A Marion County court didn’t err when it granted insurance holding company CNO board of directors members’ motion to dismiss a shareholder’s lawsuit for failure to make pre-suit demand, the Indiana Court of Appeals concluded.
In 2010, William Carter filed a purported shareholder derivative action against the defendants, who are current and former CNO directors and officers. He did not make a demand on the board of directors before filing the complaint. Carter alleged that these members breached their fiduciary and good faith duties and other claims because they were aware or should have been aware of problems with CNO’s long-term care business segment.
Both the trial court and Court of Appeals looked to Delaware law to decide whether to grant the defendants’ motion to dismiss because CNO is a Delaware corporation. The trial court granted the motion, finding Carter didn’t allege claims showing that pre-suit demand on the board of directors was futile, as required by Delaware Chancery Court Rule 23.1. The Court of Appeals agreed.
“We conclude that Carter has not alleged particularized facts to show that the Director Defendants face a substantial likelihood of liability for the conduct described in the Amended Complaint, nor has he alleged particularized facts to show that the Director Defendants breached their duties of good faith and loyalty,” Judge Edward Najam wrote in William T. Carter, derivatively on behalf of CNO Financial Group, Inc. v. R. Glenn Hilliard, et al., 49A02-1106-PL-582. “Therefore, Carter has not shown under Delaware law that pre-suit demand on the Board would have been futile.”