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Bezirdjian v. O'Reilly

March 30, 2010

LAWRENCE BEZIRDJIAN, PLAINTIFF AND APPELLANT,
v.
DAVID J. O'REILLY ET AL., DEFENDANTS AND RESPONDENTS.



(Contra Costa County Super. Ct. No. C07-01144) Trial Judge: Hon. David B. Flinn.

The opinion of the court was delivered by: Dondero, J.

CERTIFIED FOR PUBLICATION

In this shareholder derivative action, plaintiff Lawrence Bezirdjian appeals the trial court's orders granting nominal defendant Chevron Corporation's motion for judgment on the pleadings and dismissing his lawsuit. We affirm.

FACTUAL BACKGROUND AND PROCEDURAL HISTORY

On May 22, 2007, plaintiff filed a shareholder derivative complaint on behalf of Chevron Corporation (Chevron) against current and certain former members of its Board of Directors (Board).*fn1 The complaint contains counts for breach of fiduciary duties, gross mismanagement, constructive fraud, and waste of corporate assets, in connection with illicit payments Chevron allegedly made to Saddam Hussein in exchange for Iraqi oil from 2000 to 2003. In the complaint, plaintiff acknowledged that the majority of his factual allegations were derived from an article published by the New York Times on May 8, 2007, entitled "Chevron Seen Settling Case on Iraq Oil." He also alleged that he was excused from making a prefiling demand on the Board to institute this action because such demand would be futile. Specifically, he stated "the [Board] cannot exercise independent objective judgment in deciding whether to bring this action or whether to vigorously prosecute this action because each of its members participated personally in the wrongdoing or are dependent upon other Defendants who did."

On August 9, 2007, the trial court filed its order staying the action. The order includes a stipulation from the parties deeming the complaint to be a stockholder's demand to pursue the claims alleged therein, and giving the Board until December 1, 2007, to act on the demand. Plaintiff was granted leave to amend the complaint within 15 days upon the lifting of the stay. The matter was subsequently continued several times.

On June 17, 2008, plaintiff filed an amended shareholder derivative complaint. The amended complaint repeats the original complaint's allegations concerning the illicit payments, deletes the allegation excusing a prefiling demand, and adds the following: "Plaintiff made demand on Chevron to commence legal action . . . . Plaintiff's demand was refused. Accordingly, plaintiff has made sufficient effort to get Chevron to bring this action and need do no more." This portion of the complaint goes on to state that the Board had formed a special committee of directors (Committee) to consider and respond to plaintiff's demand. On April 30, 2008, the Committee reported to the Board "that it had concluded its investigation and . . . had determined it not to be in the best interests of Chevron or its stockholders to pursue the claims asserted herein." Thereafter, Chevron management was directed to seek dismissal of the action.

Attached to the complaint as an exhibit is a letter dated June 11, 2008, from Chevron's attorney. The letter states that the Board had granted the Committee "the power to investigate, analyze, deliberate upon, and respond to the demand," and had further resolved that the Committee's conclusions would be binding on the Board without further review. The letter goes on to state that the Committee and its counsel interviewed 34 individuals and reviewed over 150,000 pages of documents in the course of its investigation into the complaint's allegations.

On July 21, 2008, Chevron filed a demurrer to the amended complaint.*fn2

On August 20, 2008, the trial court overruled the demurrer but advised the parties that it would entertain a motion to dismiss.

On January 7, 2009, Chevron filed a motion for judgment on the pleadings. In its motion, Chevron sought to make a prima facie showing that the directors who comprised the Committee were independent, and that they acted reasonably and in good faith in declining to pursue the underlying lawsuit. Chevron also asked the court to take judicial notice of certain court records, Chevron's 2008 proxy statement, and a set of facts stipulated to by the parties.

On March 11, 2009, the trial court granted Chevron's motion and dismissed the action.

Judgment in favor of Chevron was filed on April 27, 2009. This ...


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