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`IN THE SUPREME COURT OF THE STATE OF NEVADA
`_______________________________________
`Supreme Court Case No.
`Electronically Filed
`Aug 25 2022 08:52 a.m.
`________________________________
`Elizabeth A. Brown
`Clerk of Supreme Court
`RAYMOND J. CHESS, GERALD B. BUDDE, H. BENJAMIN SAMUELS,
`HARRY DEMOTT, MICHAEL L. CLARK, PAMELA S. MADER, and
`JACQUELINE A. DEDO,
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`Petitioners,
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`v.
`EIGHTH JUDICIAL DISTRICT COURT of the State of Nevada, in and for Clark
`County; THE HONORABLE NANCY L. ALLF, DISTRICT JUDGE, DEPT. 27
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`Respondent,
`and
`WORKHORSE GROUP, INC., ROMARIO ST. CLAIR AND
`ANDREW EVERSON
`Real Parties in Interest
`_________________________________________________________
`PETITION FOR WRIT OF MANDAMUS
`_______________________________________________
`HOLLAND & HART LLP
`J. Stephen Peek, Esq. (1758)
`Jessica E. Whelan, Esq. (14781)
`9555 Hillwood Drive, 2nd Floor
`Las Vegas, Nevada 89134
`Telephone: (702) 669-4600
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`Attorneys for Petitioners
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`
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`8/24/22 8:24 PM
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`Docket 85216 Document 2022-26516
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`RULE 26.1 DISCLOSURE
`The undersigned counsel of record certifies that the following are persons or
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`entities as described in Nev. R. App. P. 26.1(a) and must be disclosed. These
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`representations are made in order that the judges of this court may evaluate possible
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`disqualification or recusal.
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`Petitioner-Defendant Raymond J. Chess is an individual;
`Petitioner-Defendant Gerald B. Budde is an individual;
`Petitioner-Defendant H. Benjamin Samuels is an individual;
`Petitioner-Defendant Harry DeMott is an individual;
`Petitioner-Defendant Michael L. Clark is an individual;
`Petitioner-Defendant Pamela S. Mader is an individual;
`Petitioner-Defendant Jacqueline A. Dedo is an individual.
`The law firms of Holland & Hart LLP and Simpson Thatcher & Bartlett LLP
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`have appeared in the district court and are expected to appear before this Court.
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`ROUTING STATEMENT
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`The Nevada Supreme Court should retain this writ proceeding because it
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`involves a question of first impression and because it raises a question of statewide
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`public importance. NRAP 17(a)(11)-(12). In particular, this matter directly
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`concerns the intersection of NRS 78.012’s legislative prohibition on incorporation
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`of other states’ laws with the scope of Nevada officer and director liability.
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`TABLE OF CONTENTS
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`RULE 26.1 DISCLOSURE ....................................................................................... i
`ROUTING STATEMENT ........................................................................................ ii
`TABLE OF CONTENTS ......................................................................................... iii
`TABLE OF AUTHORITIES ................................................................................... iv
`INTRODUCTION .................................................................................................. 1
`ISSUE PRESENTED .............................................................................................. 2
`RELIEF SOUGHT .................................................................................................. 3
`STATEMENT OF FACTS ..................................................................................... 3
`General Background ............................................................................................ 4
`This Action .......................................................................................................... 5
`Proceedings And Decision Below ....................................................................... 6
`STATEMENT OF REASONS WHY THE WRIT SHOULD ISSUE ................... 9
`CONCLUSION ..................................................................................................... 25
`CERTIFICATE OF COMPLIANCE ....................................................................... 27
`CERTIFICATE OF SERVICE ................................................................................ 29
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`TABLE OF AUTHORITIES
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`CASES
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`iv
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`Page(s)
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`Badger v. Eighth Judicial Dist. Ct.,
`132 Nev. Adv. Op. 39, 373 P.3d 89 (2016) ...............................................................................9
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`Beazer Homes Nev. Inc. v. Eighth Judicial Dist. Ct.,
`120 Nev. 575, 579-80, 97 P.3d 1132, 1135 (2004) ..................................................................16
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`Brophy v. Cities Service Co.,
`70 A.2d 5 (Del. Ch. 1949)................................................................................................ passim
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`Canarelli v. Eighth Judicial Dist. Ct.,
`136 Nev. 247, 464 P.3d 114 (2020) .........................................................................................21
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`Chur v. Eighth Judicial District Court,
`136 Nev. 68, 458 P.3d 336 (2020) ................................................................................... passim
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`Cohen v. Mirage Resorts, Inc.,
`119 Nev. 1, 62 P.3d 720 (2003) .........................................................................................23, 24
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`Daisy Sys. Corp. v. Finegold,
`1988 WL 166235 (N.D. Cal. Sept. 19, 1988) ..........................................................................22
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`Farrar v. Workhorse Grp., Inc.,
