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Laborers’ Local # 231 Pension Fund v. Intersil Corp.
United States District Court for the Northern District of California
868 F. Supp. 2d 838, 2012 WL 762319 (2012)
Delaware corporation Intersil Corp. (defendant) hired Compensia Inc. (defendant) to assist Intersil’s board (defendant) in determining executive pay for 2010. In March 2011, Intersil’s board recommended that Intersil’s shareholders approve an executive-compensation plan that raised executive pay by an average of 41.7 percent. In a nonbinding shareholder vote, 56 percent of Intersil’s shareholders rejected the compensation plan. In August 2011, Intersil shareholder Laborers’ Local # 231 Pension Fund (Laborers’ Local) (plaintiff) brought a shareholders’ derivative suit on Intersil’s behalf against Intersil executives and directors (defendants), alleging breach of fiduciary duty and unjust enrichment. Laborers’ Local claimed that the compensation plan was excessive, irrational, and unreasonable because Intersil’s 2010 net income had declined substantially while the board sought to increase executive compensation. Laborers’ Local also asserted a claim against Compensia for aiding and abetting the alleged breach of fiduciary duty. Laborers’ Local did not make a presuit demand on Intersil’s board before filing the derivative action, instead alleging that demand would have been futile because (1) the board faced a substantial likelihood of liability for breaching its duty of loyalty and (2) the shareholders’ no vote on the compensation plan meant that the board’s decision was not entitled to the protection of the business-judgment rule. Intersil, Compensia, and the Intersil executives and directors moved to dismiss.
Rule of Law
Holding and Reasoning (Davila, J.)
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