Teladoc Health’s Shareholder Derivative Action

Paul, Weiss is defending the Teladoc defendants in the case.

Magistrate Judge Barbara Moses of the Southern District of New York recommended on March 26 that a shareholder derivative action against 17 current or former directors and officers of Teladoc Health, Inc. be dismissed with prejudice.

The case—one of several brought during the #MeToo era that alleged securities violations related to executive misconduct—was brought following news about an extramarital affair between Teladoc’s former CFO and a junior subordinate that allegedly began in 2014. After senior management learned about the affair in late 2016, Teladoc engaged outside counsel to conduct an internal investigation, and ultimately disciplined the CFO. In December 2018, the Southern Investigative Research Foundation published an article detailing the story of the affair. Shortly thereafter, Teladoc’s stock dropped by approximately 7% and the CFO resigned with “good reason” pursuant to a separation agreement. Plaintiffs brought a derivative action challenging the company’s response to the affair, but did not first make a demand on the company’s board.

Magistrate Judge Barbara Moses of the Southern District of New York recommended dismissal of the suit because demand on the board was not excused, rejecting the plaintiffs’ arguments that the directors faced a substantial likelihood of personal liability, acted in bad faith, or were otherwise not disinterested and independent.

Teladoc Health, Inc. is a multinational telemedicine and virtual healthcare company based in the United States.

The Paul, Weiss team included litigation partners Daniel Kramer (Picture) and Audra Soloway and counsel Caitlin Grusauskas. 

Involved fees earner: Caitlin Grusauskas – Paul Weiss Rifkind Wharton & Garrison; Daniel Kramer – Paul Weiss Rifkind Wharton & Garrison; Audra Soloway – Paul Weiss Rifkind Wharton & Garrison;

Law Firms: Paul Weiss Rifkind Wharton & Garrison;

Clients: Teladoc Health Inc;

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Martina Bellini

Author: Martina Bellini