Opinion
Index No. 601438-20 Motion Seq. No. 4
02-02-2022
THE CITY OF PHILADELPHIA BOARD OF PENSIONS AND RETIREMENT, as Trustee for THE CITY OF PIDLADELPHIA PUBLIC EMPLOYEES RETIREMENT SYSTEM, Derivatively on Behalf of STANDARD CHARTERED PLC and STANDARD CHARTERED HOLDINGS, LTD., Plaintiff, WILLIAM WINTERS, CBE, JOSE VINALS, DR. LOUIS CHEUNG, CHRISTINE HODGSON, NAGUIB KHERAJ, DR. BYRON GROTE, ANDREW HALFORD, JASMINE WHITBREAD, GAY HUEY EV ANS, DAVID CONNER, DR. NGOZI OKONJOIWEALA, MARK SMITH, EV AN MERVYN DA VIES, CBE, JOHN PEACE, PETER SANDS, GARETH BULLOCK, VALERIE GOODING, CBE, RUDOLPH MARKHAM, RUTH MARKLAND, SUNIL MITTAL, MICHAEL DENOMA, RICHARD MEDDINGS, SIR CHUNG KONG CHOW, PAUL SKINNER, OLIVER STOCKEN, LORD JONATHAN TURNER, KAIKHUSHRU SHIA VAX NARGOLWALA, STEFANO BERTAMINI, ALUN MICHAEL REES, JASPAL BINDRA, DR. HAN SEUNG-SOO, SIMON LOWTH, MARGARET EWING, VISWANATHAN SHANKAR, DR. LARS THUNELL, OM BHATT, DR. KURT CAMPBELL, and TRACY JAYNE CLARKE, Defendants, and STANDARD CHARTERED PLC, and STANDARD CHARTERED HOLDINGS, LTD., Nominal Defendants.
Unpublished Opinion
Submission Date: 12/2/21
Present: HON. TIMOTHY S. DRISCOLL Justice
HON. TIMOTHY S. DRISCOLL J.S.C.
Papers Read on these Motions:
Memorandum of Law in Support.....................................................................................x
Affirmations in Support with Exhibits............................................................................x
Memorandum of Law in Opposition................................................................................x
Affirmations in Opposition with Exhibits.......................................................................x
Reply Memorandum of Law.............................................................................................x
Reply Affirmation with Exhibits......................................................................................x
Presently pending before the Court is the motion filed by nominal defendant Standard Chatered pic ("SC"). For the following reasons, SC's motion is granted.
BACKGROUND
A. Relief Requested
SC moves for an Order dismissing the Amended Complaint without leave to replead 1) under CPLR § 3211(a)(2), (3), and (7) based on lack of subject-matter jurisdiction and Plaintiffs lack of standing to bring derivative or multiple derivative claims on behalf of the Nominal Defendants, 2) alternatively, under CPLR § 327 and the doctrine of forum non conveniens in favor of a more convenient and suitable alternative forum for this action, namely, the English High Court, or 3) alternatively, under CPLR § 3211(a)(8) with respect to claims asserted on behalf of S.C. based on lack of personal jurisdiction.
B. The Parties' History
The Amended Complaint alleges, in relevant part, as follows:
SC is a publicly-owned multinational banking and financial services company registered and organized under the laws of England and Wales and headquartered in London. S.C. is a registered Bank Holding Company under the Bank Holding Company Act and is regulated in the United States by the Federal Reserve.
Standard Chartered Holdings, Ltd. ("SCH"), a holding company with no employees, is a wholly-owned subsidiary of SC. Standard Chartered Bank ("SCB") is, in turn, a wholly-owned subsidiary of SCH. S.C. indirectly owns and controls its bank operating subsidiary SCB through SCH. S.C. exercises complete control over SCH, and SCH's three current directors are also directors of SC.
SCB is a financial institution registered and organized under the laws of England and Wales and headquartered in London. It is one of the world's largest international banks, with operations in more than sixty markets around the world.
Since 1976, SCB has held a license issued by New York State to operate as a foreign bank branch in New York, New York. SCB New York provides United States dollar ("USD") clearing services for international wire payments, which can involve, among other things, the conversion of payments from a foreign currency into USD. SCB New York is subject to oversight and regulation by the Federal Reserve, as well as the New York State Department of Financial Services ("DFS").
This action arises from the systematic violation of the banking laws of the United States and the State of New York by SC, SCH, and SCB. SC, SCH, and SCB permitted countries, entities, and individuals sanctioned by the United States Department of the Treasury's Office of Foreign Assets Control ("OFAC"), including the Islamic Republic of Iran, unlawful access to the United States banking system and USDs.
