Tomran, Inc. v. Passano

KENNEY, Judge. Tomran, Inc. (“Tomran”), on behalf of Allied Irish Banks (“AIB”), filed a triple derivative action against appellees, the officers and directors of Allfirst Bank, a wholly owned subsidiary of Allfirst Financial, Inc. (“Allfirst Financial”), which is a wholly owned subsidiary of AIB. The suit was filed in the Circuit Court for Baltimore City, which dismissed it on three independent Irish law grounds. Tomran appeals that decision and presents three questions for our review, which we have slightly reworded: I. Did the trial court abuse its discretion in dismissing the complaint by refusing to honor the parties’ contractual agreement to apply New York law to “all rights” of the parties, contrary to Kronovet v. Lipchin, 288 Md. 30 , 415 A.2d 1096 (1980), and the Restatement 2d of Conflict of Laws § 187?

II

Did the trial court err in dismissing the complaint on standing grounds by “refusing to predict the direction in which” a foreign court may rule, contrary to its obligation under Maryland Code (1974, 2002 Repl-Yol.) § 10-501 of the Courts and Judicial Proceedings Article (“CJ”) to determine foreign law; and because authoritative evidence of Irish law, including a treatise on point authored by the Chief Justice ⁷¹⁰ of the foreign court and settled English authority, demonstrated Tomran’s standing?

III

Did the trial court abuse its discretion in refusing to follow the liberal amendment policy spelled out in Maryland Rule 2-322 and 2-341, to allow an amendment that would have cured any defect relied upon to dismiss the complaint, when the amendment would not have caused any prejudice to the defendants? For the reasons stated below, we shall affirm the judgment of the circuit court. FACTUAL AND PROCEDURAL HISTORY This case arises out of one of the banking scandals that plagued Allfirst Bank and earned the distinction of being the largest bank fraud in Maryland history. On February 6, 2002, Allfirst Bank announced that it had discovered that its foreign currency trader, John Rusnak, had committed fraud that ultimately caused Allfirst Bank to restate its earnings downward by almost $700 million.

Tomran, a holder of American Depositary Receipts (“ADRs”) of AIB stock worth over $100,000, made a demand on the boards of AIB and Allfirst Bank. AIB is an Irish corporation publicly traded on the New York Stock Exchange. AIB owned 100% of Allfirst Financial. Allfirst Financial is a Delaware Corporation with its principal place of business in Baltimore.

Allfirst Financial is a bank holding company, which was the sole owner of various subsidiaries, including Allfirst Bank. Allfirst Bank, a financial institution with its principal place of business in Baltimore, is registered on the books of the Commissioner of Financial Regulation pursuant to Maryland Code (1980, 2003 Repl.) § 1-101 of the Financial Institutions Article (“FI”). On April 1, 2003, AIB announced the sale of all of its interest in Allfirst Financial to M & T Bank Corporation, a New York corporation. Unsatisfied with their denial of his demand, on May 13, 2002, Tomran filed a derivative suit for money damages and declaratory and injunctive relief against the directors and ⁷¹¹ senior officers of Allfirst Bank and nominal defendants, AIB, Allfirst Bank, and Allfirst Financial. 1 On August 14, 2002, Tomran amended its complaint to read as a “triple derivative” action. 2 The amended complaint alleged that appellees were negligent and grossly negligent in their oversight of Rusnak, which ⁷¹² resulted in the loss to Allfirst Bank. 3 The amended complaint also sought a declaratory judgment and injunction regarding Allfirst Bank’s changing of its charter in December 1998 from that of a national banking association to a Maryland charter.

