Kaplan v. Peat, Marwick, Mitchell & Co

In Kaplan v. Peat, Marwick, Mitchell & Co. (Del. 1988) 540 A.2d 726, the Delaware Supreme Court reasoned that a third-party defendant's standing to raise the demand requirement must be determined based on its nature and purpose. (Id. at p. 730.) The court explained that "the purpose of pre-suit demand is to assure that the stockholder affords the corporation the opportunity to address an alleged wrong without litigation and to control any litigation which does occur." (Ibid.) It concluded that third-party defendants may challenge the sufficiency of a shareholder's demand. (Ibid.) In that case, the court excused the plaintiff's failure to make a demand on a corporation that had been joined as a nominal defendant and had declared its position of neutrality on a motion to dismiss the lawsuit. (Id. at p. 731.) It held "that when a corporation chooses to take a position in regards to a derivative action asserted on its behalf, it must affirmatively object to or support the continuation of the litigation," and that a declared "position of neutrality must be viewed as tacit approval for the continuation of the litigation." (Ibid.)