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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.
Teladoc Wins Dismissal of Derivative Action
- Client News
- September 17, 2021
Paul, Weiss secured the dismissal with prejudice of a shareholder derivative action against 17 current or former directors and officers of Teladoc Health, Inc. In dismissing the complaint, U.S. District Judge Gregory Woods of the Southern District of New York adopted in full the report and recommendation issued by Magistrate Judge Barbara Moses of the Southern District of New York on March 26.
The case—one of several brought during the #MeToo era that alleged securities violations related to executive misconduct—was brought following news about an extramarital affair between Teladoc’s former CFO and a junior subordinate that allegedly began in 2014. After senior management learned about the affair in late 2016, Teladoc engaged outside counsel to conduct an internal investigation and ultimately disciplined the CFO. In December 2018, the Southern Investigative Research Foundation published an article detailing the story of the affair. Shortly thereafter, Teladoc’s stock dropped by approximately 7% and the CFO resigned with “good reason” pursuant to a separation agreement. The plaintiffs brought a derivative action challenging the company’s response to the affair, but did not first make a demand on the company’s board.
Embracing the defendants’ arguments, Judge Moses recommended dismissal of the suit because demand on the board was not excused, rejecting the plaintiffs’ arguments that the directors faced a substantial likelihood of personal liability, acted in bad faith or were otherwise not disinterested and independent. Judge Woods adopted Judge Moses’ report and recommendation in full, finding no plain error in her recommendation of dismissal. Judge Woods further denied leave to amend, finding that although the court’s decision would be the first judicial decision in the case, and although the plaintiffs had “stuffed their complaint with facts to support their position,” they were unable to cure the complaint’s deficiencies.