- Court: U.S. Supreme Court Certiorari Granted
- Area(s) of Law: Civil Procedure
- Date Filed: June 24, 2013
- Case #: 12-1208
- Judge(s)/Court Below: 704 F.3d 156 (2013)
- Full Text Opinion
Respondent filed a shareholder’s derivative lawsuit against Petitioner alleging wrongs to various investment funds that Petitioner managed. Petitioner moved to dismiss the suit under Federal Rule of Civil Procedure 23.1 because Respondent had not made a pre-suit demand on each of the funds’ board of directors to remedy the wrongs, and because Respondent had not plead sufficient facts to show that making such a demand would be futile. The district court agreed, and dismissed Respondent's claim.
On appeal, Respondent argued that the court of appeals should review the district court’s decision to dismiss Respondent’s claim de novo, while Petitioner’s argued that the proper standard of review was abuse of discretion. The First Circuit held that de novo review was the proper standard. Applying that standard, the court determined that Respondents had adequately pled demand futility and reversed the decision of the district court.
On review, Petitioner argues that abuse of discretion is the proper standard of review for rule 23.1 dismissals because such highly fact based decisions, which originally arose in equity, are better left to the discretion of trial courts. The Supreme Court granted certiorari to decide whether the proper standard of review for a dismissal under Federal Rule of Civil Procedure 23.1 is de novo review or abuse of discretion.