Katz v. Chevron Corp., 22 Cal. App. 4th 1352, 1366 (1994).17FDIC v. Perry, No. CV 11-5561 ODW (MRWx) (C.D. Cal. Dec. 13, 2011); Gaillard v. Naomasa Co., 208 Cal. App.3d 1250, 1264 (1989).18 Cal. Corp. Code § 309; Lee v. Insurance Exch., 50 Cal. App. 4th 694 (1996); Aronson v. Lewis, 473 A.2d 805, 812 (Del. 1984).19In re Caremark Int’l Deriv. Litig., 698 A.2d 959, 967 (Del. Ch. 1996) (emphasis in original).20In re Walt Disney Co.
Under Delaware law, when an affirmative decision by a board of directors is challenged, demand futility is analyzed under the test established by Aronson v. Lewis, which permits a finding of demand futility if there is a reasonable doubt regarding (1) whether the directors are disinterested and independent, or (2) whether the challenged decision was a “valid exercise of business judgment.” Aronson v. Lewis, 473 A.2d 805, 814 (Del. 1984). On the other hand, when a complaint challenges something other than “a particular business decision made by the board as a whole” – such as board inaction – demand futility is analyzed under the test established by Rales v. Blasband, 634 A.2d.
The Court denied the Motion to Dismiss in its entirety.The Court first analyzed whether Plaintiff had adequately alleged demand futility. The Court found that Plaintiff had met both of the prongs of the test for demand futility set forth in Aronson v. Lewis, 473 A.2d 805, 814 (Del. 1984). But because only one prong need be satisfied, the Court limited its analysis to the first prong in the Aronson test: namely that the complaint must raise a reasonable doubt that a majority of the directors could have independently evaluated a demand.
 Bancorp at 28—31.  473 A.2d 805 at 814 (Del. 1984) (“Our view is that in determining demand futility the Court of Chancery in the proper exercise of its discretion must decide whether, under the particularized facts alleged, a reasonable doubt is created that: (1) the directors are disinterested and independent; and (2) the challenged transaction was otherwise the product of a valid exercise of business judgment”).  Bancorp at 32.
The plaintiff alleged that Fortress was New Residential’s controlling stockholder and that the transaction was not entirely fair. The court reiterated the standard for pleading demand futility under Aronson v. Lewis, 473 A.2d 805 (Del. 1984), overruled by Brehm v. Eisner, 746 A.2d 244 (Del. 2000), pursuant to which demand is futile only if a plaintiff alleges particularized facts to raise a reasonable doubt that either a majority of the directors are disinterested and independent, or the challenged transaction was otherwise the product of a valid exercise of business judgment. With respect to director independence, the court concluded that the plaintiff failed to raise a reasonable doubt as to the impartiality of a majority of the board.
Kamen v. Kemper Fin. Servs., Inc., 500 U.S. 90, 95–96 (1991).Aronson v. Lewis, 473 A.2d 805, 814 (Del. 1984), overruled on other grounds byBrehm v. Eisner, 746 A.2d 244 (Del. 2000).Edgar v. MITE Corp., 457 U.S. 624, 645 (1982).
Plaintiff also asserted direct breach of fiduciary duty claims against the board for alleged disclosure violations in the transaction proxy. According to the Court, plaintiff and defendants agreed that the futility of a demand on the board to pursue the derivative claims was subject to assessment under the second prong of Aronson v. Lewis, 473 A.2d 805, 814 (Del. 1984), which requires a plaintiff to allege “particularized facts sufficient to raise a reasonable doubt that … ‘the challenged transaction was … the product of a valid exercise of business judgment.’” After an extensive review of prior case law, the Court held that where—as here—directors are protected from duty of care claims by an exculpatory charter provision pursuant to 8 Del. C. § 102(b)(7), “a plaintiff must allege that a majority of the board faces a substantial likelihood of liability for non-exculpated claims in order to raise a reason to doubt that the challenged decision was a valid exercise of business judgment under the second prong of Aronson” (emphasis added).
The seminal opinion of the Delaware Supreme Court in Aronson v. Lewis established the test used by Delaware courts in determining whether a plaintiff stockholder’s demand would have been futile: Has the plaintiff stockholder seeking to proceed with a claim on behalf of the company pleaded particularized facts creating a “reasonable doubt” that either (1) the directors are disinterested and independent, or (2) the challenged transaction was otherwise the product of a valid exercise of business judgment? 473 A.2d 805, 814 (Del. 1984). In two recent opinions — Sandys v. Pincus, 152 A.3d 124 (Del. 2016) and Delaware County Employees Retirement Fund v. Sanchez, 124 A.3d 1017 (Del. 2015) — the Delaware Supreme Court applied the Aronson test for demand futility under Rule 23.
Rather, Delaware law requires the plaintiffs show conduct by the directors asked to consider the demand that is “so egregious on its face that board approval cannot meet the test of business judgment, and a substantial likelihood of liability therefore exists.” Aronson v. Lewis, 473 A.2d 805, 815(Del. 1984). The Court applied the demand futility test to find that demand on the Board was not excused and thus dismissal was warranted.
In some cases, however, the board may be disabled from making the decision to sue or not to sue. In those cases, demand is said to be futile.Nevada follows the Delaware Supreme Court’s jurisprudence on demand futility as established in Aronson v. Lewis, 473 A.2d 805 (1984) and Rales v. Blasband, 634 A.2d 927. SeeShoen v. SAC Holding Corp., 137 P.3d 1171, 1184 (2006).