I must confess that I confess that I am nonplused by a recent ruling by U.S. District Court Judge James A. Teilborg in SinglePoint Direct Solar LLC v. Curiel, 2022 U.S. Dist. LEXIS 19880.  The case involved, among other things, a derivative claim brought by a member of a Nevada limited liability company, SDS.   Under Rule 23.1 of the Federal Rules of Civil Procedure, a member must "state with particularity: . . . any effort by the plaintiff to obtain the desired action from the directors or comparable authority and, if necessary, from the shareholders or members; and . . . the reasons for not obtaining the action or not making the effort."  In other words, the plaintiff must either state that demand was excused or that demand was made and wrongfully refused.  

In this case, the plaintiff's complaint failed to allege either, but the verification included the following:

I, Pablo Curiel Diaz, being duly sworn, deposes and says that I am a Counterclaimant in the above captioned case, Case No. 2:21-cv-01076-JAT, filed in the United States District Court for the District of Arizona. I was a shareholder and member at the time of the transactions complained of herein, or my shares or membership later devolved on me by operation of law. This action is not a collusive one to confer jurisdiction that this Court would otherwise lack. On March 16, 2021, my legal counsel, The Law Offices of Donald W. Hudspeth, P.C., sent a demand letter outlining the factual basis for the instant Counterclaims, and demanded that the officers, board members, and Majority Managers, of SinglePoint, Inc. and SinglePoint Direct Solar, LLC, respectively, take corrective action to resolve the issues or otherwise to bring [sic]. To my knowledge, no corrective action has been taken, which necessitated the filing of the instant action.

Judge Teilborg ruled that this was sufficient for purposes of NRCP 23.1.  My puzzlement lies with the fact that ruling discusses the standard applied to demand futility cases (i.e., cases in which no demand was made).  Here, it is clear that a demand was made.  Therefore, the analysis should have focused on whether the board had refused to act on the demand and, if so, whether that refusal was "wrongful".

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