A federal appeals court won't revive a shareholder lawsuit brought against Bob Iger and other members of Disney's board for allegedly participating in a conspiracy to enact illegal anti-competitive agreements in the animation industry. On Wednesday, the Ninth Circuit Court of Appeals affirmed dismissal of the lawsuit because plaintiffs had failed to properly make a demand upon the board to take action.

The lawsuit addressed industry-wide pacts to keep the cost of labor low. All the way back in the mid-1980s, George Lucas sold his company's computer division to Steve Jobs. At the time, the two agreed to restrain competition for skilled labor at both Pixar and Lucasfilm. Over time, more companies, including Sony and Fox's Blue Sky Studios, were said to have joined into "gentleman's agreements" not to cold call each other's animation employees, provide notifications when providing job offers and make no counteroffers.

That led to an investigation by the U.S. Justice Department, and in 2010, a settlement wherein Apple, Google, Intel, Adobe and Pixar agreed to stay away from anti-poaching pacts. Then came the class-action lawsuits, and further settlements.

Finally, in 2015, Eugene Towers brought a stockholder-derivative complaint on behalf of Disney that targeted Iger and others including Twitter CEO Jack Dorsey (who joined Disney's board in 2013), Facebook COO Sheryl Sandberg (on Disney's board since 2009), and former Starbucks CEO Orin Smith (since 2006).

The lawsuit failed at the district court upon the judge's conclusion that the plaintiffs failed to establish sufficient facts regarding the Disney board's knowledge of any conspiracy.

On appeal comes discussion of a rule for stockholder-derivative suits that requires plaintiffs state their efforts to obtain a desired action from board directors or at least show such action would be futile. Towers admitted not making a demand on the board, and the appeals court emphasizes that he must therefore plead bad faith by alleging with particularity that a majority of directors knowingly violated fiduciary duties or consciously disregarded such duties.

Towers pointed to key Disney officers actively participating in the conspiracy, but the appeals court deems it insufficient.

"[W]e cannot assume that members of the Board had knowledge of the conspiracy simply because other individuals at Disney — even other Board members — knew," states the opinion. "Instead, Plaintiff would need to demonstrate a clear line of communication and knowledge between the implicated officers and the Board. Here, Plaintiff did allege that [former Disney Studios chairman Richard] Cook and [Disney Animation Studios Ed] Catmull communicated with the Board, particularly during discussions of the Pixar acquisition, but he did not allege with particularity that information regarding the conspiracy was ever transmitted to the Board by these or other officers."

The rest of the opinion (read here) then rejects alternative arguments for futility, including that the board was serving while Cook was allegedly orchestrating the conspiracy as well as employment compensation issues coming up during Disney's acquisition of Pixar. The appeals court offers that plaintiffs needn't trot out a "smoking gun," but on the other hand, "something more than speculative, conclusory allegations is required."

"Ultimately, the allegations in Plaintiff’s amended complaint do not constitute particularized facts demonstrating demand futility," writes Ninth Circuit Judge Milan D. Smith Jr. "Whether the Board’s alleged misconduct is characterized as conscious inaction or active connivance, Plaintiff needed to demonstrate that a majority of the Director Defendants knew of the conspiracy, and he failed to do so."