Paul, Weiss is widely recognized as having one of the nation’s preeminent securities litigation and regulatory practices. For two decades, our lawyers have guided global corporations and financial institutions through a series of “bet-the-company” securities-related crises, consistently reducing or eliminating their most damaging claims and negotiating favorable resolutions.
Delaware Chancery Court Dismisses Derivative Action Against lululemon Board and Founder
- Client News
- June 13, 2016
The Delaware Court of Chancery dismissed in its entirety a
derivative complaint filed against the board of directors of
lululemon athletica, including Paul, Weiss client Dennis "Chip"
Wilson, lululemon's founder and former chairman of its board.
The derivative complaint alleged, among other things, that Mr.
Wilson sold a significant amount of his lululemon stock on June 7,
2013, the same day that former CEO Christine McCormick Day informed
the board of her resignation, but three days before the company
publicly announced Ms. Day's resignation. The plaintiffs alleged
that the board could not impartially consider a demand because the
directors breached their fiduciary duties by failing to investigate
Mr. Wilson's purportedly suspicious trading activity. They also
asserted a claim against Mr. Wilson for allegedly breaching his
fiduciary duties by using material, non-public information to
influence certain stock sales for his personal financial
gain.
In a 40 page memorandum opinion, the court held that the
derivative claims were barred under principles of issue and claim
preclusion based on the 2013 dismissal of a derivative suit
involving substantially similar allegations brought in the Southern
District of New York. Applying New York state law, the Chancery
Court found that principles of issue preclusion barred the
plaintiffs' claims because the New York court considered and
decided the same theory of demand futility. The Chancery Court also
held that the plaintiffs' derivative claims were barred by claim
preclusion because they could have been raised in the prior New
York action.
The Paul, Weiss team included litigation partners Stephen Lamb,
Michele
Hirshman and Audra Soloway, who argued in the
Chancery Court on behalf of Mr. Wilson, and associates Daniel Mason
and Brette
Tannenbaum. Paul, Weiss also successfully defended Mr. Wilson
against securities fraud and derivative suits filed in the Southern
District of New York, and in the appeals from the dismissal of
those actions in the Second Circuit.