AmEx Wins Dismissal of Shareholder Derivative Suit Concerning Alleged Antitrust Violations

On October 29, 2015, Justice Shirley Werner Kornreich of the Commercial Division of the New York State Supreme Court granted Cravath’s motion on behalf of American Express Company and certain of its directors and officers to dismiss a shareholder derivative suit brought by Bob H. Lankford, Trustee of the Elizabeth H. Lankford Bypass Trust.

The complaint centered on allegations that defendants failed to maintain proper internal controls and committed antitrust violations that are the subject of the Department of Justice’s enforcement action against AmEx in New York federal court. Plaintiff sought injunctive relief, restitution and damages for claims including (i) breach of fiduciary duty for disseminating false and misleading information; (ii) breach of fiduciary duties for failing to maintain internal controls; (iii) unjust enrichment; (iv) abuse of control; and (v) gross mismanagement.

Defendants moved to dismiss on the grounds of demand futility, arguing that no demand relating to the allegations was made on the board and that a demand in such an instance would not have been futile. In granting the dismissal, Justice Kornreich found that the alleged misconduct was in fact “a real business judgment issue and there is a presumption that the board acted pursuant to their business judgment in good faith [and] with loyalty” and that she “[did] not believe demand futility was made out.” She further stated that she “[found] the entire complaint to be totally conclusory” and was therefore dismissing the action with prejudice.

The Cravath team included partners Evan R. Chesler, Rowan D. Wilson, Peter T. Barbur and Kevin J. Orsini, senior attorney Lillian S. Grossbard and associate Alexandra N. Rothman. The case is Lankford v. Chenault, et al., No. 650866/2015 (N.Y. Sup.).