Glaubach v PricewaterhouseCoopers, LLP  2018 NY Slip Op 30875(U)  May 9, 2018  Supreme Court, New York County  Docket Number: 157993/2016  Judge: O. Peter Sherwood is something of a nightmare.  Plaintiff is the founder, former president and a minority shareholder of a home health services company which is successful.  He takes a medical leave and all hell breaks loose.

“Numerous Personal Touch cxecutives, particularly chief executive officer David Slifkin (Slifkin), executive vice-president and general counsel Robert Marx (Marx), and vice-president Gertrude Balk (Balk), engaged in fraud, theft, looting, breach of fiduciary duty, corporate waste and
mismanagement (id.. ii 8). These executives fraudulently caused millions of dollars of payments to
he made by the company to them, which were then reported as ‘”continuing legal education·
reimbursements” (id.. 1 25, 27). ”

“Glaubach asserts that for years he had a “direct relationship of trust” with PwC, and that each
year PwC discussed the financial health of the company with Glaubach at Personal Touch’s offices
(id.,  57). He also asserts that he discussed with PwC his role as 27% shareholder, as a lender of
$10 million. and the importance of the audits to his own financial decisions (id). In 2013.  PwC v.’as
told of the fraud and improper activities. and following this, PwC reexamined and reevaluated the
previous years’ financial statements. purporting to address these issues (id,  60).
Glaubach asserts that since the fraud. looting. and accounting malpractice, the value of the
company has severely declined, and the value of his shares have plummeted. He states that he
loaned millions of dollars to the company, and that he has spent millions of dollars in legal foes to
try to repair the damage to the company, and to his own reputation (id., 62).”

Glaubach’ s first cause of action for accounting malpractice is asserted derivatively. Since
Personal Touch is incorporated in Dela\vare, Deb.ware law applies to the issue of whether Glaubach
has adequately pleaded that he demanded that the company bring the claim, or that such demand
would he futile for the purposes of his derivative claims (see Asbestos Workers Phila. Pension Fund v Rell, 137 AD3d 680, 681 p’1 Dept 2016). Under Delaware law, and Delaware Chancery Court
Rule 23.1. tu have standing to pursue a derivative claim on behalf of a company, a plaintiff ”must
make a pre-suit demand that the board pursue the contemplated action” (id. at 681-682 ). Such a presuit demand ‘·may be excused, however, if such a demand would have been futile” (id. [internal
quotation marks and citation omittcdl). Either presuit demand or demand futility must be pleaded
\vith particularity in order for a derivative claim to survive a dismissal motion (see Brehm v fasner,
746 A2d 244, 254 l Del 2000]).

ln the instant case, the amended complaint fails to allege that Glaubach ever demanded that
the Personal Touch board pursue an audit malp;acticc claim against P\VC. or that such a demand
would have been futile.”