`21-cv-2072, Dkt. No. 64 (C.D. Cal. July 16, 2021) ...............................................................4, 6
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`Galloway v. Truesdell,
`83 Nev. 13, 422 P.2d 237 (1967) .............................................................................................21
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`Guzman v. Johnson,
`483 P.3d 531 ......................................................................................................................13, 22
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`Hilton Hotels Corp. v. ITT Corp.,
`978 F. Supp. 1342 (D. Nev. 1997) .............................................................................................8
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`In re Allegiant Travel,
`2020 WL 7491073 (allowing Delaware insider trading claim to proceed) .......................12, 13
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`In re DISH Network Deriv. Litig.,
`133 Nev. 438, 401 P.3d 1081 (2017) .......................................................................................13
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`In re Wynn Resorts,
`Case No. A-18-769630-B, Order .......................................................................................12, 13
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`v
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`Kahn v. Kolberg Kravis Roberts & Co., L.P.,
`23 A.3d 831 (Del. 2011) ....................................................................................................22, 24
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`Latesco, L.P. v. Wayport, Inc.,
`2009 WL 2246793 (Del. Ch. July 24, 2009)............................................................................24
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`Lawrence v. Clark Cty.,
`127 Nev. 390, 393, 254 P.3d 606, 608 (2011) .........................................................................15
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`Libby v. Eighth Judicial Dist. Ct. of the State,
`130 Nev. Adv. Rep. 39, 325 P.3d 1276 (2014) ........................................................................12
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`MountainView Hosp., Inc. v. Eighth Judicial Dist. Ct.,
`128 Nev. 180, 273 P.3d 861 (2012) ...........................................................................................9
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`Nelson v. Sierra Constr. Corp.,
`77 Nev. 334, 341, 364 P.2d 402, 405 (1961) ...............................................................23, 24, 25
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`Parametric Sound Corp. v. Eighth Judicial Dist. Ct.,
`133 Nev. 417, 401 P.3d 1100 (2017) ...........................................................................13, 23, 24
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`Peck v. Zipf,
`133 Nev. 890, 892, 407 P.3d 775, 778 (2017) .........................................................................15
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`Rock Ivy Holdings, LLC v. RC Props., LLC,
`464 S.W.3d 623 (Tenn. Ct. App. 2014) .....................................................................................7
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`Somersett Owners Ass’n v. Somersett Dev. Co., Ltd.,
`137 Nev. Adv. Op. 35, 492 P.3d 534 (2021) ...........................................................................21
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`State v. Eighth Judicial Dist. Ct.,
`118 Nev. 140, 42 P.3d 233 (2002) .......................................................................................9, 10
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`State, Dep’t of Tax. v. Chrysler Grp. LLC,
`129 Nev. 274, 300 P.3d 713 (2013) ........................................................................................18
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`Washoe Med. Ctr. v. Second Judicial Dist. Ct.,
`122 Nev. 1298, 148 P.3d 790 (2006) .......................................................................................12
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`Wynn Resorts, Ltd. v. Eighth Judicial Dist. Ct.,
`133 Nev. Adv. Op. 57, 399 P.3d 334 (2017) .............................................................................9
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`STATUTES
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`Nev. Stat. ch. 19, §§ 1-31...............................................................................................................20
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`Nev. Stat. ch. 29, § 639 ..................................................................................................................19
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`Nev. Stat. ch. 281, §§ 1-38.............................................................................................................20
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`Nev. Stat. ch. 485, §§ 1- 267 .........................................................................................................20
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`Nev. Stat. ch. 559, §§ 1-7 ..............................................................................................................20
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`Nev. Stat. ch. 601, § 3 ....................................................................................................................20
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`NRS 11.202 ....................................................................................................................................21
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`NRS 78.012 ............................................................................................................................ passim
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`NRS 78.138 ............................................................................................................................ passim
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`NRS 78.139 ....................................................................................................................................16
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`NRS 694.030 ............................................................................................................................19, 20
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`Securities Exchange Act of 1934 § 10(b) ........................................................................................4