New York was the focal point of SC's illicit activities that enabled Iran to evade United States sanctions provisions, providing Iran with illegal access to billions in USDs. As the seventh largest dollar clearer in the world - clearing almost $200 billion in payments per day through its New York banking operations - S.C. conducted thousands of funds transfers in dollar clearing transactions on behalf of Iran between 2001 and 2014.
DFS later determined that between 2001 and 2010, SC conducted approximately $250 billion of non-transparent Iranian USD transactions through its New York banking operations, in violation of United States and New York laws and regulations. Additionally, between June 2009 and June 2014, SC's banking subsidiary processed nearly 10,000 illegal payments, totaling more than $437 million, for the benefit of sanctioned Iranian parties. The majority of these transactions were processed in New York State.
The Individual Defendants are 1) current and former members of the Boards of Directors of the SC, SCH, and SCB, 2) members of the S.C. Board who were also employed as officers of SC, and 3) various officers of SC, who a) personally benefitted from the illegal transactions conducted on behalf of OFAC-sanctioned parties because their compensation was directly tied to SC's annual financial performance, and b) violated the Group Code of Conduct by causing and/or permitting S.C. and SCB to violate the applicable laws and regulations of the United States and the State of New York, causing S.C. and SCB to incur more than one billion dollars in fines, penalties, forfeitures, and defense and remediation costs.
Plaintiff asserts derivative claims under the United Kingdom Companies Act 2006 (c.46) ("UK Companies Act"), English common law, the New York Business Corporation Law ("BCL") and New York common law.
C. The Parties' Positions
SC argues that the Court lacks subject matter jurisdiction under BCL § 626. Under Section 626, a shareholder can sue derivatively on behalf of a foreign corporation in New York only if that corporation is "doing business" here. Plaintiff has not satisfied its burden of overcoming the presumption that S.C. and SCH, both foreign corporations incorporated in England, are doing business in their place of incorporation and not in New York.
SC further contends that Plaintiff lacks standing under English law to assert derivative claims on the Nominal Defendants' behalf. It asserts that, under the internal affairs doctrine, English law governs the substantive issue of Plaintiff s standing to step into the shoes of two English companies and litigate those companies' claims against their current and former directors. It further posits that while the UK Companies Act's "judicial permission" requirement does not apply in New York, this does not mean that Plaintiff automatically has standing to pursue derivative claims in New York on behalf of two English corporations. Nor does it mean that the law of a different jurisdiction governs standing.
SC avers that English common law governs the substantive question of Plaintiff s standing to sue. Thus, if a derivative claim falls outside of the UK Companies Act, it can proceed only if it satisfies the more stringent common law requirements. Accordingly, a derivative claim on behalf of an English company either 1) falls within Part 11 of the UK Companies Act and is subject to the judicial permission requirement, or 2) falls outside of Part 11 and is subject to the more demanding common-law requirements. Plaintiff cannot, according to SC, meet those "Foss" common-law requirements, as initially set forth in Foss v. Harbottle, 2 Hare 461 (Eng. 1843). Nor can Plaintiff meet those requirements to assert its "double" derivative claims on behalf of SCH.
SC contends that this action alternatively should be dismissed under the doctrine of' forum non conveniens. Plaintiffs claims lack a sufficient nexus with New York to justify burdening this Court. Plaintiff is a Pennsylvania pension fund seeking to assert claims under English law on behalf of two English corporations against Defendants who do not reside in New York. Moreover, neither the alleged conduct nor the alleged injury occurred here, and Plaintiffs choice of forum is entitled to little deference. Additionally, England is an adequate alternative forum with a superior interest in this action, Plaintiff concedes that English substantive law governs its claims, and the relevant witnesses and documents are in England.
SC argues that it is not subject to personal jurisdiction in New York. Plaintiff cannot possibly contend that S.C. is subject to general personal jurisdiction in New York, as S.C. is an English corporation headquartered in London. As to specific personal jurisdiction, Plaintiff does not allege that 1) the claims arise from any act by S.C. in New York or from SC's ownership, use, or possession of real property in the State, or that 2) S.C. committed a tortious act abroad that caused injury in New York. The Amended Complaint merely cites the presence and business operations of the S.C. "Group" in New York, the existence of an SCB branch in New York, the various regulatory settlements with United States authorities, and SC's establishment of a committee to oversee the "Group's" compliance with its obligations under these settlements. Plaintiff's conclusory assertion that S.C. was doing business in New York through SCB New York is insufficient to plead personal jurisdiction over SC. Further, the exercise of personal jurisdiction would violate due process, as the Complaint does not allege any suit-related conduct by S.C. that creates a substantial nexus with New York.
