Martin

BACKGROUND

A. The Operative Complaint

Plaintiffs filed the operative consolidated complaint in December 2011, described as ―a failed ‗say-on-pay‘‖ derivative shareholder action against defendants. The complaint alleged three causes of action against the individual defendants for breach of fiduciary duty based upon institution of the 2010 executive compensation program (first cause of action), false and misleading statements by the Board claiming it had adhered to Jacobs‘s ―pay for performance‖ policy (second cause of action), and false and misleading statements comparing Jacobs‘s performance to its ―peer group‖ (third cause of action). Plaintiffs alleged causes of action against Cook for aiding and abetting breaches of fiduciary duties (fourth cause of action) and breach of contract (fifth causes of action). The pertinent factual allegations of the operative complaint can be summarized as follows. In May 2010, the Board adopted a pay-for-performance compensation policy

3 designed to promote a performance-based culture and align the interests of Jacobs‘s executives with those of shareholders by linking compensation to the corporation‘s performance. Contrary to the stated policy,…

I concur as to all causes of action except the first cause of action for breach of fiduciary duty in *942 connection with the 2010 executive compensation program. I recognize that for the most part courts have rejected “say on pay” 1 cases challenging executive compensation disapproved by shareholders. (See, e.g., Robinson Family Trust v. Greig (N.D. Ohio, May 10, 2013, No. 5:12 CV 1713) 2013 WL 1943330 ; Raul v. Rynd (D.Del. 2013) 2013 U.S.Dist. Lexis 35256 [929 F.Supp.2d. 333]; see Sargent & Honabach, D & O Liability Handbook (2013-2014 ed.) § 110; Fairfax, Sue on Pay: Say on Pay’s Impact on Directors’ Fiduciary Duties (2013) 55 Ariz. L.Rev. 1, 25 (Fairfax); 2 but see NECA-IBEW Pension Fund ex rel. Cincinnati Bell, Inc. v. Cox (S.D. Ohio, Sept. 20, 2011, No. 1:11-cv-451) 2011 WL 4383368 .) Nevertheless, I believe here plaintiffs allege something more than just shareholder disapproval of executive compensation. Those allegations are sufficient at the pleading stage to state a cause of action for breach of fiduciary duty.

Because Jacobs Engineering Group, Inc. (the Company), is incorporated in Delaware, the parties agree that Delaware law governs the Company’s internal affairs.…

Three plaintiffs 1 filed the operative consolidated amended shareholder derivative complaint on behalf of nominal party Jacobs Engineering Group, Inc., against multiple defendants, including the individual members of Jacobs’s board of directors (the Board), 2 senior Jacobs executives 3 covered by a May 2010 executive compensation plan adopted by the Board, and Frederic W. Cook & Co., Inc., a consultant to Jacobs on the creation of the compensation plan. The consolidated complaint alleged the Board members violated fiduciary duties by adopting the compensation plan in the face of poor performance by Jacobs, misrepresenting compliance with the plan and company performance in a proxy statement, and failure to alter the plan in response to its rejection by a majority of Jacobs’s shareholders in a nonbinding vote. Plaintiffs alleged it was “useless and futile” to file a presuit demand on the Board to rescind the plan.

The trial court sustained defendants’ demurrer to the consolidated complaint on the grounds that plaintiffs had failed to adequately plead presuit demand futility, and alternatively, the complaint failed to state a cause of action under applicable California and…