proxy letter constituted a post-suit demand, which, under
Spiegel, would preclude him from claiming demand futility.
Defendants set forth the standards under Delaware law for
determining whether a demand is sufficient. Defendants correctly
state that a shareholder's demand must "(1) identify the alleged
wrongdoers, (2) describe the factual basis of the alleged acts,
(3) describe the harm caused to the corporation, and (4) request
remedial relief." Defendants' Opposition, at 9 (citing Levner
v. Saud, 903 F. Supp. 452, 456 (S.D.N.Y. 1994); Allison v.
General Motors Corp., 604 F. Supp. 1106, 1117 (Del. 1985); 5
Moore's Federal Practice, § 23.1.08[b] (3d ed. 1997)). The
proxy letter at issue here fails to identify the alleged
wrongdoers, fails to describe the factual basis of the alleged
acts, and fails to describe the harm caused to the corporation.
The remedial relief requested in the proxy letter is for Medibuy
to sue Premier and HPG. It does not mention PPP. Thus, under the
standards articulated by defendants themselves, the proxy letter
cannot constitute a Rule 23.1 demand. Additionally, the Court
notes that the proxy letter itself is addressed to the
shareholders rather than to the board of directors.
Defendants argue that even if the demand itself was
insufficient, "by attempting to make a demand on the
corporation, the shareholder plaintiff `tacitly concedes the
independence of the majority of the board to respond.'"
Defendants' Opposition, at 14 (quoting Levine v. Smith,
591 A.2d 194, 212, overruled on other grounds by Brehm v.
Eisner, 746 A.2d 244, 253 (Del. 2000)). However, Levine never
states that "by attempting to make a demand" the plaintiff
tacitly concedes the independence of the board; instead, it
states that "by making demand upon a board . . ." Id. at 212.
In so claiming, defendants incorrectly attempt to inject a
subjective element into the requirements for demand sufficiency.
Defendants argue that Nemazee characterizes the proxy letter as
a demand in his Amended Complaint. Leaving aside the fact that
the Court looks to the original Complaint for remand purposes,
defendants provide no legal support for the argument that
plaintiffs subsequently-expressed intentions should trump the
plain language of the proxy letter. An ex post facto
expression of intent cannot create a sufficient demand where one
is lacking, nor can it serve to vitiate an otherwise sufficient
demand.*fn8 Additionally, for the reasons set forth above, it
lacked the requisite substantive specificity required to suffice
as a formal demand. Given the significant consequence of making
a demand under Delaware law, the Court of Chancery has expressed
serious reservations about "construing ambiguous communications
to be demands." Leslie v. Telephonics Office Techs., Inc.,
1993 WL 547188 (Del.Ch. Dec. 30, 1993). Judging the proxy letter
by the standards set forth by defendants, the Court finds that
Nemazee did not make a post-suit demand by submitting his proxy
letter. Nemazee may therefore argue that making a demand would
have been futile.
2. Demand Futility
Defendants contend that even if Nemazee did not waive his
claim to demand futility, such futility cannot be established.
The question of whether making a demand would have been futile
is a mixed question of law and fact. The Court need not examine
defendants' contention, because to do so would require the Court
to draw inferences against Nemazee. Here, the removal to federal
court was based on a claim of fraudulent joinder. As noted
supra, in order to maintain such a claim, defendants must show
there is "no possibility" that Nemazee can state a cause of
action against PPP. An examination of the Complaint and motion
papers reveals that there is a possibility that Nemazee will be
able to prove demand futility. This finding is based on a
variety of factors, including but not limited to the alleged
substance of the concession transactions themselves, the alleged
conflicts of interest of various directors, Medibuy's alleged
failure to conduct shareholder meetings, and Medibuy's alleged
intransigence in providing Nemazee with basic information, such
as the identities of the members of the board of directors. See
generally Complaint, Plaintiffs Reply. Consequently,
defendants' contention of fraudulent joinder fails and this
Court is deprived of subject matter jurisdiction over the
For purposes of the instant remand motion, the Court need not
find that demand would have been futile. The Court makes no
determination as to this question, other than holding that such
a finding is possible. By so holding, defendants' claim of
fraudulent joinder fails and this Court is deprived of subject
matter jurisdiction over the action. The question of whether, in
fact, demand would have been futile should be determined by the
New York State Supreme Court.
B. Motion to Transfer the Venue to the Middle District of
Having rejected defendants' contention that PPP was
fraudulently joined, this Court lacks subject matter
jurisdiction to hear this action. The action is remanded to the
New York State Supreme Court. Consequently, defendants'
cross-motion for transfer of venue to the Middle District of
Tennessee is denied as moot.
C. Nemazee's Motion for Attorneys' Fees & Costs
Nemazee moves for an award of attorneys' fees and costs
pursuant to 28 U.S.C. § 1447(c). This statute states that an
order remanding a case "may require payment of just costs and
any actual expenses, including attorney fees, incurred as a
result of the removal." Plaintiff correctly notes that the
payment of fees pursuant to 28 U.S.C. § 1447(c) does not depend
on a showing of bad faith. See, e.g., Garbie v. DaimlerChrysler
Corp., 211 F.3d 407, 410 (7th Cir. 2000). However, in that
case, cited by Nemazee, the Seventh Circuit did note that
"almost every step of Chrysler's conduct throughout this
litigation has been in bad faith [. . .]." Id at 410-11.
The Second Circuit has noted that in light of the ex parte
nature of removal, plaintiffs may be exposed to "the possibility
of abuse, unnecessary expense and harassment if a defendant
removes improperly, thereby requiring plaintiff to appear in
federal court, prepare motion papers and litigate, merely to get
the action returned to the court where the plaintiff initiated
it." Circle Indus. U.S.A. v. Parke Constr. Group,
183 F.3d 105, 109 (2d Cir. 1999). The framers of 28 U.S.C. § 1447(c) were
aware of this fact and nonetheless left the determination of
costs to the discretion of the Court. In this case, after
reviewing the motion papers in this action, the Court finds no
basis for imposing fees
and costs and therefore determines that fee-shifting would be
inappropriate in this case.
For the reasons set forth above, Nemazee's motion to remand
the action to the New York State Supreme Court is GRANTED;
defendants' cross-motion to transfer the action to the Middle
District of Tennessee is DENIED AS MOOT. Nemazee's motion for
attorneys' fees and costs is DENIED.
The Clerk of the Court is directed to close the file in this