In opposition, Plaintiff argues that the Court has subject matter jurisdiction over the claims asserted on behalf of S.C. and SCH. Plaintiff adequately alleges that S.C. engaged in activities that constitute doing business in New York and that there is a nexus between its claims and SC's transaction of business in New York. Additionally, because SCH is a holding company with no employees, no operations, and was created solely for tax or financing purposes, SCB's New York actions are properly attributable to it.
Plaintiff contends that it has standing to assert derivative claims on behalf of S.C. under the UK Companies Act. It notes that the substantive provisions of the UK Companies Act have been applied to determine derivative claim standing, notwithstanding the inapplicability of the Act's procedural provisions.
Plaintiff avers that it has standing to assert double derivative claims on behalf of SCH. Plaintiff agrees with S.C. that the double derivative claim asserted against SCH is governed by English common law and the Foss principles. Contrary to SC's assertions, however, Plaintiff satisfies the "fraud-on-the-minority" exception to the Foss rule that would otherwise preclude standing. Moreover, while S.C. contends that Plaintiff must establish that the Individual Defendants control a majority of the voting stock of S.C. to maintain a derivative claim, the authorities cited by its expert require "wrongdoer control," not majority ownership, for application of this exception. Under the totality of the circumstances, the Individual Defendants, either through their positions as members of the S.C. Board and/or as members of the SCH Board of Directors, control SCH. Further, despite repeated regulatory proceedings, criminal charges, and written agreements to remediate its anti-money laundering and sanctions compliance deficiencies, the Individual Defendants continued to cause and/or permit S.C. to engage in illegal transactions on behalf of Iranian parties subject to OFAC sanctions for well over a decade. Thus, Plaintiff adequately pleads that the Individual Defendants engaged in deliberate or dishonest breaches of duty. Plaintiff also adequately alleges that the increases in performance-based compensation paid to the Individual Defendants who served as Executive Directors of S.C. and Directors of SCH constitutes a personal benefit.
Plaintiff avers that dismissal is not warranted based on forum non conveniens. The critical events underlying Plaintiffs claims occurred in New York, where SCB New York processed tens of thousands of illegal USD transactions. Further, Plaintiffs choice of forum is entitled to deference, and neither the availability of an alternative forum nor the applicability of English law is an adequate basis for dismissal on forum non conveniens grounds. New York has a compelling interest in the adjudication of Plaintiff s claims, and it is far from clear that all of the relevant documents and witnesses are located in England. Litigating this case in New York does not impose an undue hardship on Defendants, who chose to direct their business efforts towards this state.
Plaintiff contends that the Court has personal jurisdiction over S.C. pursuant to CPLR § 302(a)(1). S.C. transacted business in New York by its own actions and through its agent, SCB New York, and Plaintiff alleges an adequate nexus between its claims and the subject transactions. The exercise of long-arm jurisdiction over S.C. based on those activities comports with due process. S.C. has availed itself of the benefits of New York's banking system, the dollar as a stable currency, and the predictable jurisdictional and commercial law of New York and the United States, to conduct illegal USD clearing transactions for OFAC-sanctioned Iranian parties. Thus, SC has sufficient minimum contacts to support the exercise of long-arm jurisdiction.
On reply, SC argues that Plaintiff lacks standing under English law to assert derivative claims. Plaintiff concedes that it is still not a member of S.C. and instead alleges that it is presently in the process of becoming a record holder of S.C. stock and therefore a member of SC. In any event, membership alone does not confer standing to sue derivatively on behalf of S.C. under the UK Companies Act. A member of an English corporation cannot assert a derivative claim on that corporation's behalf unless the member establishes that an exception to the common law Foss rule applies or the member obtains judicial permission from the English High Court to bring a statutory derivative claim. Although the UK Companies Act's judicial-permission requirement does not apply outside of England, membership alone does not confer derivative standing under the UK Companies Act whenever a shareholder elects to sue in a different country. Indeed, Plaintiffs English-law expert does not support Plaintiffs argument, and instead agrees with SC's expert that if the claim falls outside of the statutory regime, as a matter of English law, the stricter requirements of the common law must be satisfied.
