Avis Budget Group Directors and Officers Win Dismissal of Securities and Fiduciary Duty Action

Paul, Weiss achieved a significant victory on behalf of Avis Budget Group when U.S. District Judge Julien Neals of the District of New Jersey dismissed in full a derivative five-count complaint against Avis's directors, two of its officers and a large minority stockholder. 

The stockholder plaintiff alleged that certain of Avis's directors and officers made trades in Avis's stock based on material non-public information about delays in the delivery of new cars to Avis's fleet in 2022 and 2023. The plaintiff also alleged that Avis's directors permitted share buybacks that gave a large minority stockholder control over Avis and that Avis entered into a voting and governance agreement with that stockholder that was not properly disclosed and, as amended, violated Delaware law. 

In his opinion, Judge Neals accepted Paul, Weiss's arguments that the plaintiff failed to plead demand futility for any of her claims under controlling Delaware precedent, requiring their dismissal. He rejected the plaintiff's argument that the large minority stockholder controlled Avis, noting that Avis's directors took “affirmative steps, consistent with [their] duty of loyalty, to restrain” the influence of the stockholder. Judge Neals described the challenged share buyback program as a “common practice” that fell “squarely within the bounds of the valid exercise of business judgment” and “inherently benefit[ted] all shareholders by increasing share prices.” Finally, he rejected the plaintiff's Caremark claim alleging that the directors and officers breached their duty of oversight to the company, as well as claims of unjust enrichment and material omissions in Avis's disclosures. The court did not reach the issue of whether the standard “cooperation agreement” between Avis and the minority stockholder violated Delaware law, instead holding that “any potential flaw” would at most constitute a breach of the fiduciary duty of care, for which Avis's directors are exculpated by Avis’s corporate charter.

The Paul, Weiss team includes litigation partners Audra Soloway, Jaren Janghorbani, Kristina Bunting and Matthew Stachel.