In its amended complaint, Tomran contended that, as a result of tbe change in the charter, the officers and directors of Allfirst Bank were no longer “ ‘personally liable to the Bank or its shareholders for money damages.’ ” 4 This, they contend, makes the charter change an interested director transaction that “conferred a very substantial personal benefit upon the officers and directors of the Bank, including the officers and directors who participated in the purported transfer of the Bank’s charter and in the purported entry into force of the new articles of incorporation[.]” Tomran sought a declaration ⁷¹³ “confirming that the change in the Bank’s articles was not retroactive and did not cover the $40 million in losses already in place as of December 1998.” It also sought to enjoin the appellees “from asserting that their liability to the Bank [was] limited in any fashion by the December 1998 transaction.” All the officers and directors of the Bank filed motions to dismiss on the following grounds: that Tomran had failed to state a claim upon which relief could be granted; that Maryland courts did not have the authority to address this case; that Tomran did not have standing to sue; and that Allfirst’s charter barred Tomran’s claims. 5 At the hearing on the motions to dismiss, two Irish barristers, through affidavits and depositions, advised the court as experts on Irish company law. Both experts, Michael Ashe for the appellees and Eion McCullough for the appellants, agreed that shareholder derivative suits are rare in Ireland, and that the case would turn on whether English common law “is relevant to commercial life and practice.” In its order and opinion, dated December 30, 2002, the circuit court determined that the complaint failed to state a claim upon which relief could be granted. In rendering its decision, the circuit court, in reference to subject matter jurisdiction, stated that it was “not prepared to say that a Maryland court is required to abstain from exercising jurisdiction over the internal affairs of AIB, even if that entails the application of foreign law to the rights and duties of the parties.” The circuit court also determined that Irish law should apply “in determining the sustainability of [Tomran’s] claims in this case.” The court explained that, where the Court has held that the internal affairs doctrine does not pose a complete bar to its exercise of jurisdiction over the internal affairs of a foreign corporation, it is unwilling to go farther and ignore the well settled principles that underlie that doctrine and require that the law of the ⁷¹⁴ place of incorporation govern the rights and responsibilities of the parties with respect to its internal operations. The court found that Tomran, to maintain the action, needed to establish: (1) that it is entitled, “as a beneficial owner of AIB shares rather than a registered shareholder,” to bring a derivative suit against AIB; (2) that the amended complaint “set forth allegations sufficient to constitute a ‘fraud on the minority’ exception to the rule in the case of Foss v. Harbottle, 2 Hare 461 (1843), which stands for the general proposition under Irish law that even registered shareholders may not maintain an action on behalf of the company” 6 ; and (3) that “Irish law would permit a triple derivative action.” 7 As to the first, because no Irish case has permitted a beneficial owner of shares to maintain a derivative action, it concluded that Tomran lacked standing to sue.

As to the seeond, the court found that “it was unlikely that the bald allegations contained in ... the first amended complaint would satisfy an Irish court that the ‘fraud on the minority’ exception ... has been pled adequately!.]” As to the third, the court found no authority to suggest that “Ireland is about to permit double or triple derivative actions by even registered shareholders.” Consequently, the circuit court concluded that Tom-ran’s request for a declaratory judgment and injunction was “rendered moot by the Court’s determination that [Tomran] lacks standing to bring this action.” ⁷¹⁵ Tomran filed a motion to amend the complaint and two motions requesting the court to alter or amend its judgment. After the court denied all of the post-hearing motions, Tomran noted this timely appeal. STANDARD OF REVIEW We review de novo a trial court’s grant of a motion to dismiss, considering whether the court was legally correct. Adamson v. Corr.

Med. Servs. Inc., 359 Md. 238, 246 , 753 A.2d 501 (2000); Phillips Way, Inc. v. Presidential Fin. Corp., 137 Md.App. 209, 212 , 768 A.2d 94 (2001) (citing State v. Jones, 103 Md.App. 548, 606 , 653 A.2d 1040 (1995)).

In so doing, “we must assume the truth of the well-pleaded factual allegations of the complaint, including the reasonable inferences that may be drawn from those allegations.” Adamson, 359 Md. at 246, 753 A.2d 501 ; Allied Inv. Corp. v. Jasen, 354 Md. 547, 555 , 731 A.2d 957 (1999); Stone v. Chicago Title Ins. Co., 330 Md. 329, 333 , 624 A.2d 496 (1993); Tafflin v. Levitt, 92 Md.App. 375, 379 , 608 A.2d 817 (1992). In reviewing the trial court’s denial of Tomran’s motions for leave to amend, an abuse of discretion standard applies.

Walls v. Bank of Glen Burnie, 135 Md.App. 229, 236 , 762 A.2d 151 (2000); Wormwood v. Batching Systems, Inc., 124 Md.App. 695, 700 , 723 A.2d 568 (1999). DISCUSSION I. American Depositary Receipts (“ADRs”) For a general understanding of ADRs, we quote at length from Pinker v. Roche Holdings Ltd., 292 F.3d 361 (3rd Cir.2002). An ADR is a receipt that is issued by a depositary bank that represents a specified amount of a foreign security that has been deposited with a foreign branch or agent of the depositary, known as the custodian. The holder of an ADR is not the title owner of the underlying shares; the title owner of the underlying shares is either the depositary, the ⁷¹⁶ custodian, or their agent.

