April 15, 2015
On April 3, 2015, Weil secured an important appellate victory for the board of directors of lululemon athletica inc. in a stockholder derivative action alleging that the board “intentionally facilitated” insider trading by Dennis J. Wilson, then the founder and chairman of the board of lululemon. Plaintiff, a lululemon stockholder, alleged that Mr. Wilson sold a large block of lululemon stock shortly after learning about the resignation of Christine McCormick Day, lululemon’s Chief Executive Officer, and that the audit committee’s failure to immediately disclose the resignation facilitated the alleged insider trading.
The claim was dismissed by the United States District Court for the Southern District of New York in April 2014 due to plaintiff’s failure to make a pre-suit demand on lululemon’s board. The Court of Appeals for the Second Circuit affirmed on April 3, 2015, holding that plaintiff’s allegation that demand was excused “fall[s] short of Delaware’s stringent requirements” with respect to the circumstances under which demand is excused. The Court of Appeals stated that Mr. Wilson’s “outsize role at lululemon . . . does not justify an inference that the Board is incapable of exercising its independent business judgment” concerning the alleged insider trading and that the audit committee’s oversight responsibilities with respect to the company’s disclosure obligations did not “give rise to a reasonable inference” that the audit committee lacked independence with respect to plaintiff’s claim that the audit committee and board acted improperly.