This section contains the nature of the case and procedural background.

P sued IBM under a derivative lawsuit for excessive compensation to executives and directors. P's amended complaint alleged that the board wasted the assets of the corporation. P claimed that during a period of declining profits the director defendants engaged in self-dealing by awarding excessive compensation to 15 of 18 outside directors. D moved to dismiss for the failure to state a claim upon which relief may be granted as P failed to serve a demand on the board to initiate a lawsuit. The complaint was dismissed because P did not make demand upon the board that it initiate a lawsuit. The Appellate Division affirmed the dismissal, concluding that the complaint did not contain any details from which the futility of the demand could be inferred.

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