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`Securities Exchange Act of 1934 § 20 .............................................................................................4
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`OTHER AUTHORITIES
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`Nev. R. Civ. P. 12(b)(5) .................................................................................................................14
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`Nev. R. Civ. P. 23.1 .................................................................................................................1, 3, 4
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`SEC Rule 10b5-1 .............................................................................................................................7
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`INTRODUCTION
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`This petition raises a purely legal question of first impression for this Court
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`and of great importance to Nevada corporate law: whether Nevada courts can and
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`should adopt Delaware corporate law and recognize a private, derivative claim for
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`insider trading by a shareholder against a Nevada corporation’s directors and
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`officers, where the Legislature has expressly determined that Nevada courts should
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`not modify or supplement Nevada corporate law with the laws and judicial decisions
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`from other states, where this Court and the Legislature have not expressly authorized
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`such a claim (and the Legislature has implicitly rejected such a claim), and where
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`the alleged insider trading did not cause any harm to the corporation. The answer to
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`this question is no, and the district court erred in reaching a contrary conclusion.
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`Here, shareholder-plaintiffs brought suit derivatively against Workhorse
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`Group Inc. (“Workhorse” or the “Company”) and its board of directors (the “Board”)
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`without first making a demand on the Board pursuant to Rule 23.1 of the Nevada
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`Rules of Civil Procedure. Shareholder-plaintiffs pleaded that making such a demand
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`would have been futile, because a majority of the corporation’s board faced a
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`substantial likelihood of liability under an insider trading theory as recognized by
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`the Delaware Court of Chancery in Brophy v. Cities Service Co., 70 A.2d 5 (Del.
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`Ch. 1949). The district court held that shareholder-plaintiffs had adequately pleaded
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`demand futility under Rule 23.1. In reaching that result, the district court reasoned
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`that while “Nevada has not recognized a Brophy claim recognized in Delaware to
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`hold directors and officers liable to the corporation, it has not rejected this claim”
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`either and, therefore, “the case will move forward.”
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`The district court’s decision is error, as it is completely at odds with both the
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`laws of this State concerning the duties and obligations of Nevada directors and
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`officers and this Court’s prior decisions. If the district court’s decision were allowed
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`to stand, it would fundamentally reshape Nevada corporate law to conform to
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`Delaware law and would jeopardize the business-friendly environment the
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`Legislature sought to create for Nevada corporations.
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`This Court should therefore exercise its discretion to consider the merits of
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`this writ petition to (1) provide guidance to the district courts that they should not
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`graft onto Nevada corporate law the laws and judicial decisions of other states,
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`including Delaware, and (2) clarify that the Nevada Legislature has declined to
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`recognize a private, derivative implied claim by a shareholder of a Nevada
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`corporation against the corporation’s directors and officers for insider trading
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`particularly where, as here, the corporation is not alleged to have suffered any harm.
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`ISSUE PRESENTED
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`Did the district court err in holding that shareholder-plaintiffs, suing
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`derivatively on a corporation’s behalf, had adequately pleaded demand futility on
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`the basis that a majority of the corporation’s board faced a substantial likelihood of
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`liability on an insider trading theory under Delaware law as recognized in Brophy v.
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`Cities Service Co., 70 A.2d 5 (Del. Ch. 1949), where the Legislature has determined
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`that Nevada courts should not modify or supplement Nevada corporate law with the
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`laws and judicial decisions from other jurisdictions, where this Court and the
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`Legislature have not expressly authorized such a claim (and the Legislature has
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`implicitly rejected such a claim), and where the alleged insider trading is not alleged
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`to have caused any harm to the corporation?
