Kruss

As we explain anon, plaintiff in this difficult shareholder derivative suit must be given leave to amend his second amended complaint so as to allege violations of director fiduciary duty under California law. Plaintiff had alleged violations of California law in his prior, first amended complaint, but the trial court—erroneously as we show below—thought the case was governed entirely by Nevada law and required plaintiff to plead violations of Nevada law in the second amended complaint.

But then, even though plaintiff had alleged violations of fiduciary duty under Nevada law, the trial court dismissed the suit anyway. The court reasoned that none of the alleged violations of fiduciary duty took place when plaintiff owned stock in the subject company.

As we explain below, that was error too. The second amended complaint (all the complaints for that matter) alleged self-dealing on the part of defendant directors that continued into the period when plaintiff did own stock in the company.

Hence, the judgment of dismissal must be reversed. Plaintiff will have leave to amend to allege violations of fiduciary duty under California law. And, as one might expect, neither…