A Pryor Cashman team led by litigation partner James S. O'Brien, Jr., with the assistance of litigation group member Kaveri Arora, successfully defended clients Fred Sacramone, James Shiah, Jeanne Kingsley, and Stephen Berini in a derivative action brought by plaintiff Efraim Barenbaum on behalf of FTE Networks, Inc. in the U.S. District Court, Southern District of New York.
The clients were members of FTE Networks' Board of Directors when the complaint was filed. Plaintiff alleged that they had failed to uncover and were complicit in fraud and embezzlement at the company. The Pryor Cashman team moved to dismiss the complaint and then the amended complaint on several grounds, one of which was lack of standing. O'Brien argued that Plaintiff had failed adequately to allege -- as he was required to do -- that it would have been futile for him to demand that the Board members commence the action seeking to recover for the alleged fraud and embezzlement.
United States District Judge Mary Kay Vyskocil agreed and dismissed the case with prejudice. According to the decision,
"After a series of revelations of corporate misconduct by executives at FTE Networks, Inc., Plaintiff Ephraim Barenbaum, IRA, brought this action derivatively to recover on behalf of the company for that wrongdoing. In addition to the responsible actors, Barenbaum sued certain members of the FTE Board. However, Barenbaum's Amended Complaint fails to allege that demand on the now-existing FTE Board of Directors would have been futile, as he must, to have standing to bring a derivative case. As a result, the Amended Complaint is dismissed with prejudice."
The full decision can be read here: U.S. District Court Southern District of New York Opinion and Order Granting Motions to Dismiss [1:19-cv-05913 (Mkv)].
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