On June 1, 2023, the New York State Supreme Court, Appellate Division, First Department, Skadden secured the unanimous affirmance of the dismissal with prejudice of a shareholder derivative action against nearly 40 current and former directors of Barclays PLC and Barclays Capital Inc. The complaint — one of several brought against a number of foreign banking institutions and companies in the last several years — alleged that the defendants breached fiduciary duties by failing to provide adequate oversight and controls over the course of a decade, which led to billions of dollars in fines and penalties. Justice Robert R. Reed of the Commercial Division held that the plaintiff lacked standing and dismissed the action with prejudice from the bench following oral argument.
In the first of these foreign derivative shareholder suits to reach a decision on appeal, the First Department affirmed that the Commercial Division correctly dismissed the complaint for lack of standing because, under New York’s internal affairs doctrine, English substantive standing requirements applied. In doing so, the First Department expressly addressed any ambiguity created by its previous decision in Culligan Soft Water Co. v. Clayton Dubilier & Rice LLC, rejecting the argument that the Culligan decision overruled the internal affairs doctrine and limiting its application to situations where foreign corporations had a substantial-enough presence in New York to call for the application of New York law.