Blog

Connolly Gallagher Successfully Defends Former CEO of United Airlines

By

In Corporate Litigation | On March 18, 2019

In City of Tamarac Firefighters’ Pension Trust Fund v. Corvi, the plaintiff stockholder brought a derivative action against United Continental Holdings, Inc. (“United Airlines”) and its board of directors for wrongful demand refusal, waste, and unjust enrichment related to a separation agreement it entered into with its former CEO. 2019 WL 549938 (Del. Ch. Feb. 12, 2019). The pre-litigation demand requested that the board claw back the separation compensation or rescind the separation agreement. The “twist” in this case related to whether a stockholder also “tacitly concedes” that a special committee created by the board is disinterested and independent for purposes of responding to a demand. Here, the Court of Chancery held that the tacit concession did not extend to the special committee.
Although the tacit concession did not apply to the special committee, the Court also held that the stockholder failed to plead particularized facts sufficient to create a reasonable doubt that the demand refusal was a valid exercise of the board’s business judgment. Specifically, the stockholder’s arguments failed to show gross negligence or bad faith. Furthermore, because the stockholder’s claims for waste and unjust enrichment arose from the same underlying facts that were the subject of the litigation demands, they were subject to the same demand-refusal analysis and failed for the same reason as the wrongful demand refusal claim. Therefore, all claims against United’s former CEO were dismissed.
Connolly Gallagher represented United Airlines’ former CEO and successfully argued the motion to dismiss.

Please note that email communications to the firm through the website do not create an attorney-client relationship. Do not send any privileged or confidential information to the firm through the website.

Click “Accept” below to confirm that you have read and understand this notice.