In re China Agritech, Inc. Shareholder Derivative Litigation

Shareholder Albert Rish (plaintiff) brought a derivative suit against China Agritech's board (defendants), alleging a systematic lack of oversight; despite the company engaging in major transactions in 2009 and 2010 — including a related-party acquisition benefiting the co-founders — there was no evidence the three-member Audit Committee ever met during that period, even as Agritech reported a material-weakness disclosure to the SEC, then abruptly claimed it was fixed and fired its outside auditor days later, again without any recorded Audit Committee meeting. Rish also alleged Agritech reported profits to the SEC in four of five years while reporting losses to Chinese regulators in the same periods. The defendants moved to dismiss for failure to plead demand futility.