At oral argument, the parties confirmed that Plaintiff became a registered owner of the shares. Accordingly, SC's argument regarding Plaintiffs lack of membership is moot.
SC avers that Plaintiff cannot satisfy the fraud-on-the-minority exception because it fails to plead wrongdoer control. Plaintiff does not dispute that Defendants collectively own less than 0.1% of SC's outstanding shares and thus do not control SC. Plaintiff instead limits its wrongdoer control argument to SCH, arguing that Defendants, either through their positions as members of the S.C. Board and/or as members of the SCH Board of Directors, control SCH. Plaintiff does not base this contention on any English authority, and instead points to Delaware law. Once again, Plaintiffs English law expert does not endorse its position. Contrary to Plaintiffs contention, the relevant question is whether, at a general meeting of shareholders, the alleged wrongdoers could block a shareholder resolution requiring the wrongdoers' removal and the corporation to sue. If a majority of S.C. members want the company to assert claims belonging to SCH, the members can achieve that result at a general meeting of SC's shareholders and Defendants would be powerless to block them given their de minimis share of holdings. Further, Plaintiffs contention that the parent's board always controls the subsidiary would mean that wrongdoer control would exist in every double derivative action naming the parent's directors as defendants. Even in double derivative actions, the question remains whether the alleged wrongdoers control the parent company so as to be in a position to procure, through their control of the corporate chain, that no claim would otherwise be brought by voting down such a resolution at the parent company's general meeting.
SC argues that Plaintiff also fails to plead fraud. Plaintiff does not attempt to explain how its allegation that Defendants failed to prevent SCB's New York branch from engaging in tens of thousands of illegal transactions constitutes actual fraud. Moreover, in arguing that an oversight failure constitutes actual fraud, Plaintiff improperly relies on the court's discussion of New York law in Mason-Mahon, which did not address the fraud-on-the-minority exception or hold that the plaintiff in that case had alleged actual fraud. An alleged failure of management or supervision does not amount to fraud under the fraud-on-the-minority exception, and Plaintiffs expert does not contend otherwise. Plaintiff also does not allege anything approximating the kind of self-dealing transactions necessary to show that Defendants used the breach of duty to further their own ends by benefiting themselves financially at the company's expense, diverting business in their own favor, or appropriating company assets. Plaintiff instead alleges only that Defendants received routine performance-based compensation notwithstanding their alleged breaches of duty. English courts have required a far closer connection between the benefit gained and the loss to the company.
SC repeats its contention that this action should be dismissed based on forum non conveniens. Plaintiff does not dispute that England undeniably has the greater interest in adjudicating Plaintiffs claims under English law. Relying on commercial tort cases, Plaintiff argues that the relevant conduct occurred in New York. This derivative action, however, does not assert that Defendants tortiously harmed Plaintiff by processing USD transactions in New York in violation of anti-money-laundering and sanctions laws. Rather, Plaintiff alleges that directors of S.C. and SCH breached their duties by failing to exercise adequate oversight of SCB's New York branch, conduct that undeniably occurred in England. Similarly, the alleged injury or damages to S.C. occurred in England because S.C. is incorporated in England.
SC reiterates that this Court lacks subject matter jurisdiction under BCL §§ 626 and 1319. Plaintiff cannot manufacture subject-matter jurisdiction based on SCB's New York activities. BCL § 1319 does not authorize subject matter jurisdiction based on actions through an agent and instead permits derivative actions on behalf of a foreign corporation only if it is doing business in this state. Plaintiff also cannot rely on case law permitting the imputation of contacts to a parent where the subsidiary's conduct is sufficiently important to the parent that, but for the subsidiary, the parent would have entered New York to conduct such activities itself. S.C. could not have performed SCB's banking activities in New York without a banking license. Had it obtained a New York license, SC would be a foreign bank like SCB and the Banking Law would not create subject matter jurisdiction over derivative claims asserted on its behalf. Plaintiff also fails to allege that S.C. and SCH do business in New York under CPLR § 302(a)(1). Plaintiff ignores that the BCL expressly provides that a foreign corporation shall not be considered to be doing business in New York by reason of its settlement of any action or proceeding. Finally, the Court lacks personal jurisdiction because the Complaint does not allege any suit-related conduct by S.C. that creates a substantial nexus with New York.
The Court held oral argument on SC's motion on December 2,2021.
RULING OF THE COURT
SC's motion is granted based on Plaintiffs lack of standing to assert derivative claims on behalf of the Nominal Defendants.
