O  T  H  E  R      D  E  C  I  S  I  O  N  S  :

In re Sonus Networks, Inc., 2007 WL 4707827 (Mass. Super.)
(Dec. 7, 2007) (van Gestel, J.).

This derivative shareholder action involved competing motions to dismiss: Defendants sought dismissal with prejudice based on Plaintiffs’ failure to make a pre-suit demand on the company’s board of directors and Plaintiffs sought voluntary dismissal without prejudice in order to inspect the company’s records to determine whether pre-suit demand was necessary under Delaware law.

It appeared to the Court that the Plaintiffs sought voluntary dismissal so that they could do “what they should have done before filing suit in the first place: employ the summary procedure embodied in 8 Del. C. § 220 to investigate the possibility of corporate wrongdoing at Sonus.” Id. at *2. In evaluating Plaintiffs’ motion, the Court took guidance from the Delaware Supreme Court’s “policy against allowing stockholder Plaintiffs to amend their complaints after an unsuccessful appeal” for failure to make pre-suit demand. Id. at *1. This policy is intended to “encourage [] the Plaintiffs to investigate their claims before filing a complaint so that

they have a basis at the outset to make particularized factual allegations in the complaint.” Id. Although Plaintiffs in this case had not yet mounted an unsuccessful appeal – or even argued an unsuccessful motion at the trial stage – there had nevertheless “been considerable pain for the Defendants measured by the presumed substantial attorneys fees and costs involved in mounting their motion [to dismiss] and presenting the arguments to this Court thereon.” Id.

In light of these circumstances, the Court decided to dismiss Plaintiffs’ complaint without prejudice, but subject to an important condition: that “Plaintiffs pay to the Defendants, within 30 days from the date of this Order the costs, including reasonable counsel fees, of preparing the Defendants’ Motion to Dismiss … and all of the research, briefing, preparation for and presentation of the argument thereon ….” Id. at *2. If Plaintiffs failed to satisfy this condition, dismissal would be with prejudice.

In re American Tower Corp. Derivative Litigation, 2007 WL 4357771 (Mass. Super.)
(Nov. 27, 2007) (van Gestel, J.).

Shareholders in a derivative action moved for leave to amend a complaint that had been dismissed with prejudice for failure to make pre-suit demand. In originally dismissing the complaint, the Court cited the Delaware Supreme Court’s decision in White v. Panic for its emphasis on Plaintiff’s obligation to conduct a thorough investigation of the challenged corporate activity before filing suit.

In rejecting the instant motion, the Court again cited White v. Panic with

approval. The Court also emphasized the lateness of Plaintiff’s request to amend: “No effort, however, was made by the Plaintiff to seek leave to amend that complaint before this Court heard argument on the [original] motion to dismiss, reviewed the record, examined the briefs, studied the law crafted its decision. … This kind of let’s-see-what-the-judge-does-on-the-motion-attacking-present-complaint-first,-and-then-move-to-amend-later approach is not favored in a busy Session of the Superior Court.” Id. at *1.