Cravath, Swaine & Moore LLP Logo
  • Practices
  • People
  • Careers
  • News & Insights
  • Practices
  • People
  • Careers
  • News & Insights
  • Our Story
  • The Cravath System
  • Diversity & Inclusion
  • Pro Bono
  • Alumni Journal
  • 200.Cravath

Cravath’s London Office Moves to 100 Cheapside

Read More

News & Insights

Citigroup Directors Win Appeal Dismissing Shareholder Derivative Litigation

May 28, 2014

On May 22, 2014, the New York State Supreme Court Appellate Division, First Department, unanimously affirmed the trial court’s decision dismissing a shareholder derivative action against Cravath clients, the outside directors of Citigroup, Inc.

Citigroup shareholder Stanley Lerner filed a derivative action in New York State Supreme Court alleging breach of fiduciary duty, corporate waste and mismanagement in connection with Citigroup’s losses on collateralized debt obligations, comprised of subprime mortgages and other assets, during the period from approximately 2005 through 2007. In a novel twist to actions of this type, Mr. Lerner amended his complaint to include a separate waste claim against the members of the board committee that had considered and rejected his demand to bring a derivative suit on behalf of Citigroup, asserting that the committee’s lengthy investigation of Mr. Lerner’s initial demand was itself a waste of corporate assets.

Cravath argued the outside directors’ motion to dismiss the complaint before the trial court on January 26, 2012. On May 15, 2012, Justice Bernard J. Fried dismissed the suit with prejudice. In his opinion, Justice Fried agreed with defendants that the board’s rejection of the demand was protected by Delaware’s business judgment rule and that the amended complaint failed to raise a reasonable doubt about the reasonableness and good faith of the demand committee’s investigation. The court also held that plaintiff had failed to allege the futility of his demand with respect to his follow-on waste claims against the demand committee for purportedly conducting a “sham” investigation. Following oral argument on September 10, 2013, the Appellate Division affirmed the trial court’s decision.

This is the third dismissal Cravath achieved for the Citigroup outside directors in actions related to the 2008 financial crisis. Cravath previously represented the outside directors in shareholder derivative actions alleging related claims in the Delaware Court of Chancery and in the U.S. District Court for the Southern District of New York (please click here); both actions were dismissed.

The Cravath team included partner Richard W. Clary and associate Andrew A. Bosse.

Related Practices & Industries

  • Appellate
  • Shareholder Derivative Actions
  • Board and Officer Representation
  • Securities Litigation
  • Financial Services and Insurance

People

Photo
Name
Richard W. Clary
Title
Litigation
Title
Retired Partner
Email
rclary@cravath.com
Phone
+1-212-474-1227
vCard
Download vCard

    Education

    • J.D., 1978, Harvard Law School
      Sears Prize, magna cum laude
    • B.A., 1975, Amherst College
      Phi Beta Kappa, magna cum laude

    Cravath Bicentennial

    Celebrating 200 years of partnership. In 2019, we celebrated our bicentennial. Our history mirrors that of our nation. Integral to our story is our culture.

    Explore

    Cravath, Swaine & Moore LLP Logo
    • CONTACT US
    • OUR STORY
    • ALUMNI PORTAL
    • DISCLAIMERS & NOTICES

    Attorney Advertising. ©2025 Cravath, Swaine & Moore LLP.