The Court's analysis begins with the internal affairs doctrine, a conflict of laws principle that "recognizes that only one State should have the authority to regulate a corporation's internal affairs-matters peculiar to the relationships among or between the corporation and its current officers, directors, and shareholders-because otherwise a corporation could be faced with conflicting demands." New Greenwich Litig. Tr., LLC v. Citco Fund Servs. (Eur.) B.V., 145 A.D.3d 16, 22 (1st Dept. 2016), quoting Edgar v. MITE Corp., 457 U.S. 624, 645 (1982). Put another way, the internal affairs doctrine provides that the substantive law of the state or country of incorporation governs claims with respect to the relationship between the corporation, its directors, and a shareholder. New Greenwich Litig. Tr., LLC, 145 A.D.3d at 22. S.C. is registered and organized under the laws of England and Wales and SCH is SC's wholly owned subsidiary. Thus, English substantive law governs the merits of this action.
New York common-law principles dictate that the law of the forum governs procedural rules. Davis v. Scottish Re Grp. Ltd., 30 N.Y.3d 247, 252 (2017). "Where there is disagreement as to the nature of a law, the law of the forum normally determines for itself whether a given question is one of substance or procedure." Davis, 30 N.Y.3d at 252, quoting Tanges v. Heidelberg N. Am., 93 N.Y.2d 48, 54 (1999).
While the foreign jurisdiction's designation of the rule as procedural or substantive is instructive, it is not dispositive. Davis, 30 N.Y.3d at 252. That case is particularly instructive. In Davis, the Court of Appeals addressed whether Rule 12A of order 15 of the Cayman Islands Grand Court Rules was procedural or substantive. Rule 12A provides, in relevant part, that a plaintiff asserting a contested derivative action in the Cayman Islands must apply to the Cayman Islands Grand Court for leave to continue the action. Davis, 30 N.Y.3d at 251. The court held that Rule 12A is a procedural rule that is inapplicable in New York courts. In so holding, the court noted that Rule 12A served as a "gatekeeping function, but only as to derivative actions brought in the Cayman Islands, not for derivative actions, wherever brought, concerning Cayman companies specifically." Id. at 254.
The Court is also guided by the Second Department's decision in Mason-Mahon v. Flint, 166 A.D.3d 754 (2d Dept. 2018). There, the Second Department examined whether the judicial permission requirement contained the UK Companies Act is a procedural or substantive rule. Section 260(1) of the UK Companies Act, which is titled "Derivative Claims in England and Wales or Northern Ireland," provides that 1) "[f]his Chapter applies to proceedings in England and Wales or Northern Ireland by a member of a company-(a) in respect of a cause of action vested in the company, and (b) seeking relief on behalf of the company, and shall be referred to as a derivative claim." Section 261(1) states that "[a] member of a company who brings a derivative claim under this Chapter must apply to the court for permission (in Northern Ireland, leave) to continue it." Mason-Mahon, 166 A.D.3d at 756.
Part 11 of the UK Companies Act is divided into Chapter 1 (§§ 260-264) and Chapter 2 (§§ 265-269). Chapter 1 "applies to proceedings in England and Wales or Northern Ireland by a member of a company." Chapter 2 "applies to proceedings in Scotland by a member of a company." Arison, 134N.Y.S.3dat 673 (quotations omitted).
The Second Department held that the judicial permission requirement is "a procedural rule applicable only in England and Wales, or Northern Ireland" and the plaintiff accordingly was not required to obtain judicial permission prior to commencing his derivative action in New York. Mason-Mahon, 166 A.D.3d at 756-57. The court, analogizing to Davis, noted that the judicial permission requirement "appears to serve a gatekeeping function, but only as to derivative actions commenced in England and Wales, or Northern Ireland, not for derivative actions, wherever commenced, concerning companies incorporated in England and Wales, or Northern Ireland, specifically." Id., quoting Davis, 30 N.Y.3d at 254.
This case presents a novel question left open by Mason-Mahon: does English common law govern the plaintiffs standing to maintain derivative claims on behalf of an English corporation in a New York court because the judicial permission requirement does not apply outside of the United Kingdom? This Court answers that question in the affirmative.
