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In May 2016, a shareholder of Cyanotech Corporation launched an activist campaign to gain control of the Company, demanding that the Company’s Board of Directors take certain actions, including removing its Chairman from the Board. Shortly thereafter, the shareholder filed a derivative suit in the United States District Court for the District of Nevada. The Company turned to Simpson Thacher to coordinate its response to the activist litigation. In January 2017, Simpson Thacher secured the dismissal of the derivative claim for failure to satisfy derivative standing requirements. The District of Nevada found that Plaintiff had failed to adequately plead that demand was wrongfully refused. 

Nearly three years later, the same activist brought another derivative action in the District of Hawaii, this time arguing that demand on the Company’s Board would be futile. Simpson Thacher again filed a motion to dismiss on behalf of Cyanotech Corporation, arguing that Plaintiff was precluded from invoking demand futility as a basis for its derivative action in light of its earlier demand to the Board.

On July 15, 2020, Judge Jill Otake of the District of Hawaii granted Cyanotech Corporation’s motion to dismiss, finding that Plaintiff’s earlier demand precluded its latest attempt to plead demand futility. Judge Otake dismissed the case with prejudice, finding that any amendment would be futile.

Partners James Kreissman and Stephen Blake were recognized as AmLaw Litigation Daily “Litigator of the Week” finalists for their work in this case (subscription required).  

The Simpson Thacher team included James Kreissman, Stephen Blake and Breanna Philips.