Zhang v. YUAN ( 2024 )

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA JINJU ZHANG, Case No. 23-cv-05818-VC Plaintiff, ORDER DENYING MOTION TO v. DISMISS THIRD AMENDED DERIVATIVE COUNTERCLAIM BELIN YUAN, et al., Re: Dkt. No. 130 Defendants. The motion to dismiss Yuan’s third amended counterclaim is denied. Zhang’s argument that the $50,000 state court settlement could not have been a recovery on behalf of Camiwell because Yuan paid it personally makes no sense, and also contradicts the allegations in the counterclaim. His argument that the counterclaim does not comply with Rule 23.1 because it does not state both what efforts Yuan made to demand that the Camiwell board take action and the reason for not making any such efforts fails because Rule 23.1 requires a shareholder bringing a derivative suit to plead the efforts they took to demand action or why such efforts would have been futile, not both. Arduini v. Hart, 774 F.3d 622, 628 (9th Cir. 2014). And his final arguments—that the counterclaim does not plead with sufficient particularity the reasons why a demand would have been futile and that it does not satisfy California Corporations Code section 800(b)(2)—are waived because they were raised for the first time on reply. Indeed, not only does Zhang’s motion not include these arguments, it concedes that Yuan did satisfy “the second prong” of Rule 23.1 and adequately state why he made no demand on the Camiwell board. IT IS SO ORDERED. Dated: November 14, 2024 Koo. umn off scarce VINCE CHHABRIA United States District Judge