In re The Limited, Inc. Shareholders Litigation

Leslie Wexner (defendant) was the founder, president, CEO, and chairman of The Limited, Inc. In 1996, The Limited entered into a redemption agreement with a trust controlled by Leslie Wexner. Under the agreement the trust could compel The Limited to redeem some or all of its stock at $18.75 per share, or, after 2005, The Limited could repurchase the shares at $25 per share. In 1999, The Limited announced a plan to repurchase a large number of outstanding shares at $50 to $55 per share. Leslie Wexner and the trust agreed not to participate in the repurchase plan. However, at the same time the repurchase plan was announced, the board also agreed to rescind the redemption agreement it had entered into with the trust. Rochelle Phillips, Miriam Shapiro, and Peter Sullivan (the Shareholders) (plaintiffs) owned stock in The Limited. Without first making a demand on the board of directors, the Shareholders filed a derivative action against the company and each director. Their complaint alleged that the repurchase plan and the rescission of the redemption agreement constituted corporate waste and a breach of the duties of care and loyalty. The 12-member board of directors also included Wexner’s wife Abigail Wexner (defendant); Donald Shackleford (defendant), who was also a director of a subsidiary corporation of The Limited; David Kollar (defendant), the principal of a company which earned $400,000 annually from The Limited for providing music to its stores; Kenneth Gilman, Martin Trust, and Leonard Schlesinger (defendants), employees or contractors of The Limited, earning $1.8 million, $1.8 million, and $150,000 annually from the company respectively; and E. Gordon Gee (defendant), president of The Ohio State University, who successfully solicited a $25 million donation from Leslie Wexner. The board members moved to dismiss the complaint for failure to properly make a demand on the board prior to bringing a derivative action, and for failure to state a claim