ADRs are tradeable in the same manner as any other registered American security, may be listed on any of the major exchanges in the United States or traded over the counter, and are subject to the Securities Act and the Exchange Act. This makes trading an ADR simpler and more secure for American investors than trading in the underlying security in the foreign market. ADRs may be either sponsored or unsponsored. An unsponsored ADR is established with little or no involvement of the issuer of the underlying security.

A sponsored ADR, in contrast, is established with the active participation of the issuer of the underlying security. An issuer who sponsors an ADR enters into an agreement with the depositary bank and the ADR owners. The agreement establishes the terms of the ADRs and the rights and obligations of the parties, such as ADR holders’ voting rights. Id. at 367 (citations omitted).

II

Jurisdiction The first question to be considered is jurisdiction. The officers and directors argue that the internal affairs doctrine prohibits Maryland courts from interfering with the internal affairs of a foreign corporation and acts as a jurisdictional bar. Tomran posits that the internal affairs doctrine has evolved and is now recognized as a choice of law doctrine that does not necessarily preclude jurisdiction. Generally, “[w]ith regard to foreign corporations, Maryland courts have traditionally declined to interfere in management disputes under the ‘internal affairs doctrine.’ ” NAACP v. Golding, 342 Md. 663, 673 , 679 A.2d 554 (1996) (citations omitted). 8 In Golding , the Court of Appeals explained: ⁷¹⁷ Our courts ... can enforce no forfeiture of charter for violation of law, or removal of officers for misconduct; nor can they exercise authority over the corporate functions, the by-laws, nor the relations between the corporation and its members, arising out of, and depending upon, the law of its creation.

These powers belong only to the State which created the corporation. Id. at 674 , 679 A.2d 554 (quoting Condon v. Mutual Reserve Fund Life Ass'n, 89 Md. 99, 116-17 , 42 A. 944 (1899)). The officers and directors rely heavily on NAACP v. Golding to support their argument that the internal affairs doctrine is in “full force today” and precludes jurisdiction by a Maryland court over the case. In Golding , the circuit court, upon request by certain youth members, enjoined an election of the NAACP.

Those members protested the organization’s rule that only youth paying the higher adult membership fee would be allowed to vote. In reversing the decision, the Court of Appeals concluded that the court should not have intervened “in the internal affairs of a voluntary membership organization.” Id. at 672 , 679 A.2d 554 . In this case, the circuit court determined that the “internal affairs doctrine is alive and well in Maryland,” but that Golding did not require the court “to abstain from exercising jurisdiction.” The court distinguished the holding in Golding “because it turns on both the limited circumstances under which a court should address the disputes of voluntary mem ⁷¹⁸ bership organizations, particularly where there is no economic interest at stake, and on the failure of the youth members to exhaust their internal remedies.” Quoting Edgar v. MITE Corp., 457 U.S. 624, 645 , 102 S.Ct. 2629 , 73 L.Ed.2d 269 (1982), the Court of Appeals in Golding stated: The internal affairs doctrine is a conflict of laws principle which recognizes that only one State should have the authority to regulate a corporation’s internal affairs—matters peculiar to the relationships among or between the corporation and its current officers, directors, and shareholders— because otherwise a corporation could be faced with conflicting demands. Golding, 342 Md. at 673 , 679 A.2d 554 .

Thus, if the internal affairs doctrine is indeed a conflict of laws principle rather than an automatic bar to jurisdiction, as the Court in Golding indicated, a forum, non conveniens analysis is appropriate. See Restatement (Second) of Conflicts of Laws § 313 (stating that “[a] court will exercise jurisdiction over an action involving the internal affairs of a foreign corporation unless it is an inappropriate or an inconvenient forum for the trial of the action”); CJ § 6-104 (stating that, “[i]f a court finds that in the interest of substantial justice an action should be heard in another forum, the court may stay or dismiss the action in whole or in part on any conditions it considers just”); Jones v. Prince George’s County, 378 Md. 98, 120-21 , 835 A.2d 632 (2003) (citations omitted) (stating that “[a] court must weigh in the balance the convenience of witnesses and those public-interest factors of systemic integrity and fairness that, in addition to private concerns, come under the heading of ‘the interest of justice.’ ”). In this case, the alleged fraud occurred in Maryland; the nominal defendant, Allflrst Bank, is chartered in Maryland; and it is alleged that “the evidence and witnesses related to the claims are principally located in Maryland, as are most of the defendants.” Thus, we are not persuaded that Maryland is an inconvenient forum for the trial of the action or that the Maryland courts are necessarily without jurisdiction. ⁷¹⁹ III. Choice of Law But, if there is jurisdiction, what law should apply?

