead plaintiffs with Andrews, Springer, and Gainey McKenna as co-lead counsel. Taylor's efforts were deemed inferior, resulting in the denial of his motion for lead plaintiff status.
Legal Issues Addressed
Appointment of Lead Plaintiffs in Derivative Litigationsubscribe to see similar legal issues
Application: The court applied a multi-factor balancing test from Hirt v. U.S. Timberlands Service Co. to appoint the Niedermayer Plaintiffs as lead plaintiffs over Taylor.
Reasoning: The Niedermayer Plaintiffs are appointed as lead plaintiffs based on a multi-factor balancing test from Hirt v. U.S. Timberlands Service Co. Key factors include the quality of pleadings, economic stakes, litigative vigor, absence of conflicts among stockholders, enthusiasm in prosecution, and the competence of counsel.
Continuing Wrong Doctrinesubscribe to see similar legal issues
Application: The court considered the continuing wrong doctrine to allow potential standing for the Niedermayer Plaintiffs, acknowledging ongoing wrongful transactions.
Reasoning: While generally strict, the court noted flexibility for cases involving ongoing wrongful transactions, allowing for potential standing under the continuing wrong doctrine.
Forum Selection and Forum Non Convenienssubscribe to see similar legal issues
Application: The case was dismissed based on forum non conveniens, and the court upheld the enforcement of the forum selection bylaw favoring Delaware as the venue.
Reasoning: The judge denied a motion to dismiss based on improper venue on June 24, 2015, but allowed for a motion to dismiss for forum non conveniens, which was subsequently filed.
Section 220 Demand for Inspection of Corporate Books and Recordssubscribe to see similar legal issues
Application: The Niedermayer Plaintiffs made Section 220 demands to obtain documents supporting their allegations against CytRx board members.
Reasoning: Niedermayer and Reed made Section 220 demands to obtain documents linking the alleged misconduct to the CytRx board.
Standing in Stockholder Derivative Actionssubscribe to see similar legal issues
Application: The court found that the Niedermayer Plaintiffs had standing for claims involving seven out of thirteen articles, as they purchased shares before their publication.
Reasoning: It was determined that, regardless of the continuing wrong doctrine’s applicability, the Niedermayer Plaintiffs had standing regarding seven of the thirteen articles, as they purchased stock before the publication of those articles.