In Pyott v. Louisiana Municipal Police Employees’ Retirement System, No. 380, 2012 (Del. Apr. 4, 2013), the Delaware Supreme Court held that a prior California ruling dismissing a derivative suit brought by different shareholders barred a subsequent Delaware derivative action challenging the same conduct. The case involved derivative suits brought against Allergan’s directors, charging them with breach of fiduciary duty after the company paid $600 million in fines for allegedly marketing the company’s BOTOX drug for off-label uses. A California federal court dismissed one group of derivative actions raising those claims. The defendants then argued that the California judgment was preclusive in the Delaware action. The Delaware Court of Chancery refused to dismiss the action, holding that the stockholder plaintiffs in the two jurisdictions were not in privity under Delaware law, and the California stockholders were not adequate representatives of the defendant corporation. On appeal, the Delaware Supreme Court reversed on both points. The Delaware court held that California law, not Delaware law, governed the issue of privity because the full faith and credit clause required Delaware to give the California judgment the same preclusive effect that a California court would give it, and under California preclusion principles, derivative plaintiffs are in privity. With regard to whether the California plaintiffs were inadequate representatives, the Delaware Supreme Court rejected the trial court’s “‘fast filer’ irrebuttable presumption of inadequacy” — that is, the trial court’s ruling that shareholders are inadequate if they do not pursue a § 220 action to inspect the company’s books and records before proceeding with their derivative action. The court emphasized that “[a]bsent the presumption, there was no basis on which to conclude that the California plaintiffs were inadequate.”