Freedman v. Redstone

(United States Third Circuit) – Dismissal of a shareholder action alleging that defendant Board of Directors and the individual members failed to comply with its 2007 plan which would render tax deductible certain incentive compensation paid to the company’s executives, which allegedly resulted in the payment of more than $36 million of excess compensation, is affirmed, where: 1) with regard to the derivative suit, plaintiff did not make a pre-suit demand to the Board of Directors or present sufficient allegations explaining why a demand would have been futile; and 2) with regard to the direct suit, federal tax law does not confer voting rights on shareholders not otherwise authorized to vote or affect long-settled Delaware corporation law which permits corporations to issue shares without voting rights, so plaintiff’s contention regarding defendant-company’s issuance of non-voting shares fails to state a claim on which relief may be granted.