Nathanson v. Tortoise Capital Advisors

Summary

The Supreme Court of Maryland affirmed the dismissal of a shareholder derivative claim brought on behalf of two closed-end funds against their investment adviser and board of directors, holding that the shareholders failed to plead demand futility. The court clarified that futility turns on whether a majority of directors could consider a litigation demand in accordance with the standard of conduct codified in CA § 2-405.1(c)—not on the likelihood they would refuse it—and that the phrase 'conflicted or committed to the decision in dispute' describes a single inquiry rather than two alternative routes to excusing demand. It further held that allegations of substantial or unexculpated personal liability and of post-collapse board conduct hostile to litigation do not establish futility, because the former would require merits analysis and the latter shows mere resistance rather than incapacity. No separate opinions were filed.