Tomran argues that the trial court erred in refusing to apply New York law pursuant to the choice of law clause in the Deposit Agreement between Tomran and AIB when Tomran purchased 4,800 AIB ADRs. Section 7.6 of the Deposit Agreement states: “[TJhis Deposit Agreement and the Receipts [ADR] shall be interpreted and all rights hereunder and thereunder and provisions hereof and thereof shall be governed by the laws of the State of New York.” Tomran argues that this clause clearly dictates that “New York law applies not only to interpretation of the Receipts and the Deposit Agreement, but also to all rights arising from those documents.” (Footnote omitted.) Tomran directs us to Batchelder v. Kawamoto, 147 F.3d 915 (9th Cir.1998), cert. denied, 525 U.S. 982 , 119 S.Ct. 446 , 142 L.Ed.2d 400 (1998), in which the Court considered a choice of law question pursuant to a Deposit Agreement that included similar language to Section 7.6. The relevant portion stated: [T]his Deposit Agreement and the [American Depositary] Receipts and all rights hereunder and thereunder and provisions hereof and thereof shall be governed by and construed in accordance with the laws of the State of New York, United States of America. It is understood that notwithstanding any present or future provision of the laws of the State of New York, the rights of holders of Stock and other De/posited, Securities, and the duties and obligations of the Company in respect of such holders, as such, shall be governed by the laws of Japan.

([Ejmphasis added). Id. at 918. The Court of Appeals for the Ninth Circuit indicated that the second sentence of this passage required the application of Japanese law to matters involving shareholder rights and the corporation’s duties to the shareholders, including the holders of deposited securities. Tomran argues that, “but for the existence of the second sentence ” in the Batchelder Deposit Agreement, the court would have applied New York law.

Therefore, because ⁷²⁰ there was no language similar to the “second sentence” in the current case clarifying the rights of deposit holders, Section 7.6 governs the choice of law question and provides that New York law should apply. 9 Tomran further explains that Maryland courts, for more than two decades, have required the enforcement of choice of law provisions in contracts. The Restatement (Second) of Conflict of Laws § 187 (1971), which has been adopted by Maryland, provides that “[t]he law of the state chosen by the parties to govern their contractual rights and duties will be applied, even if the particular issue is one which the parties could have resolved by an explicit provision in their agreement directed on that issue.” There are two exceptions: “a) the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties’ choice or b) the application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue and which, under the rule of § 188, would be the state of the applicable law in the absence of an effective choice of law by the parties.” Kronovet v. Lipchin, 288 Md. 80 , 44-45, 415 A.2d 1096 (1980) (quoting Restatement (Second) of Conflict of Laws § 187 (1971)). The officers and directors argue that “the Deposit Agreement, including its choice-of-law provision, [is] inapplicable to issues concerning AIB’s internal affairs.” They contend that the Deposit Agreement only governs the mechanics of the ADR program, including, for example, the form and transferability of receipts, cancellation and destruction of surrendered receipts, and execution and delivery of receipts. The Deposit Agreement does not address AIB’s internal structure or the rights deposit holders have concerning AIB’s ⁷²¹ internal affairs.

Had the Deposit Agreement addressed the matter, as did the agreement in Batchelder , the issue could have been disposed of more easily. Maryland courts do favor the enforcement of choice of law provisions in contracts, but we are not persuaded that the language “all rights hereunder and thereunder and provisions hereof and thereof,” which clearly refers respectively to the “Deposit Agreement and the Receipts,” can be read so broadly as to reflect an intention by AIB to cede to the law of New York matters concerning its internal affairs, which most certainly would include the determination of who has the right to maintain a derivative suit. See Fletcher Cyclopedia at § 8444. Rather, we read the language to mean that New York law governs the mechanics of the ADR program itself.

See Nat’l Glass, Inc. v. J.C. Penney Props., Inc., 336 Md. 606, 610 , 650 A.2d 246 (1994) (stating that § 187 “sets forth the limitations on the parties’ choice of law”). Therefore, we look to the internal affairs doctrine to determine what law to apply. In Batchelder , the court said: In any event, even if we were to ignore the Deposit Agreement’s choice-of-law provision, ordinary conflicts-of-law principles would direct us to apply Japanese law to Batchelder’s claim.... Under the “internal affairs” doctrine, the rights of shareholders in a foreign company, including the right to sue derivatively, are determined by the law of the place where the company is incorporated.

