Litigation Department Obtains Victory for Citigroup Board of Directors in Shareholder Derivative Action

March 10, 2014

Plaintiff elects to voluntarily withdraw the action rather than oppose defendants’ motion to dismiss in case involving alleged wrongdoing in connection with Citigroup’s mortgage securitization business.

Willkie litigators obtained a decisive victory in the case of Warner v. Prince, when the plaintiff elected to withdraw the action rather than oppose defendants’ motion to dismiss. The plaintiff, a purported shareholder of Citigroup, commenced a derivative action alleging that Citigroup’s Board of Directors had wrongfully rejected her demand that the company pursue claims against certain of its current and former officers and directors for breach of fiduciary duty, waste, and unjust enrichment arising from alleged wrongdoing in connection with Citigroup’s mortgage securitization business.

In response, the Board formed a demand committee to investigate the claims and determined, in the exercise of its business judgment, that pursuit of the claims was not in the company’s best interests. The plaintiff then filed suit in New York Supreme Court alleging that the demand committee’s investigation was insufficient and that the Board therefore wrongfully refused her demand. Willkie filed a motion to dismiss on behalf of the Citigroup Board, arguing that the plaintiff had failed to plead particularized facts sufficient to show that the committee’s investigation of the demand was unreasonable or that the Board’s decision to refuse the demand was not made in good faith. Two days before their brief in opposition was due, plaintiff’s counsel offered to dismiss the action voluntarily rather than defend the complaint. Justice Ramos of the Commercial Division ordered the case dismissed pursuant to a stipulation of all parties.

The case was handled by partners Mary Eaton and Sameer Advani, and associates Norman Ostrove, Zheyao Li, Dane Lund and Lars Hulsebus.