Demand Futility Under FRCP 23. 1 In addition to complying with the requirements of Rule 8, a plaintiff in a shareholder derivative action must also comply with the requirements of Rule 23.1. See Forestal x. Xxxxxxxx, 2016 U.S. Dist. LEXIS 191432, *15 (C.D. Cal. Nov. 14, 2016). "The derivative form of action permits an individual shareholder to bring 'suit to enforce a corporate cause of action against officers, directors, and third parties.'" Kamen x. Xxxxxx Fin. Servs., Inc., 500 U.S. 90, 95 (1991) (quoting Xxxx x. Xxxxxxxx, 396 U.S. 531, 534 (1970). "Devised as a suit in equity, the purpose of the derivative action was to place in the hands of the individual shareholder a means to protect the interests of the corporation from the misfeasance and malfeasance of 'faithless directors and managers.'" Id. (quoting Xxxxx x. Beneficial Loan Corp., 337 U.S. 541, 548 (1949)). "A shareholder seeking to vindicate the interests of a corporation through a derivative suit must first demand action from the corporation's directors or plead with particularity the reasons why such demand would have been futile." Xxxxxxxxxx x. Xxxxx, 765 F.3d 1137, 1148 (9th Cir. 2014) (quoting In Re Silicon Graphics Inc. Sec. Litig., 183 F.3d 970, 983 (9th Cir. 1999) (citing Fed.R.Civ.P. 23.1)). "The purpose of this demand requirement in a derivative suit is to implement the basic principle of corporate governance that the decisions of a corporation—including the decision to initiate litigation—should be made by the board of directors of the majority of shareholders." Id. (internal quotations and citations omitted). Because DPW is incorporated in Delaware, the Court applies Delaware substantive law to the dispute. (See Compl. ¶ 1.). See Kamen, 500 U.S. at 98-99; Xxxxxxxxxx, 765 F.3d at 1148 ("[T]he substantive law which determines whether demand is, in fact, futile is provided by the state of incorporation of the entity on whole behalf the plaintiff is seeking relief.") (citation omitted)). Under Delaware law, an exception to the demand requirement applies if the shareholder bringing a derivative suit can show that such a demand would be futile "because the directors are incapable of making an impartial decision regarding whether to institute such litigation." Id. Here, Plaintiffs failed to make any demand on the board, and therefore must show demand futility in order to have standing to pursue their claims. See Forestal, 2016 U.S. Dist. LEXIS 191432, at *16. Plaintiffs must state with particularity "the reasons for no...
