Jones v. Martinez CA2/6

Filed 10/2/14 Jones v. Martinez CA2/6

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SIX

DANNY JONES, 2d Civil No. B249146 (Super. Ct. Nos. 1402853, 1403016) Plaintiff and Appellant, (Santa Barbara County)

v.

ANGEL MARTINEZ et al.,

Defendants and Respondents,

DECKERS OUTDOOR CORPORATION,

Nominal Defendant and Respondent.

Danny Jones filed this shareholder derivative action on behalf of Deckers Outdoor Corporation to recover damages he contends it suffered as a result of misconduct by Deckers' officers and directors. The trial court sustained Respondents' demurrer with leave to amend but Jones elected not to file an amended complaint. Jones appeals from the resulting judgment of dismissal. Jones asserts the trial court erred by concluding Delaware law applies to bar discovery requests he served on Deckers shortly after his complaint was filed. We affirm.

1 FACTUAL AND PROCEDURAL HISTORY Jones owns 1,900 shares of Deckers common stock. Respondents are current or former officers or members of Deckers' board of directors. Deckers is a Delaware corporation based in Goleta, California that manufactures sheepskin footwear and other apparel. Its shares are traded on the NASDAQ exchange. On July 26, 2012, Jones commenced this shareholder derivative action against Deckers' board of directors and officers. Jones's complaint asserts "claims for insider trading . . ., breach of fiduciary duty, breach of the duty of honest services, and unjust enrichment" based upon allegedly false and misleading public statements to investors by Deckers' officers and board members. Jones claims statements about Deckers' financial condition and future business prospects drove its shares to "artificially inflated prices." Jones's complaint also accused Respondents of concealing unspecified facts about Deckers' inability to mitigate the effect of a large increase in the cost of sheepskin and a decrease in demand for UGG products that, when revealed, drove the price of Deckers' shares down. On August 27, 2012, Jones sent a "First Request for Production of Documents" to Deckers. On October 1, 2012, Deckers served its objections to the discovery requests, citing Delaware, California law and other authority to support its position that Jones lacked standing to bring this shareholders derivative action because 1) he had not made a demand on Deckers' board of directors for the relief he contended was appropriate to meet specific assertions of mismanagement or malfeasance; 2) he had not demonstrated in his complaint that such a demand would be futile; and 3) because derivative plaintiffs are not entitled under Delaware law to discovery that would enable them to demonstrate demand futility. Jones's motion to compel Deckers to respond to the requests followed on November 13, 2012.