Facts: Shareholders of F5 Networks, Inc. brought a derivative action on behalf of the corporation against John McAdam and other current and former officers and directors of F5 Networks in the United States District Court for the Western District of Washington, alleging that McAdam and other insiders had engaged in illegal backdating of stock options and insider trading. F5 Networks moved to dismiss the derivative action for failure to make a demand that the company’s board of directors take action. The district court certified to the Supreme Court of Washington the question of whether Washington embraces the demand futility standard.

Question(s): Were the shareholders excused from making a demand on grounds of futility?

Conclusion: Justice Chambers’ opinion for a unanimous Court concluded that although Washington Revised Code §23B.07.400(2) is ambiguous with regard to whether demand is required in all circumstances, case law suggests that Washington embraces the demand futility standard. Thus, as the evidence of illegal activity by the board of directors and other insiders indicated that demand would be futile, it was not required.

Docket No. 81817-7 (from Fed Case No. C06-794RSL)

Plaintiff: Hutton

Defendant: McAdam & F5 Networks, Inc.

Briefs:

Argument: Tuesday, March 24, 2009 2:30pm

[Source: TVW, http://tvw.org]

Decided: Thursday, May 21st, 2009

Prevailing Party: McAdam & F5 Networks, Inc. (Defendant)

Vote: 9-0

Citation: Pending

Alexander

Johnson

Madsen

Sanders

Chambers
(Majority)

Owens

Fairhurst

Johnson

Stephens