Tom Nagrone v. Michael A. Davis

MEMORANDUM

This is a combined appeal. First, Plaintiffs Thomas Nagrone and other participants in the Tidyman’s Management Services, Inc. Employee Stock Ownership Plan and Trust (“Plaintiffs”) appeal the district court’s grant of summary judgment in favor of Defendants Michael Davis and John Maxwell (“Defendants”) on the issues of futility of demand and ERISA preemption. Second, Tidyman’s Management Services, Inc. (“TMSI”) appeals the district court’s denial of its motion for leave to amend so that it could be joined as a Plaintiff. For the reasons discussed below, we reverse the district court’s summary judgment rulings and remand for further findings. We do not reach the appeal of the district court’s denial of the motion for leave to amend.

A. Futility of Demand

In this case, it is undisputed that before filing their complaint, Plaintiffs failed to make a demand for action on either the Employee Stock Ownership Plan and Trust (“ESOP”) or the corporate officers. Under Washington law, a “complaint in a proceeding brought in the right of a corporation must ... allege with particularity the demand made, if any, to obtain action by the board of directors and either that the demand…