Chancellor Andre Bouchard of the Court of Chancery in Wilmington said an earlier dismissal by an Arkansas judge of a nearly identical lawsuit by another group of shareholders precluded the Delaware case from going forward.
He said that while the Arkansas plaintiffs may have chosen to rush their case rather than fully investigate alleged wrongdoing, their haste did not disqualify them from representing Wal-Mart shareholders.
“We believe that the Arkansas ruling is correct and have said all along that the Walmart Board of Directors has the appropriate authority to conduct an investigation into the matters alleged in these cases,” Wal-Mart spokesman Randy Hargrove said in a statement.
Friday’s decision is a loss for the California State Teachers’ Retirement System (CalSTRS) and New York City pension funds that had brought the Delaware case. Their lawyer, Stuart Grant, did not immediately respond to a request for comment.
Guilherme Loureiro, chief executive officer of Wal-Mart de Mexico SAB, speaks during an event at a Bodega Aurrera store. (PHOTO: Susana Gonzalez/Bloomberg)
The litigation stemmed from a 2012 New York Times investigation that found Wal-Mart had engaged in a multi-year bribery campaign to build its Wal-Mart de Mexico business.
According to the newspaper, Wal-Mart sent investigators to Mexico City and found a paper trail of suspect payments totaling more than $24 million.
However, top executives shut down the internal probe and did not notify U.S. or Mexican law enforcement until after the newspaper had informed Wal-Mart that it was looking into the issue.
The Delaware lawsuit sought to hold Wal-Mart directors liable for damages they caused the Bentonville, Arkansas-based retailer, in what is known as a derivative lawsuit. Successful derivative cases usually result in corporate governance changes.
While the Delaware shareholders were fighting for company documents to bolster their case, a federal judge dismissed a parallel derivative case in Arkansas for failing to prove the board was too conflicted to investigate itself.
That ruling has been appealed.
In his 60-page decision, Bouchard said the Arkansas plaintiffs’ strategy “does not rise to the level of litigation management that was so grossly deficient as to render them inadequate representatives” of Wal-Mart shareholders.
The Wall Street Journal in October 2015 said a U.S. probe into the alleged corruption uncovered few major offenses, and that Wal-Mart might be able to settle with a fine and no criminal charges being brought.
Source: reuters.com
