In a letter to the parties before Tuesday’s hearing, Judge Thompson noted that the new allegations regarding demand futility addressed several counts, including breach of fiduciary duty. She pointed out that the officer defendants’ oversight of discriminatory lending and hiring practices will implicate a different set of facts than the breach of duty claim against the board of director defendants, who are also named in the litigation. A lawyer for the three executives, Leonid Traps of Sullivan & Cromwell LLP, argued that, for that reason, the count should be dismissed.
Traps also argued that the allegations against the officers are not consistent with the claims against the directors, as the shareholders contend. “The directors and officers are obviously different people,” Traps said. “They make different statements on different dates, and critically, they knew different things.” The lawyer also argued that the plaintiffs had not alleged that a majority of the board “is somehow beholden to the officers,” so they can’t claim that a demand to the board would have been futile.
