The recent decision in Laborers’ District Council Construction Industry Pension Fund v. Bensoussan, No. CV 11293-CB (Del. Ch. June 14, 2016), illustrates that derivative suits allegedly filed without adequate investigation can have preclusive effect against more factually developed, but later-filed, suits. In Bensoussan, Delaware Court of Chancery Chancellor Andre G. Bouchard dismissed a derivative suit on preclusion grounds notwithstanding the stockholders’ contention that the plaintiffs in a derivative action filed earlier in federal district court in New York failed to make a books and records request or otherwise adequately investigate their claims before filing suit.
Background
On June 5, 2013, Dennis Wilson, the founder of lululemon athletica Inc., allegedly learned that the company’s CEO, Christine Day, intended to resign. On June 7, a brokerage firm sold some of Wilson’s shares allegedly pursuant to a trading plan for nearly $50 million in proceeds. On June 10, the company announced Day’s intention to resign, and lululemon stock dropped more than 17 percent. The timing of Wilson’s stock sale prompted widespread media attention, and litigation ensued.
