William B. Chandler

“ Fraudulent concealment "requires an affirmative act of concealment by a defendant--an 'actual artifice' that prevents a plaintiff from gaining knowledge of the facts or some misrepresentation that is intended to put a plaintiff off the trail of inquiry." ”

“ The Supreme Court of Delaware strongly encourages this Court to freely exercise its discretion "in favor of the stay when there is a prior action pending elsewhere, in a court capable of doing prompt and complete justice, involving the same parties and the same issues." [6] Further, it recognizes that "considerations of comity and the necessities of an orderly and efficient administration of justice" [7] often require that "litigation should be confined to the forum in which it first commenced, and a defendant should not be permitted to defeat the plaintiff's choice of forum in pending suit." ”

“ Plaintiffs may prove demand futility by raising a reason to doubt whether the challenged transactions were a valid exercise of business judgment.
Plaintiff alleges that the challenged transactions raise a reason to doubt whether the option grants were a valid exercise of business judgment. Specifically, plaintiff states that the terms of the stock option plans required that " [t] he exercise price of each option shall be not less than one hundred percent (100%) of the fair market value of the stock subject to the option on the date the option is granted." ”

“ Defendants argue that there is no fraudulent concealment since Merrill Lynch based its report on public disclosures and plaintiff bases his complaint on the Merrill Lynch report. That is, defendants insist that Ryan, through investigation, could have discovered the same information that Merrill Lynch discovered. This defense is unconvincing. Shareholders may be expected to exercise reasonable diligence with respect to their shares, but this diligence does not require a shareholder to conduct complicated statistical analysis in order to uncover alleged malfeasance. ”

“ A shareholder plaintiff does not sue for his direct benefit. Instead, he alleges injury to and seeks redress on behalf of the corporation. Further, the board or any shareholder with standing may represent the injured party. Thus, this Court places less emphasis on the celerity of such plaintiffs and grants less deference to the speedy plaintiff's choice of forum. ”

“ On March 18, 2006, The Wall Street Journal sparked controversy throughout the investment community by publishing a one-page article, based on an academic's statistical analysis of option grants, which revealed an arguably questionable compensation practice. Commonly known as backdating, this practice involves a company issuing stock options to an executive on one date while providing fraudulent documentation asserting that the options were actually issued earlier. These options may provide a windfall for executives because the falsely dated stock option grants often coincide with market lows. ”

“ The Merrill Lynch analysis measured the extent to which stock price performance subsequent to options pricing events diverged from stock price performance over a longer period of time to measure the aggressiveness of the timing of option grants and found that Maxim's average annualized return of 243% on option grants to management was almost ten times higher than the 29% annualized market returns in the same period. This timing, by my judgment and by support of [p355] empirical data, seems too fortuitous to be mere coincidence. ”

“ I.FACTS Maxim Integrated Products, Inc. is a technology leader in design, development, and manufacture of linear and mixed-signal integrated circuits used in microprocessor-based electronic equipment. From 1998 to mid-2002 Maxim's board of directors and compensation committee granted stock options for the purchase of millions of shares of Maxim's common stock to John F. Gifford, founder, chairman of the board, and chief executive officer, pursuant to shareholder-approved stock option plans filed with the Securities and Exchange Commission. ”

“ Second, most corporate litigation in the Court of Chancery involves companies with documents and witnesses located outside of Delaware. Defendants point to no documents they will be unable to produce and no witnesses who will be subjected to overwhelming hardship by testifying in Delaware. While it is true that California might provide a more convenient location, motions to dismiss a plaintiff's choice of forum are not granted for defendants' mere convenience. Thus, there is no showing that the "ease of access of proof standard supports a stay or dismissal. ”

“ After all, any grant of options had to have been approved by the committee, and that committee can be reasonably expected to know the date of the options as well as the date on which they actually approve a grant. Nor is it any defense to say that directors might not have had knowledge that backdating violated their duty of loyalty. Directors of Delaware corporations should not be surprised to find that lying to shareholders is inconsistent with loyalty, which necessarily requires good faith. ”

“ The appearance of impropriety grows even more when one considers the fact that the board granted options, not at set or designated times, but by a sporadic method. [34]
Plaintiff supports his breach of fiduciary duty claim and his assertion that demand is futile by pointing to the board's decision to ignore limitations set out in the company's stock options plans. The plans do not grant the board discretion to alter the exercise price by falsifying the date on which options were granted. ”

“ Delaware law recognizes two instances where a plaintiff is excused from making demand. [22] Failure to make demand may be excused if a plaintiff can raise a reason to doubt that: (1) a majority of the board is disinterested or independent or (2) the challenged acts were the product of the board's valid exercise of business judgment. ”

“ Ryan is a shareholder of Maxim and has continuously held shares since his Dallas Semiconductor Incorporated shares were converted to Maxim shares upon Maxim's acquisition of Dallas Semiconductor on April 11, 2001. He filed this derivative action on June 2, 2006, against Gifford; James Bergman, B. Kipling Hagopian, and A.R. Frank Wazzan, members of the board and compensation committee at all relevant times; Eric Karros, member of the board from 2000 to 2002, and M.D. Sampels, member of the board from 2001-2002. ”

“ A defendant may be liable "even when the defendant retaining the benefit is not a wrongdoer" and "even though he may have received [it] honestly in the first instance." [62]
At this stage, I cannot conclude that there is no reasonably conceivable set of circumstances under which Gifford might be unjustly enriched. ”

“ Creating such a reason to doubt is a difficult feat under Delaware law. Rule 23.1 requires that the complaint "allege with particularity the efforts, if any, made by the plaintiff to obtain the action the plaintiff desires from the directors ... ”

“ LEXIS 79, [WL] at *9.↑ See, e.g., AFSCME Employees' Pension Planet v. Jobs, No. 06-5007 (N.D. Cal.) ; In re Caremark Rx, Inc. Derivative Litig., Master Docket No. 3:06-cv-00535 (M.D. Tenn.) ; Brandin v. Darwin, C.A. No. ”