Danaher Wins Dismissal of Board Diversity Suit by Pension Fund

Danaher Corp. won dismissal of a shareholder derivative suit alleging the medical equipment maker made misleading statements about its commitment to diversity given that its board lacked any Black directors.

The U.S. District Court for the District of Columbia ruled Monday in favor of the company after finding that the plaintiffs failed to make a diversity demand to the board of directors, or to prove that such a demand would have been futile.

“The Board—not shareholders—controlled the decision to act, and Plaintiffs thus had to make demand on the Board. Because they did not, the Court will dismiss the case,” Judge Trevor McFadden said.

The plaintiffs—including the general pension fund of Pontiac, Michigan and shareholder Harry Markarian—alleged Danaher falsely represented its commitment to diversity as its board lacked a single Black member. Their suit demanded that individual directors pay damages and the company add two Black board members and one member from another minority group, among other things.

The plaintiffs and Danaher didn’t immediately respond to requests for comment on Monday’s ruling.

The suit filed last September said the directors breached fiduciary duty, unjustly enriched themselves, and made material misrepresentations in their proxy statements

The plaintiffs said they didn’t need to demand pre-suit fixes because the same board members that created the lack of diversity faced potentially liability—creating a conflict of interest for them. But McFadden said the plaintiffs didn’t provide specific evidence of potential liability or conflicts for any of the directors.

McFadden also said most of the company’s statements about diversity never mentioned the board, but instead focus on associates or the general workforce.

“If a basketball coach says that his players ‘are in top physical condition,’ the coach is not also suggesting that he is in great shape,” he said. “Just so here.”

The plaintiffs also could not point to any strict diversity requirements within Danaher’s proxy materials that the board failed to meet, the opinion said.

The court also rejected the unjust enrichment claim, saying plaintiffs failed to directly tie the directors’ compensation to allegedly wrongful acts.

The case is in re: Danaher Corp. Shareholder Derivative Litigation, D.D.C., No. 20-cv-02445, 6/28/21.