Beam ex rel. Martha Stewart Living Omnimedia, Inc. v. Stewart
Delaware Supreme Court
845 A.2d 1040 (2004)
Monica Beam (plaintiff), a shareholder of Martha Stewart Living Omnimedia (MSO), sued derivatively on MSO's behalf against Martha Stewart (defendant) for breaching her fiduciary duties by illegally selling ImClone stock and mishandling the resulting media fallout. Beam skipped the usual requirement of first demanding that MSO's board sue Stewart itself, claiming demand would have been futile because five of MSO's six directors were too conflicted to decide fairly: Stewart herself, an inside officer receiving substantial pay from MSO, two longtime friends of Stewart, and a director who had lobbied a publisher to block a critical book about Stewart. The Court of Chancery found Beam hadn't shown demand futility and dismissed the case. Beam appealed.
Whether a shareholder who skips a presuit demand on the board must plead particularized facts creating reasonable doubt about a majority of the board's independence.