Posted On Friday, October 10, 2014
Pietragallo Gordon Alfano Bosick & Raspanti, LLP is pleased to announce the election of its newest partner, John A. Schwab. Mr. Schwab, a former Captain and Chief Defense Trial Attorney with the U.S. Marine Corps, is an experienced litigator who practices in the areas of white collar criminal defense, government investigations, corporate internal investigations and compliance, Federal and State Qui Tam litigation, and commercial litigation. Mr. Schwab also serves as Co-chair of the firm’s Cyber Liability and Technology Law practice group.
He represents various corporate and individual clients, in a wide range of regulatory and enforcement matters investigated by the United States of America, Commonwealth of Pennsylvania, and numerous federal and state agencies. Many of the cases involve alleged violations of federal and state laws, including money laundering, bank and lender fraud, internal revenue fraud and tax evasion, procurement and contracting fraud, trade secret theft, health care fraud, public corruption, mail and wire fraud, and conspiracy.
Mr. Schwab’s litigation practice also includes an emphasis on electronic discovery and the impact of technology in civil and white collar criminal cases. His civil practice extends to a variety of matters including commercial disputes, shareholder actions, corporate waste and breaches of fiduciary duty, intellectual property and trade secrets, employment, False Claims Act (qui tam), and other complex commercial litigation.
Active in the legal community, Mr. Schwab is a member of the Allegheny County Bar Association’s Federal Court Section and previously served as Co-Chair of the Section’s Federal Criminal Practice Subcommittee. He is on the White Collar Committee of the National Association of Criminal Defense Lawyers and, since 2008, has served as a faculty member of the National Trial Advocacy College at the University of Virginia School of Law. He is also a frequent speaker on topics such as e-discovery, cyber liability, and defense of white collar cases.
Mr. Schwab was selected in 2013 and 2014 as a Pennsylvania Super Lawyers Rising Star in the area of White Collar Criminal Defense. He was also selected by The Legal Intelligencer as a Lawyer on the Fast Track for 2011. The individuals are selected as the future leaders of Pennsylvania’s legal community.
Prior to joining the firm, Mr. Schwab served as a Judge Advocate from 2003 to 2009 in the United States Marine Corps at Parris Island, South Carolina; Camp Lejeune, North Carolina; and Fallujah, Iraq. Mr. Schwab received his B.S. in Accounting from Grove City College and his J.D. from Dickinson School of Law of the Pennsylvania State University.
Earlier this month, Judge Sue Robinson of the U.S. District Court for the District of Delaware granted Defendants’ Motion to Dismiss Plaintiff’s Second Amended Complaint in E.I. Du Pont de Nemours & Co. ex rel. Zomolosky v. Kullman, et al., Civ. No. 13-94-SLR, 2014 U.S. Dist. LEXIS 127853 (D.Del. Sept. 12, 2014). Robert Zomolosky is a Du Pont shareholder who brought this derivative litigation against various former and present members of Du Pont’s Board of Directors over their handling of multiple of licensing and litigation issues against Monsanto Company.
In bringing a derivative action, shareholders must generally demonstrate that they have made a demand upon the Board to take the requested action. Demand is excused, however, “if a plaintiff raises a reasonable doubt that a majority of the board was disinterested or independent, or that the challenged acts were a result of the board’s valid business judgment.” When a board did not act, refrained from acting, or violated its oversight duties, “the plaintiff must create a reasonable doubt that, as of the time the complaint was filed, the board of directors could have properly exercised its independent and disinterested business judgment in responding to a demand.” In this case, Plaintiff alleges that the board refrained from preventing infringement of Monsanto’s patents, thereby leading to litigation against the company. Further, Plaintiff alleges that the board condoned wrongdoing, as demonstrated by giving Du Pont’s CEO, Ellen Kullman, a raise.
Interestingly, the Court noted that Du Pont’s charter absolves the board of directors of personal liability for breaches of fiduciary duty except those based on fraudulent, illegal, or bad faith conduct. The Court found that the allegations raised in the Second Amended Complaint were insufficient to infer that the directors had constructive knowledge that Du Pont was infringing and that failure to prevent such infringement was a breach of their fiduciary duties. Although Plaintiff sought to establish that the board failed to exercise oversight in the face of red flags – namely Du Pont paying repeated patent infringement settlements – the Court found Plaintiff’s allegations to be conclusory and legally insufficient. Du Pont’s actions with respect to Monsanto were taken upon consideration and consultation with counsel. The Court refused to infer a “pattern of unlawful infringement” based upon litigation that dated back 10 years. Further, business plans and “board letter updates” were provided to the directors. The Court noted that these documents provided board members with updates on research and development, but the Court refused to infer that these documents provided notice of infringement.
As this case demonstrates, the burden the Plaintiff must meet in pleading such derivative actions is a relatively high one. Boards of directors are given rather wide latitude in relying on their in-house and outside counsel in strategic legal matters.
