California State Teachers’ Retirement System v. Alvarez

Facts

In April 2012, the New York Times reported on an alleged bribery scheme at Wal-Mart de Mexico (WalMex) and subsequent cover-up by Wal-Mart executives. Multiple derivative lawsuits followed in both Arkansas federal court and Delaware Court of Chancery. The Delaware Plaintiffs heeded the Delaware Chancellor’s advice to use “tools at hand” and pursued a Section 220 books and records action that lasted nearly three years. Meanwhile, the Arkansas Plaintiffs proceeded without seeking books and records, despite being aware of the Chancellor’s warning. The Arkansas federal court initially stayed proceedings pending Delaware litigation but later lifted the stay. In March 2015, the Arkansas court dismissed the derivative complaint for failure to plead demand futility. When the Delaware Plaintiffs later amended their complaint, the defendants moved to dismiss based on issue preclusion from the Arkansas judgment. The Court of Chancery granted the motion, finding that Arkansas law on issue preclusion was satisfied and the Arkansas Plaintiffs had adequately represented the Delaware Plaintiffs. On appeal, the Delaware Supreme Court remanded for consideration of Due Process concerns, after which the Court of Chancery issued a supplemental opinion finding no Due Process violation but recommending a new approach.