Batchelder, 147 F.3d at 920 (citations omitted). When no choice of law provision has been agreed upon by the parties, the internal affairs doctrine would suggest that the law of the place of incorporation governs the rights and responsibilities of the parties. See First Nat’l City Bank v. Banca Para El Comercio, 462 U.S. 611, 621 , 103 S.Ct. 2591 , 77 L.Ed.2d 46 (1983); Edgar, 457 U.S. at 645 , 102 S.Ct. 2629 ; Koster v. Am. Lumbermens Mut.

Cas. Co., 330 U.S. 518, 527-31 , 67 S.Ct. 828 , 91 L.Ed. 1067 (1947); Rogers v. Guar. Trust Co., 288 U.S. ⁷²² 123, 145, 53 S.Ct. 295 , 77 L.Ed. 652 (1933). Therefore, because AIB is incorporated in Ireland, Irish law applies. 10 Tomran next argues that, once the circuit court decided to apply Irish law, it was bound under the Erie Doctrine and CJ § 10-501 “actually to predict the way that foreign jurisdiction would rule, rather than refuse to decide the issue.” 11 CJ § 10-501 states that “every court of this State shall take judicial notice of the common law and statutes of every state, territory, and other jurisdiction of the United States, and of every other jurisdiction having a system of law based on common law of England.” Tomran specifically objects to what it characterizes as the circuit court’s decision not to predict the future of Irish law.

The circuit court stated in its opinion: [Tomran] has constructed a well reasoned argument as to how and why an Irish court should extend whatever rights registered shareholders have to sue a company derivatively to beneficial owners of shares, such as holders of American ⁷²³ depositary receipts, in order to comport with the realities of modern commercial life and practice. But it is not the function of this Court to predict the direction in which Irish courts may head in the future when presented with an appropriate case of this nature. Rather, it is the obligation of this Court, under choice of law principles herein stated, to interpret the corporate law of Ireland as it exists today. Undertaking that serious responsibility, the Court is unable to find any basis in the deposit agreement or in Irish case law or statutes to support the right of a beneficial owner such as Tomran to bring a derivative action against AIB.

Even the limited authority presented in the older English cases is not directly apposite to the situation presented here. Faced with a paucity of precedent and confronted by an Irish legal system that is clearly more restrictive of the rights of shareholders than our American system, this Court is unwilling to hold that Tomran has established its standing to bring this action against AIB. We reach, through a de novo review, the same conclusion as the circuit court in regard to Tomran’s standing. Although it is perhaps somewhat of an overstatement to say that it was not the role of the circuit court to “predict the direction in which Irish courts may head in the future,” it is also an overstatement to say that the circuit court refused to decide the issue.

In context, we read the circuit court’s statement to say that, despite Tomran’s arguments that the Irish courts are becoming more liberal in their recognition of shareholder rights and may in the future permit an owner of ADRs to bring a derivative action against an Irish corporation, there is no clear legal authority indicating that, if asked to decide this case at this time, an Irish court would find that Tomran has standing to bring the action. To that extent, the court’s focus in an Erie like analysis or in interpreting a foreign law under CJ § 10-501 et seq. is necessarily time bound to the case before it. As the United States Court of Appeals for the Eighth Circuit has indicated, “This Court must look to [the foreign law] as it is and not as one might believe it ought to ⁷²⁴ be.” Carson v. Nat. Bank of Commerce Trust and Sav., 501 F.2d 1082, 1085 (8th Cir.1974).

IV

Irish Company Law We begin with a brief historical overview of Irish company-law, quoting at length from The Honorable Mr. Justice Ronan Keane, Chief Justice of Ireland, Company Law § 2.01 (3d ed.2000). The general structure of Irish company law is closely modeled on that of England. The reason is obvious: the two countries had a common legal tradition and, after the Act of Union in 1800 and until 1921, all statute law affecting Ireland was enacted at Westminster. While there have been substantial changes in Irish company law since 1921, it was thought better to preserve the general structure inherited from the English, and such changes as have been made since 1921 have in many instances been based on changes in the neighbouring jurisdiction.