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`RELIEF SOUGHT
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`Petitioners request that this Court issue a writ of mandamus, or in the
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`alternative, writ of prohibition, directing the district court to enter an order
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`dismissing the lawsuit on the grounds that shareholder-plaintiffs have failed to
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`adequately plead that a pre-suit demand on the board of directors of Workhorse to
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`bring claims against certain current and former officers and directors of Workhorse
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`would have been futile as required under Nevada Rule of Civil Procedure 23.1.
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`STATEMENT OF FACTS
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`The issue presented in this petition raises a pure question of law. As such,
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`this abbreviated statement of facts states only those facts relevant to understand the
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`purely legal issue presented.
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`General Background
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`Workhorse is a Nevada corporation that develops and manufactures electric
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`trucks. APP002, ¶ 2. In 2015, the United States Postal Service (“USPS”)
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`announced its intention to replace its aging delivery trucks and asked companies to
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`submit proposals to supply it with a new fleet. APP002–APP003, ¶ 4. Workhorse
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`submitted a proposal and created six prototype vehicles for the USPS’s
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`consideration. Id.. In 2021, the USPS announced that it had selected Oshkosh
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`Defense to supply the entire fleet. APP004, ¶ 9. Workhorse’s stock price declined
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`as a result and, shortly thereafter, Workhorse and its former officers Duane Hughes
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`(CEO), Steve Schrader (CFO), Robert Willison (COO) and Gregory Ackerson
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`(Corporate Controller) were sued under Sections 10(b) and 20 of the Securities
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`Exchange Act of 1934 in California federal court (the “Securities Class Action”).
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`APP004–APP006, ¶¶ 10, 14. The operative complaint in the Securities Class Action
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`alleges that Workhorse and its former officers made several misstatements in 2020
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`and 2021 concerning (i) Workhorse’s chances of winning the USPS contract; (ii) the
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`size and nature of Workhorse’s “backlog” of orders from customers; and (iii)
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`Workhorse’s ability to manufacture at scale and achieve its production targets. See
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`generally Farrar v. Workhorse Grp., Inc., 21-cv-2072, Dkt. No. 64 (C.D. Cal. July
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`16, 2021) (Amended Complaint for Violation of Federal Securities Law).
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`This Action
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`This action is the consolidation of two separate shareholder derivative actions
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`filed on the heels of the Securities Action. The operative complaint (the
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`“Complaint”) pleads the same theory and three categories of misstatements as in the
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`Securities Action. See generally APP012–APP030, ¶¶ 40–107. However, while the
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`Securities Action brings claims against Workhorse and its former officers for
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`making the alleged misstatements, this action brings claims against Workhorse’s
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`board of directors (the “Board”) and certain former officers for their supposed
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`inaction in allowing those misstatements to be made. APP011, ¶ 38. Specifically,
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`the Complaint asserts that each Board member, by virtue of his or her position, knew
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`or should have known that the Company’s statements were misleading and did not
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`stop them from being made so that Workhorse’s stock price could increase and the
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`directors could profit from stock sales. APP036, ¶¶ 122–124.
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`The Complaint asserts claims against each Board member for breach of
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`fiduciary duty and unjust enrichment. As to the former claim, the Complaint alleges
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`that each Board member violated his or her fiduciary duties by allowing the
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`Company to make the alleged misstatements and by engaging in, and allowing others
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`to engage in, insider trades. As to the latter claim, the Complaint alleges only that
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`the Board members “profited from their misconduct and were unjustly enriched[.]”
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`APP038, ¶ 134. While the Complaint alleges that the Company suffered damages as
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`a result of the alleged misstatements that the Board members supposedly allowed to
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`occur under their watch, the Complaint does not plead any damage to the Company
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`caused by the alleged insider trades. APP032–APP033, ¶¶ 108–111. Rather, the
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`Complaint seeks merely to “recoup” the alleged profits earned by Board members
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`as a result of their stock sales. APP033, ¶ 111.
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`The Complaint attempts not only to disgorge profits earned through the
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`alleged insider trades, despite pleading no actual damage to the Company from those
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`trades, but also to use the unjust enrichment claim in support of its demand futility
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`allegations. APP036, ¶ 123. Specifically, the Complaint alleges that, because the
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`Board members “possessed material, nonpublic company information and used that
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`information to benefit themselves by selling their personally held Company stock,”
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`they “face[d] a substantial likelihood of liability for breach of their fiduciary duty of
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`loyalty.” Id. Thus, concludes the Complaint, “[a]ny demand upon [the Board
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`members] is futile.” Id.
