Brief Fact Summary. Plaintiff, C.L. Grimes, filed an action against Defendant Board of Directors and CEO James L. Donald to invalidate Donald’s employment agreement which Plaintiff believed effectively abdicated the Board’s management powers to Donald.
Synopsis of Rule of Law. A plaintiff, by making a demand, waives his right to contest the independence of the Board of Directors, and the effect of the demand will apply for all of a plaintiff’s stated claims.
A cardinal precept of the General Corporation Law of the State of Delaware is that directors, rather than shareholders, manage the business and affairs of the corporation.View Full Point of Law
t helped to develop the agreement, and that the Board was still capable of managing the company with this agreement in place. Plaintiff then brought suit, and added additional claims against the conduct of the Board.
Issue. The issue is whether Plaintiff’s pre-suit demand waives his right to contest the independence of the Board on all of his claims.
Held. Plaintiff waived his right to contest the independence of the Board once he demanded that they invalidate the employment contract. A pre-suit demand is a tool to avoid further litigation, but it would not serve that function effectively if Plaintiff was allowed to bifurcate his claims and claim the demand was excused for one set of claims.
Discussion. The court reasoned that the demand acted as a concession that demand would be required for all claims that arose from the agreement.