At the outset, the Court is not persuaded by Plaintiffs unsupported position that it need only demonstrate corporate membership to assert its derivative claims. More compelling is the assessment of SC's English law expert, Martin Luke Moore QC, that Part 11 of the UK Companies Act is a "comprehensive and indivisible code," and "[a] claim is either entirely within it, in which case permission to continue the claim must be obtained from the English Court, or entirely outside it, in which case the common law rule applies." See Moore Reply Affm. ¶ 6(a). The Court concludes that when the judicial permission requirement of the UK Companies Act is cast aside, as it must be here, Plaintiffs standing to assert derivative claims on behalf of an English corporation in this Court becomes a substantive inquiry governed by English common law. Cf. Davis, 30 N.Y.3d at 257 ("New York courts are capable of applying Cayman substantive law to decide whether a plaintiff may bring shareholder derivative claims on behalf of a Cayman corporation").
The New York County Supreme Court's decision in Arison, 134 N.Y.S.3d 662 (N.Y. Sup. Ct. 2020) does not alter the Court's conclusion. In Arison, the court distinguished the membership requirement in the UK Companies Act from the judicial permission requirement, holding that the membership requirement was a substantive provision and the plaintiff lacked standing to assert derivative claims because he failed to satisfy that requirement. The Arison court's determination, however, was limited to the membership requirement, which is not at issue in the instant action. Indeed, the Arison court expressly noted that it did not need to reach "the knotty question ... as to whether and to what extent vestigial English common-law restrictions on derivative actions flowing from Foss [ ] and its progeny survived passage of the Companies Act." Arison, 134 N.Y.S.3d at 667,n.1.
The UK Companies Act defines "member" as "a person who agrees to become a member of a company, and whose name is entered in its register of members." Arison, 134 N.Y.S.3d at 674, quoting UK Companies Act § 112(2).
The English common law rule regarding standing to bring a derivative action is rooted in Foss. The Foss rule "provides that derivative claims are owned and controlled by the company, not its shareholders, and that a shareholder is not permitted to bring a derivative action on behalf of that company." Winn v. Schafer, 499 F.Supp.2d 390, 396 (S.D.N.Y.2007). Four exceptions to the Foss rule, however, permit a shareholder to bring a derivative action "1) if the conduct infringed on the shareholder's personal rights; 2) if the conduct would require a special majority to ratify; 3) if the conduct qualifies as a 'fraud on the minority'; or 4) if the conduct consists of ultra vires acts." Id.
Here, Plaintiff does not attempt to satisfy any of the Foss exceptions as to its derivative claims against SC. Accordingly, those claims are dismissed for lack of standing.
Plaintiff concedes that its "double derivative" claims against SCH are governed by the Foss rule. It claims that it meets the third Foss exception (and only the third exception) in that the conduct in the complaint constitutes a "fraud on the minority." This requires a showing that the alleged wrongdoers 1) maintain control over a majority of the stock with voting rights, and 2) committed fraud. A corporation's board of directors has control of a majority of the corporation's voting shares where evidence establishes that it has acquired de facto control. Id. at 396-97.
The Court concludes that Plaintiff has failed to allege that Defendants maintain control over a majority of SCH's stock with voting rights. Initially, it is undisputed that Defendants collectively own less than 0.1% of SC's outstanding shares, and do not own any shares of SCH. Faced with this seemingly insurmountable hurdle, Plaintiff asserts, inter alia, that 1) SCH, as a wholly owned subsidiary of SC, is controlled by the S.C. Board of Directors, 2) three Defendants are a) directors of SCH, and b) S.C. officers and/or serve on the S.C. Board, and 3) previously, certain Defendants who were officers of S.C. and/or served on the S.C. Board served as directors of SCH. Nevertheless, these allegations, without more, do not establish de facto wrongdoer control. Indeed, this was the First Department's conclusion in Davis v. Scottish Re Group Ltd., 160 A.D.3d 114, 118 (1st Dept. 2018) ("a director does not obtain control of a majority shareholder's voting shares merely because the majority shareholder employs him or her or appoints him or her to the company's board of directors"). The Court is further persuaded by the similar sentiments expressed in the Moore Affm. ¶ 75 ("[g]iven the purpose of the requirement for majority control, the English Court would in my view require a relatively high degree of control and would, in substance, need to be satisfied that the alleged wrongdoers (i.e. the directors of the Nominal Defendants) could themselves ensure that a resolution for their removal, or approving proceedings against them would be voted down in a general meeting"). Finally, in the absence of any controlling guidance from the New York courts, the Court is not persuaded that Delaware law is analogous or relevant to the Foss rule or its exceptions.
The Court need not address SC's remaining arguments in light of its finding that Plaintiff lacks standing to assert its derivative claims.
CONCLUSION
SC's motion to dismiss is granted. Settle judgment on ten (10) days notice.
All matters not decided herein are hereby denied.
This constitutes the decision and order of the Court.