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`Proceedings And Decision Below
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`On March 22, 2022, defendants (Petitioners here) moved to dismiss the action
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`under NRCP 23.1 and 12(b)(5) for failure to plead demand futility and for failure to
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`state a claim, respectively, and separately moved to stay the action pending the
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`outcome of the Securities Action. See generally APP044–APP079. In their motion
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`to dismiss, Petitioners argued in relevant part that the Complaint failed to allege that
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`a majority of the Board faced a substantial likelihood of liability to render futile the
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`making of a pre-suit demand as required by NRCP 23.1, because, inter alia, (i) the
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`Complaint did not allege that any director was directly involved in making or
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`developing the challenged statements or knew them to be false APP062–APP064;
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`(ii) Nevada does not recognize a breach of fiduciary duty claim based on an insider
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`trading theory, particularly when no harm to the Company is alleged APP065–
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`APP066; and (iii) even if Nevada did recognize such a claim, nearly all sales were
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`pre-planned and made in advance of any alleged fraud pursuant to valid Rule 10b5-
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`1 trading plans (and thus not suspicious) and, in any event, the Complaint failed to
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`allege that any director sold stock on the basis of any alleged insider information
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`APP066–APP068.
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`In opposition, plaintiff-shareholders argued in relevant part that while
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`this Court had yet to recognize a breach of fiduciary duty claim based on an insider
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`trading theory, “several Delaware decisions” had, and that the district court should
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`follow those decisions because Delaware is “‘the most popular state in which to
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`incorporate businesses and, as a result, its judiciary have become specialists in the
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`field,’” APP181 (quoting Rock Ivy Holdings, LLC v. RC Props., LLC, 464 S.W.3d
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`623, 635 (Tenn. Ct. App. 2014)), and because of some previously-unannounced
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`Nevada policy that Delaware case law is persuasive authority “‘where, as here, there
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`is no Nevada statutory or case law on point for an issue of corporate law,’” id.
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`(quoting Hilton Hotels Corp. v. ITT Corp., 978 F. Supp. 1342, 1346-47 (D. Nev.
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`1997)).
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`In reply, Petitioners explained that the district court could not simply import
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`Delaware case law into Nevada corporate law without running afoul of NRS 78.012
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`(providing that the “laws and judicial decisions” from other states must not
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`“supplant[ ] or modif[y]” Nevada corporate law), APP347–APP348, and that
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`recognizing a Delaware Brophy claim in this case, where no harm is alleged to have
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`befallen Workhorse, would violate this Court’s prior decisions that a corporation
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`must be harmed by the alleged misconduct for it (and shareholders suing
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`derivatively) to have a claim against its directors, APP346–APP347.
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`At a hearing on August 4, 2022, the district court denied Petitioners’ motion
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`to dismiss for failure to plead demand futility. APP375. On August 23, 2022, the
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`district court entered its Order holding that, while “the Nevada Supreme Court has
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`neither recognized nor rejected a Brophy claim in Nevada, the case will move
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`forward,” because “Plaintiffs have pled with sufficient particularity” that demand
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`was excused “based on the allegations that the directors and officers face a
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`substantial likelihood of liability for insider trading.” APP381. The district court did
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`not address the adequacy of shareholder-plaintiffs’ other demand futility allegations
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`and declined to reach defendants’ NRCP 12(b)(5) arguments in light of the parties’
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`agreement to stay the action while the overlapping Securities Action is litigated.
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`APP382.
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`STATEMENT OF REASONS WHY THE WRIT SHOULD ISSUE
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`I. The District Court’s Decision Raises A Purely Legal Question Of First
`Impression Involving Nevada Corporations Law Of Great Importance
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`“This Court has original jurisdiction to issue writs of mandamus and
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`prohibition.” MountainView Hosp., Inc. v. Eighth Judicial Dist. Ct., 128 Nev. 180,
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`184, 273 P.3d 861, 864 (2012). Generally, writ relief is available when a petition
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`presents legal rather than factual issues. Wynn Resorts, Ltd. v. Eighth Judicial Dist.
