The dismissal of a Morgan Stanley shareholder lawsuit brought in 2010 over $45 billion paid to the firm’s employees in three years was upheld Thursday by a New York appeals court.
Shareholders including the $6 million Security Police and Fire Professionals of America Retirement Fund, Roseville, Mich., had accused Morgan Stanley, former Chairman John Mack and other executives of making improper compensation and bonus payments.
New York State Supreme Court Justice Shirley Werner Kornreich threw out the suit in December 2010, citing a requirement that shareholders first make a demand on a board before suing on behalf of a company or show that such a move would be futile.
The state Appellate Division First Department in Manhattan upheld the dismissal, saying the complaint lacks specific allegations needed to determine whether work done by company employees was “of such limited value to the corporation that no reasonable person in the directors’ position” would have approved their pay.
“The complaint does not adequately plead waste,” Justice Peter Tom wrote. “It lacks the ‘specific allegations of unconscionable transactions and details regarding who was paid and for what reasons they were paid.’”
Mr. Mack ceded his chairman role at Morgan Stanley in January to CEO James Gorman, who replaced Mr. Mack as chief executive at the end of 2009.