(Solution Download) 1 Given that the shareholder was suing the directors and

1. Given that the shareholder was suing the directors and not a third party (an outsider to the corporation), was it fair to him to require that he first demand that the directors undertake the suit? Why or why not?
2. Assuming that the shareholder?s accusations were true, what could he have done to prevent the case from being dismissed?

On May 22, 2007, plaintiff [Lawrence Bezirdjian] filed a shareholder derivative complaint on behalf of Chevron Corporation (Chevron) against [David O?Reilly and others] current and certain former members of its Board of Directors (Board). The complaint contains counts for breach of fiduciary duties, gross mismanagement, constructive fraud, and waste of corporate assets, in connection with illicit payments Chevron allegedly made to Saddam Hussein in exchange for Iraqi oil from 2000 to 2003. In the complaint, plaintiff acknowledged that the majority of his factual allegations were derived from an article published by the New York Times on May 8, 2007, entitled ?Chevron Seen Settling Case on Iraq Oil.? He also alleged that he was excused from making a prefiling demand on the Board to institute this action because such demand would be futile. Specifically, he stated ?the [Board] cannot exercise independent objective judgment in deciding whether to bring this action or whether to vigorously prosecute this action because each of its members participated personally in the wrongdoing or are dependent upon other Defendants who did.?


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