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`Ct., 133 Nev. Adv. Op. 57, 399 P.3d 334, 341 (2017). Extraordinary writ relief is
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`available when there is no plain, speedy, and adequate remedy at law. Badger v.
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`Eighth Judicial Dist. Ct., 132 Nev. Adv. Op. 39, 373 P.3d 89, 93 (2016).
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`This Court has held that writ relief is available to review a district court’s
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`refusal to dismiss a case on the pleadings on a limited basis. See, e.g., State v. Eighth
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`Judicial Dist. Ct., 118 Nev. 140, 147, 42 P.3d 233, 238 (2002) (issuing writ and
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`reversing denial of NRCP 12(b)(5) motion to dismiss); Chur, 136 Nev. at 70-71, 458
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`P.3d at 339 (granting writ and reversing denial of NRCP 12(c) motion). This Court
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`may review a motion to dismiss when “(1) no factual dispute exists and the district
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`court is obligated to dismiss an action pursuant to clear authority under a statute or
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`rule; or (2) an important issue of law needs clarification and considerations of sound
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`judicial economy and administration militate in favor of granting the petition.”
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`State, 118 Nev. at 147, 42 P.3d at 238. Although only one of these criteria is
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`generally sufficient to warrant writ relief, both criteria are present here.
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`Additionally, judicial economy and Nevada’s pro-corporation public policy weigh
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`in favor of granting writ relief.
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`A. The Petition presents a purely legal issue, no facts are disputed, and
`dismissal is compelled by NRS 78.012 and this Court’s prior decisions
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`This Court has considered extraordinary writs challenging a district court’s
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`refusal to dismiss a case in similar circumstances where no factual dispute existed
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`and clear statutory authority mandated dismissal of an action. For example, just two
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`years ago in Chur v. Eighth Judicial District Court, 136 Nev. 68, 458 P.3d 336
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`(2020), this Court considered a writ petition that, like here, concerned the scope of
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`liability for Nevada directors under Nevada corporate law. There, the district court
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`denied a motion for judgment on the pleadings, concluding that allegations of gross
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`negligence were sufficient to state a claim against Nevada directors for breach of
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`their fiduciary duty of care notwithstanding NRS 78.138(7)’s requirement that
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`directors and officers are only liable for intentional misconduct, fraud, or a knowing
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`violation of the law. Id. 136 Nev. at 69, 458 P.3d at 338. This Court granted the
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`petition, in part, on the basis that it “present[ed] a purely legal question” governed
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`by NRS 78.138’s “plain language.” Chur, 136 Nev. at 71, 458 P.3d at 339.
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`Like Chur, this Petition presents a purely legal question of Nevada corporate
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`law; namely whether district courts can simply adopt—and judge the official
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`conduct of Nevada directors and officers against—Delaware judicial decisions
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`recognizing a private, derivative cause of action for insider trading. There is no
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`dispute that Petitioners sold stock on the dates and in the amounts alleged in the
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`Complaint. As shown below, even accepting as true the Complaint’s allegations,
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`the district court’s decision finding that Petitioners’ stock sales exposed Petitioners
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`to potential liability to Workhorse shareholders purporting to sue on behalf of
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`Workhorse for running afoul of Delaware judicial decisions interpreting Delaware
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`corporate law (i) violates the clear mandate of NRS 78.012 that other states’ laws
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`and judicial decisions cannot create liability for Nevada directors and officers; (ii)
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`the Legislature’s prior determination to create a private cause of action that can be
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`enforced by the company or shareholders acting on behalf of the company for insider
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`trading at stock insurance companies but not at other corporations; and (iii) this
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`Court’s prior decisions holding that a Nevada corporation cannot sue its directors
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`and officers for their misconduct when such misconduct does not harm the
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`corporation.
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`B. The Petition presents an important legal issue that needs clarification
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`This Court has granted writs of mandamus where they present important
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`issues of law that require clarification. See, e.g., Chur, 136 Nev. at 70, 458 P.3d
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`339. One particularly compelling reason the Court has exercised its discretion to
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`clarify the law is where “there is a great potential for the district courts to
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`inconsistently interpret [a] legal issue.” Washoe Med. Ctr. v. Second Judicial Dist.
