Mandamus Granted Over Denial of Special Exception

Here's one to put in your mandamus file.  The Dallas Court of Appeals has held that the trial court abused its discretion by denying a special exception and that the relators had no adequate remedy by appeal.  Of course, there's more to this holding than meets the eye.

This is a sharolder derivative suit governed by Delaware law.  Delaware law requires a party bringing such an action to first make demand that the board of directors bring suit and refuse to do so, or show that the demand would be futile.  Under Delaware law, the plaintiffs must make a particularized showing in their pleading of the facts relating to this requirement.  The plaintiffs did not do so, and the defendants/relators specially excepted to the pleading.  District Court Judge Martin Hoffman denied the special exceptions.

The court of appeals held that Judge Hoffman abused his discretion by denying the special exceptions.  On appeal, the plaintiffs appear to have tried to provide the specificity that should have been contained in their trial court pleading.  The appellate court rejected the explanations on the merits and also pointed out that the allegations were not contained in the trial court pleading.  Citing the Texas Supreme Court's opinion in In re Schmitz, 285 S.W.3d 451, 459 (Tex. 2009), the court of appeals also held that the relators/defendants did not have an adequate remedy by appeal.  I took a look at Schmitz.  It's a mandamus action from a shareholder deriviative action governed by Texas law.  The Court in that case concluded that the plaintiffs had not complied with the demand requirement before bringing suit, and that the appellate remedy would be inadequate if a shareholder were permitted to sue without complying with the statutory prerequisite demand.

The court of appeals' opinion in In re Brick may be found here.

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