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Beam ex rel. Martha Stewart Living Omnimedia, Inc. v. Stewart

Delaware Supreme Court
845 A.2d 1040 (Del. 2004)



Monica Beam (plaintiff) was a shareholder of Martha Stewart Living Omnimedia, Inc. (MSO) (plaintiff). Beam filed a derivative action on behalf of MSO against Martha Stewart (defendant), alleging breaches of Stewart’s fiduciary duties of loyalty and care for illegally selling ImClone stock and mishandling the media attention that followed. In violation of Delaware Chancery Rule 23.1, Beam did not demand that MSO’s board of directors file the lawsuit prior to filing the lawsuit herself. However, Beam alleged that any presuit demand would have been futile because a majority of the board members were not disinterested in the litigation. Specifically, Beam alleged that five of MSO’s six board members were personally interested in the litigation against Stewart: Stewart, Sharon Patrick, Arthur Martinez, Darla Moore, and Naomi Seligman. Patrick was an inside director and MSO officer, and she received significant compensation from MSO. Martinez and Moore were longstanding friends of Stewart. Seligman had called a publishing house to try to stop a book that was critical of Stewart. MSO moved to dismiss based on Beam’s failure to make a presuit demand on MSO’s board of directors. The Court of Chancery determined that Beam had not shown that a presuit demand would have been futile and dismissed the claim. Beam appealed to the Delaware Supreme Court.

Rule of Law


Holding and Reasoning (Veasey, C.J.)

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