Standard Chartered prevailed on its motion to dismiss derivative claims against 38 current and former directors and officers of Standard Chartered and its subsidiary Standard Chartered Holdings. The plaintiff, The City of Philadelphia Board of Pensions and Retirement, asserted claims of breach of fiduciary duty under English law based on regulatory resolutions relating to past compliance with U.S. sanctions and anti-money laundering laws and regulations.
Following oral argument, Justice Timothy Driscoll of the Supreme Court for Nassau County, Commercial Division, issued a decision on February 3 dismissing the plaintiff’s claims. The court held that the plaintiff lacked standing under English law to bring derivative claims on behalf of either nominal defendant.
Justice Driscoll agreed with Standard Chartered that the English common law rule of Foss v. Harbottle provides the standing requirements for derivative claims brought on behalf of English companies in New York. The Foss rule prohibits derivative actions unless a shareholder can satisfy one of four narrow exceptions. Only one of those exceptions was at issue here—the “fraud-on-the-minority” exception, which required the plaintiff to allege that the individual defendants controlled a majority of voting shares of Standard Chartered, and Justice Driscoll agreed that plaintiffs failed to satisfy that exception.
The ruling represents the most recent in a series of favorable decisions for foreign companies that have faced derivative actions in New York state courts.
The S&C team that represented Standard Chartered included Rick Pepperman, Jacob Cohen and Sam Darby.