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`Ct., 122 Nev. 1298, 1302, 148 P.3d 790, 792 (2006); see also Libby v. Eighth
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`Judicial Dist. Ct. of the State, 130 Nev. Adv. Rep. 39, 325 P.3d 1276, 1279 (2014)
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`(same).
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`Here, an important issue of law—whether district courts can adopt Delaware
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`judicial decisions interpreting Delaware corporate law to impose an entirely new
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`theory of liability for insider trading on Nevada directors and officers—needs
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`clarification because there is not merely a potential for district courts to
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`inconsistently apply the law, but several courts, including the district court below,
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`have recently actually misinterpreted and misapplied the law. See APP381; In re
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`Allegiant Travel, 2020 WL 7491073, at *5-6 (allowing Delaware insider trading
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`claim to proceed); In re Wynn Resorts, Case No. A-18-769630-B, Order at 7 (same).
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`According to the plain text of NRS 78.012, Nevada corporations and their
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`shareholders have no private cause of action to sue their directors and officers for
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`insider trading. The Legislature’s decisions limiting private insider trading claims
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`that can be enforced by the company or shareholders acting on behalf of the company
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`to stock insurance companies and this Court’s prior decisions limiting corporate
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`derivative claims against directors and officers to instances where the directors and
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`officers’ conduct harmed the corporation support that plain-text reading. This
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`Court’s intervention is therefore necessary to effectuate the intent of the Legislature,
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`affirm the law, and give guidance to the lower courts that they cannot simply import
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`into Nevada corporate law the laws and judicial decisions of other states to create
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`new theories of director or officer liability.
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`C. Granting the Petition will promote judicial economy
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`Granting the Petition also would promote judicial economy. In recent years,
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`numerous shareholder derivative lawsuits have been filed in Nevada, several seeking
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`to impose liability on Nevada directors and officers for alleged insider trading. See,
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`e.g., In re Allegiant Travel, 2020 WL 7491073, at *5-6 (involving insider trading
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`claim); In re Wynn Resorts, Case No. A-18-769630-B, Order at 7 (same); see also
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`Guzman v. Johnson, 483 P.3d 531 (Nev. 2021); Chur, 136 Nev. 68, 458 P.3d 336
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`(2020); Parametric Sound Corp. v. Eighth Judicial Dist. Ct., 133 Nev. 417, 401 P.3d
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`1100 (2017); In re DISH Network Deriv. Litig., 133 Nev. 438, 401 P.3d 1081 (2017).
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`Invariably in these cases, the question of whether, and to what extent, Delaware
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`judicial decisions interpreting Delaware corporate law should be followed and
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`adopted as Nevada’s own are presented. Avoiding fundamentally inconsistent
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`results for different litigants in these high-stakes disputes is critical to the integrity
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`of Nevada courts. Greater clarity as to when district courts should follow the judicial
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`decisions and corporate laws of other states to expand the potential liability of
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`Nevada directors and officers under Nevada law will aid in the early and consistent
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`resolution of these suits and prevent unnecessary appeals on this topic.
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`This Court would also promote judicial economy in this particular case by
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`granting the Petition. As discussed above, the district court’s decision holding that
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`the shareholder-plaintiffs have standing to pursue this lawsuit depends entirely on
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`the conclusion that “Plaintiffs have pled with sufficient particularity” that demand
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`was excused “based on the allegations that the directors and officers face a
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`substantial likelihood of liability for insider trading.” APP381. If no such claim
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`exists under Nevada law then the shareholder-plaintiffs do not have standing and
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`this case should be immediately dismissed. If this Court does not grant the petition
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`(and the stay pending the outcome of the Securities Litigation lifts), the district court
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`will need to decide the pending Rule 12(b)(5) motions and, depending on the
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`outcome of those motions, discovery might commence, and there will be the
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`potential need to expend significant judicial resources if the case were to proceed.
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`D. Granting the Petition will promote Nevada’s pro-corporation policy
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`The Nevada Legislature has pursued a public policy of encouraging
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`corporations to lo