Robert Baca v. Timothy Crown

MEMORANDUM

Robert P. Baca (“Baca”), a shareholder of Insight Enterprises, Inc. (“Insight”), ap peals the district court’s dismissal of his Second Amended Shareholder Derivative Complaint (“SAC”) for failure to plead demand futility with sufficient particularity. This court reviews for abuse of discretion a district court’s dismissal for failure to plead demand futility adequately. Janas v. McCracken (In re Silicon Graphics Inc. Sec. Litig.), 183 F.3d 970, 983 (9th Cir.1999).

In a shareholder’s derivative action, the plaintiff purports to sue in the right and for the benefit of the corporation. Such an action implicates Federal Rule of Civil Procedure 23.1, two aspects of which are pertinent here.

First, Federal Rule of Civil Procedure 23.1(b)(1) provides in relevant part that the complaint in a derivative action “must ... allege that the plaintiff was a shareholder ... at the time of the transaction complained of.” As plaintiff alleges that he first purchased shares of Insight on July 19, 2002, and held them continuously until the date of the second amended complaint, which was February 8, 2010 [ER 64], this contemporaneous ownership rule limits the transactions of which he may…