According to the law firm press release, the complaint charges the members of Imperial Holdings’ Board with violations of the 1934 Act, breach of fiduciary duty and/or waste of corporate assets, abuse of control and gross mismanagement, and further seeks a declaratory judgment that the Bylaw is contrary to law and against public policy. Specifically, the complaint alleges the Bylaw was adopted on November 3, 2014 in breach of defendants’ fiduciary duties because its sole intent is to reduce the Board’s risk of being held accountable to the Company or its shareholders for any violations of law, including criminal law, breaches of fiduciary duties or other misconduct, and to protect the Board members’ tenure by entrenching their control of the Company.
In addition, the complaint alleges that defendants caused Imperial Holdings to file a false and misleading Proxy with the SEC in connection with defendants’ attempt to obtain a shareholder “advisory vote” on the Bylaw. The Proxy is false and misleading and/or fails to disclose material information to the Company’s shareholders and violates §14(a) of the 1934 Act and Rule 14a-9 promulgated thereunder by: (a) creating a materially misleading impression that shareholder litigation serves no legitimate purpose; (b) failing to explain the meaning of the following sentence: “nor does it apply to claims . . . where a private right of action at a lower threshold . . . is expressly authorized by statute;” (c) creating a materially misleading comparison between the Bylaw and inapt statutes and laws; (d) failing to disclose material information concerning IRS and SEC investigations of Imperial Holdings; (e) failing to disclose the basis for the Board’s stated belief that the Bylaw will not unduly deter the prosecution of meritorious litigation; (f) failing to disclose the basis for the Board’s stated belief that current law (including Rule 11, the PSLRA, and the business judgment rule) is not adequate to deter unmeritorious litigation; (g) failing to disclose the Board’s understanding – in view of its own self-interest – of what constitutes meritorious or unmeritorious litigation; (h) failing to disclose that of the purported nine shareholders who individually own at least 3% of the Company’s outstanding shares, many are insiders; (i) failing to disclose what basis the Board has for choosing a 3% threshold of ownership, as opposed to any other percentage; (j) failing to disclose the basis for the representation that the Bylaw will reduce the cost of D&O insurance; (k) failing to disclose the existence of litigation in the United States District Court for the Southern District of New York, which could be grounds for future representative litigation against the Company and its directors and/or officers; (l) failing to disclose the fact that individual shareholder pursuit of “meritorious” litigation is disincentivized by the cost and complexity of such litigation, which is only tempered by the ability to pursue class and derivative litigation; and (m) being contradictory with respect to whether the vote on the Bylaw is “advisory” or not.
This case was voluntarily dismissed on September 10, 2015.