Since the accession of Ireland to the European Economic Community in 1973, however, many changes have resulted from compliance with directives of the community, now the European Union, requiring the harmonisation of company law in the member states. Both experts in this case agreed that decisions of English courts are not binding on Ireland, but are often cited as persuasive authority. Decisions from Northern Ireland, Australia, New Zealand, and other common law jurisdictions are also frequently cited in Ireland. Applying Irish law, the circuit court found that Tomran faced three hurdles to overcome a motion to dismiss: establish standing to bring the suit against AIB; adequately allege “fraud on the minority,” in accordance with Foss v. Harbottle, 2 Hare 461 (1842); and, at the time that the first amended complaint was filed, prove that the Irish courts would permit a triple derivative action.

Finding that Tomran had not overcome any of the three hurdles, the circuit court dismissed the complaint. As we shall explain, we hold that dismissal of the complaint was not error. ⁷²⁵ A. Standing In rendering its decision, the circuit court determined that Irish courts would not recognize Tomran’s standing to bring the action because there was no authority that an ADR holder was permitted to bring a derivative action. The court considered Hooker Investments Pty. Ltd. v. Email Ltd., (1986) 10 A.C.L.R. 448 and Svanstrom v. Jonasson, (1997) C.I.L.R. 192, two recent decisions from the common law courts of New South Wales and the Cayman Islands, holding that only a registered shareholder has standing to pursue a derivative action.

In Hooker, the plaintiff, who had contracted to purchase shares in the defendant company, alleged a breach of duty by the directors in their allotment of the shares. In regard to a duty owed to the company, the court stated as “the better view” that the company is normally the proper plaintiff, but in suitable circumstances the court will listen to proceedings brought in the name of a shareholder. However, with respect to this sort of duty it is clear that an equitable holder of shares is not permitted by the court to bring the action that the shareholder might bring. Hooker Investments Pty.

Ltd. v. Email Ltd., (1986) 10 A.C.L.R. 448, 445. In Svanstrom, the court considered whether a beneficial shareholder of a minority shareholding was able to bring a derivative suit, and held that such a holder did not have standing to bring an action on behalf of the company. The court recognized that, under the rule of Foss v. Harbottle, a minority shareholder could indeed bring an action if he could allege fraud by the controlling shareholders. Nevertheless, because the respondent in Svanstrom was not a registered shareholder, the court held that he did not have the authority to bring suit.

Tomran argues that these cases are not persuasive and the circuit court should have looked to Irish or English authority, which, it contends, would permit an ADR holder to bring a ⁷²⁶ derivative suit. One case cited is Tangney v. Clarence Hotels, Ltd., [1993] I.R. 51, 64. There, the Irish court held that a “transferee” of shares is entitled to assert a cause of action against the corporation to require the company to register him as the owner of shares. 12 Not only is Tomran not a transferee of shares, it seeks to enforce a right of the corporation, rather than a personal right to have shares registered in its name. Tomran asks that we seek guidance from three English cases decided in the 1800’s: Bagshaw v. Eastern Union Railway Co., 7 Hare 114 (1849) (considering whether the directors’ appropriation of monies to a fund separate from that for which they were raised was proper, and limiting Foss v. Harbottle to the proposition that if the act of the directors complained of is an act that the shareholders could confirm, an action to impeach the board’s action cannot be maintained); Great Western Railway v. Rushout, 5 DeG. & Sm. 290 (1852) (holding that beneficiaries of a trust of stock could seek an injunction to interfere with the internal management of the railway company when an unlawful application of funds is ⁷²⁷ involved); and Binney v. Ince Hall Coal & Channel Co., 35 L.J. Ch. 363 (1866) (holding that the equitable mortgagee of shares has the authority to sue the company to protect the value of the shares).

None of these cases, however, provides that a holder of ADRs has the authority to bring a derivative suit. Bagshaw and Great Western involved injunction proceedings related to alleged illegal acts, and in Binney the equitable mortgagee also sought an injunction to restrain the company from using funds to liquidate, in part, the share-capital of its members. The circuit court also considered the opinions of experts on Irish law in making its decision on standing. Both experts agreed that there was no Irish authority permitting an ADR holder to maintain a derivative action.

Moreover, both recognized that derivative suits are not “common” in Ireland. In his deposition, McCullough, Tomran’s expert, said that derivative actions are “very rare in Ireland.” Ashe, the expert for the officers and directors, stated in his affidavit that “Irish law is extremely restrictive of the right of shareholders to sue in the name of and/or on behalf of the company in which they hold shares.” They disagreed, however, as to the future of derivative suits in Ireland. McCullough