Foley & Lardner LLP is pleased to announce that its client, Emergent Capital, Inc. has secured the dismissal with prejudice of a shareholder lawsuit challenging Emergent’s minimum-support-to-sue bylaw, believed to be the first of its kind in the country. The bylaw, proposed by Emergent Chairman of the Board Phillip Goldstein and approved both by Emergent’s Board and by shareholders, requires a shareholder to obtain the consent of holders of at least 3% of Emergent’s outstanding shares before suing the company or its officers or directors on behalf of other shareholders in a class action or on behalf of the company in a derivative action.
The lead plaintiff had sued Emergent and its directors in Florida state court and in federal court in the U. S. District Court for the Southern District of Florida, seeking to have the minimum-support-to-sue bylaw struck down, among other claims.
Not only were all claims dismissed with prejudice, but the lead plaintiff made a public statement that the defendants “acted in good faith and did not engage in any improper behavior in adopting the bylaw at issue or otherwise.”
Emergent Chairman Phillip Goldstein said, “obviously we are very pleased with the result Foley obtained in this case,“ adding that “ there has been a disturbing trend of lawyer-driven knee-jerk strike suits against directors and officers of public companies, and we strongly believe this is a very good bylaw that deters such suits without unduly impeding meritorious representative lawsuits.” Goldstein noted that, “the bylaw does not prohibit a shareholder from filing a direct claim on his or her own behalf; it simply requires a shareholder who claims to represent the company or other shareholders to demonstrate that at least some other shareholders support such a lawsuit before significant costs are imposed on the company.”
Foley litigation partner Mike Matthews stated that, “we were honored to defend the first case nationwide to challenge a minimum-support-to-sue bylaw, and we commend Phillip Goldstein and Emergent’s Board of Directors for having the foresight and fortitude to take decisive action to protect shareholder value.“ In addition to Mr. Matthews, the Foley team included Michael Kirwan, Gardner Davis, and Larry Dougherty.
The court’s dismissal order is available here. The lead plaintiff’s and Emergent’s statements regarding the dismissal of the lawsuit are available here and here.
