Lewis v. Akers

• Decision Date: 28 May 1996
• Citation: 227 A.D.2d 595,644 N.Y.S.2d 279
• Parties: Harry LEWIS, Appellant, v. John F. AKERS, et al., Respondents.
• Court: New York Supreme Court — Appellate Division

Page 279

644 N.Y.S.2d 279

227 A.D.2d 595

Harry LEWIS, Appellant, v. John F. AKERS, et al., Respondents.

Supreme Court, Appellate Division,

Second Department.

May 28, 1996.

Meissner, Kleinberg & Finkel, New York City (George S. Meissner, of counsel), Bizar & Martin, LLP, New York City (Irving Bizar, of counsel), and A. Arnold Gershon, P.C., New York City (Scott M. Gilbert, of counsel), for appellant (one brief filed).

Sullivan & Cromwell, New York City (Yvonne S. Quinn and David Gaukrodger, of counsel), for respondent John F. Akers.

Cravath, Swaine & Moore, New York City (Evan R. Chesler, of counsel), for respondents Harold Brown, James E. Burke, Fritz Gerber, Nannerl O. Keohane, Thomas S. Murphy, John B. Slaughter, Lodewijk C. Van Wachem, and Edgar S. Woolard, Jr.; Donato A. Evangelista, Armonk, for respondent International Business Machines Corporation; Clark, Gagliardi & Miller, P.C., White Plains, Riker, Danzig, Scherer, Hyland & Perretti, Morristown, N.J., and Nicholas deB. Katzenbach, Princeton, N.J., for respondents Louis V. Gerstner, Jr., and Paul J. Rizzo (one brief filed).

Before BALLETTA, J.P., and THOMPSON, PIZZUTO and ALTMAN, JJ.

MEMORANDUM BY THE COURT.

In a shareholder's derivative action to recover damages for breach of fiduciary duty, the plaintiff appeals from an order of the Supreme Court, Kings County (Dowd, J.), dated March 3, 1995, which granted the motions of the defendants to dismiss the complaint.

ORDERED that the order is affirmed, with one bill of costs payable to the respondents appearing separately and filing separate briefs.

According to the complaint, on April 30, 1993, the board of directors of the defendant International Business Machines Corporation (hereinafter IBM) voted to pay the defendant John F. Akers, who was chairman of the board and chief executive officer of IBM, and who had been an employee of IBM for thirty-three years, the sums of $925,000 in recognition of his years of service to IBM and $2,500,000 as part of a retirement incentive program and voted to accelerate the vesting of his stock options. Claiming these transactions were wrongful, the plaintiff, a shareholder of IBM, instituted this action against the defendants, the inside and outside directors of IBM, IBM, and Akers, for breach of fiduciary duty sounding in the waste of corporate assets. Upon the motions of the defendants, the complaint was dismissed for failure to make a demand on the board of directors of IBM and for failure to state a cause of action for breach of fiduciary duty. We affirm.

The question of whether the demand requirement of Business Corporation Law § 626(c) has been met is a matter within the discretion of the court (see, Barr v. Wackman, 36 N.Y.2d 371, 368 N.Y.S.2d 497, 329 N.E.2d 180; MacKay v. Pierce, 86 A.D.2d 655, 446 N.Y.S.2d 403). A demand on the board is necessary prior to instituting suit against the corporation (see, Business Corporation Law § 626[c]; Lewis v. Welch, 126 A.D.2d 519, 510 N.Y.S.2d 640). A demand is not necessary if "the complaint alleges acts for which a majority of the directors may be liable, and [the] plaintiff reasonably concluded that the board would not be responsive to a demand" (see, Barr v. Wackman, supra, at 377, 368 N.Y.S.2d 497, 329 N.E.2d 180).

However, it is insufficient merely to name a majority of the directors as defendants making conclusory...