APPEAL FROM THE CIRCUIT COURT. COOK COUNTY. THE HONORABLE ALBERT GREEN, JUDGE PRESIDING.
Petition for Leave to Appeal Denied January 31, 1996.
Presiding Justice Cousins delivered the opinion of the court: Gordon and T. O'brien, JJ., concur.
The opinion of the court was delivered by: Cousins
PRESIDING JUSTICE COUSINS delivered the opinion of the court:
The plaintiffs, Bertha Miller and Fred Steinlauf, filed a shareholder derivative suit on behalf of Commonwealth Edison Company (Edison) against the defendants - present and former directors of Edison since 1975 - alleging breaches of duty in their management of the construction of nuclear power plants. The complaint also alleged that the current directors (board) breached their fiduciary duties by failing to bring any action against the defendants. Two weeks before filing the complaint, the plaintiffs made a demand on the board to bring suit against the defendants. After the board investigated the charges, the board refused the demand and sought to dismiss the complaint, arguing that the board controlled the derivative suit after addressing the plaintiffs' demand. The trial court granted the motion, from which the plaintiffs appeal.
On November 8, 1991, plaintiffs' counsel wrote a letter to the board on behalf of Mr. Steinlauf. The letter demanded that the board file suit against the directors and officers responsible for the mismanagement which led to a disallowance of plant constructioncosts from Edison's rate base. The letter also stated, "Mr. Steinlauf realizes there is a need to conduct an investigation before filing a lawsuit, but the Board of Directors should already know much of this information." Edison responded to Mr. Steinlauf's letter on December 18, 1991, and stated that the Illinois Supreme Court had just remanded the issue of the rate base back to the Illinois Commerce Commission for reconsideration. Edison also disputed Mr. Steinlauf's charges and sent him materials for him to review. Edison's letter concluded, "Commission action will probably take some months. *** After you have had an opportunity to review these materials, the Board would appreciate hearing from you as to whether you still believe you have a basis for the charges underlying your claim and, if so, what that basis might be."
On September 15, 1992, plaintiffs' counsel, now representing both plaintiffs, sent a letter to the board demanding suit against Edison's current and former directors. This letter stated:
"Since Mr. Dellsey [Edison's general counsel] wrote to us, the Illinois Supreme Court has ruled that substantial costs incurred in the construction of Byron 1 were unreasonable and must be excluded from Commonwealth Edison's rate base. *** Therefore, we reiterate our demand that the current Board bring an action against those responsible for incurring these unreasonable costs. The Board has now had ample time to investigate this matter and file suit, if such was the intent of the Board. Unless we hear from you by September 22, 1992 that a suit has been filed or that Commonwealth Edison intends to file suit promptly, Ms. Miller and the other shareholders we represent shall feel free to commence a derivative action."
Mr. Dellsey, responded by letter on September 17, 1992, stating:
"Your letter *** was directed to me today. I will bring it to the attention of the Directors at the next scheduled meeting on October 16. I am sure you will receive a reply promptly after that meeting. While I recognize that this is after the September 22 date mentioned in your letter, October 16 is the first practical opportunity for the Board to consider your letter, and I cannot see any possible prejudice to your client accruing between September 22 and October 16."
On September 24, 1992, the plaintiffs wrote to Edison's president, Bide Thomas, stating:
"On September 22, 1992, we wrote to Mr. Dellsey asking if there was any reason to believe that the Board may in fact act on our demands when it meets and initiate suit. Mr. Dellsey called us today and indicated he can make no such assurances.
Given the lack of action and response to our demands the firsttime we sent them to the board, that no new events have transpired since the April Supreme Court decisions, which afforded the Board more than adequate time to act if they were so inclined, we are disinclined to wait an entire month to have the Board once again summarily refuse our demands. *** We need your response no later than Monday, September 28, 1992 by 12:00 p.m."
Mr. Thomas wrote back on September 28, 1992, assuring the plaintiffs that the board would not "summarily refuse" any stockholder demand and requesting the ...