Union de Empleados de Muelles v. UBS Fin. Servs. Inc., No. 11-1605 (1st Cir. 2013)
Annotate this CasePlaintiffs were Puerto Rico pension plans that owned shared in closed-end investment funds (the Funds) advised by UBS Trust Company of Puerto Rico (UBS Trust). In 2008, UBS Trust, acting as the Funds' investment adviser, purchased $757 million worth of bonds from a series of issuances underwritten by UBS Financial Services Inc. of Puerto Rico (UBS Financial), and then sold these bonds to the Funds. Consequently, the Funds were so heavily invested in these bonds that they suffered significant losses when the value of the bonds depreciated. Plaintiffs brought a shareholder derivative action against the Funds' directors, UBS Trust, and UBS Financial. The district court dismissed the claims on the ground that no presuit demand had been made on the Funds' boards of directors, and Plaintiffs had failed in their complaint to state with particularity the reasons such a demand would have been futile. The First Circuit vacated the dismissal of the derivative claims and remanded, holding that Plaintiffs' allegations established with sufficient particularity that a presuit demand would have been futile, and the district court erred in reaching a contrary conclusion.
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