8th Circuit Rules Wal-Mart Case Can Move Ahead In Federal Court

by Mark Friedman  on Wednesday, Dec. 18, 2013 11:02 am  

(Photo by Wal-Mart Stores Inc.)

The U.S. Court of Appeals for the 8th Circuit said Wednesday that a lawsuit filed by shareholders against Wal-Mart Stores Inc. and its directors over allegations of bribery in Mexico can move forward in U.S. District Court.

"We are reviewing the 8th Circuit Court's ruling, and our understanding is that the court has not ruled out a stay," Wal-Mart spokesman Randy Hargrove said in a statement to Arkansas Business. "We are considering our options."

As Arkansas Business has reported, Wal-Mart of Bentonville and its directors are facing shareholder-derivative lawsuits both in U.S. District Court in Texarkana and in Delaware state court. In a derivative lawsuit, shareholders sue on behalf of the company.

In 2012, U.S. District Judge Susan Hickey agreed to Wal-Mart's request to stay the proceeding in federal court while the case in Delaware made its way through the system.

Both lawsuits were prompted by a 2012 New York Times article that revealed an alleged bribery scheme involving Wal-Mart's Mexican subsidiary and Mexican government officials.

The lawsuits accuse the retailer of violating the Foreign Corrupt Practices Act and question the board of directors' handling of the case.

Attorney Corey McGaha of Little Rock, one of the attorneys representing Wal-Mart shareholder John Cottrell of Texas, said during a September 2012 hearing that the case should remain in federal court because Cottrell raised claims that can't be settled in state court, including violations of the Securities Exchange Act of 1934. Five other shareholder derivative lawsuits were consolidated into that case in federal court.

McGaha also pointed out at the hearing that it's not unusual for two shareholder derivative cases to proceed in two different courts at the same time.

But Hickey decided to stay the case.

Attorney John Emerson of Houston, another attorney for plaintiffs in the federal case, appealed Hickey's ruling to the 8th Circuit, which ruled to lift the stay so the case can continue in federal court in Texarkana.

But 8th Circuit Judge Bobby Shepherd wrote in the opinion that "on remand, the district court may impose a more finite and less comprehensive stay, if it concludes that such a stay properly balances the rights of the parties and serves the interests of judicial economy."

Meanwhile, the case in Delaware is pending appeal at the Delaware Supreme Court, where the question about which documents could be released to shareholders is being decided.

 

 

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