On August 29, 2018, the firm obtained dismissals of two derivative lawsuits pending in the District Court for the Northern District of California against officers and directors of San Francisco-based fintech company, LendingClub. In 2017, a shareholder filed a derivative suit alleging claims under Section 14(a) of the Securities Exchange Act of 1934. Then, apparently hedging his bets in case his own action was dismissed as untimely, the shareholder also sought to intervene in an earlier-filed derivative suit that had included Section 14(a) and breach of fiduciary duty claims, but which had been dismissed so that a demand on the board of directors could be pursued. The shareholder in the second case argued that the dismissal in the earlier derivative case had been procedurally improper and should be set aside. The court agreed, and revived the earlier derivative suit.
The court, however, withheld a ruling on intervention, instead instructing the parties to brief the issue of whether the shareholder’s own suit was filed within the statute of limitations. At a subsequent hearing, the court indicated that while it might dismiss shareholder’s own action as time-barred, it was considering allowing shareholder to intervene in the earlier revived action. The court seemed troubled that the Company might lose the right to pursue a claim under Section 14(a) —which is a claim not asserted in any other suits pending against defendants. In response, Quinn Emanuel argued that the Section 14(a) claim was weak and narrow in its scope, and that any recovery under such a claim was a subset of the recovery for claims being asserted in a related derivative action pending in the Delaware Court of Chancery.
Although the court had expressed skepticism about dismissing the cases, the court did just that. The court agreed with LendingClub and its co-defendants that the second-filed case was barred by the statute of limitations, that the shareholder’s intervention request was untimely and the first-filed case should be dismissed. This outcome brings an end to derivative suits ostensibly filed on LendingClub’s behalf that were largely duplicative of suits already extant and which would have been time consuming and expensive to defend.