41 Analyses of this case by attorneys

  1. Risky Business: Protecting the Assets of Directors

    Pepper Hamilton LLPPamela PalmerDecember 28, 2017

    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.

  2. Second Circuit Reinforces High Pleading Burden for Director Duty of Oversight Claims

    Bracewell & Giuliani LLPRyan PhilpFebruary 20, 2014

    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.

  3. John Cumming v. Wesley R. Edens, et al., C.A. No. 13007-VCS (Del. Ch. Feb. 20, 2018) (Slights, V.C.)

    Potter Anderson & Corroon LLPFebruary 20, 2018

    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.

  4. Delaware Supreme Court Limits Stockholder Ratification Defense for Director Compensation Decisions

    Shearman & Sterling LLPDoreen LilienfeldDecember 23, 2017

    [10] Bancorp at 28—31. [11] 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”). [12] Bancorp at 32.

  5. Inside the Courts – An Update From Skadden Securities Litigators - November 2017/ Volume 9 / Issue 4

    Skadden, Arps, Slate, Meagher & Flom LLPDecember 1, 2017

    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.

  6. California Court of Appeal Affirms: Early Discovery Will Not Be Permitted to Aid Derivative Plaintiff in Stating a Claim

    Paul Hastings LLPTHE PRACTICE GROUPNovember 18, 2017

    [4]Kamen v. Kemper Fin. Servs., Inc., 500 U.S. 90, 95–96 (1991).[5]Aronson v. Lewis, 473 A.2d 805, 814 (Del. 1984), overruled on other grounds byBrehm v. Eisner, 746 A.2d 244 (Del. 2000).[6]Edgar v. MITE Corp., 457 U.S. 624, 645 (1982).

  7. Delaware Court Of Chancery Dismisses Derivative Action, Finding Demand Unexcused Because Plaintiff Did Not Plead Non-Exculpated Claims Against A Majority Of Directors

    Shearman & Sterling LLPNovember 15, 2017

    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).

  8. "Delaware Supreme Court Examines Director Disinterestedness, Independence"

    Skadden, Arps, Slate, Meagher & Flom LLPRonald Brown IIIMay 9, 2017

    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.

  9. “Directors’ Decisions Must Be Reasonable, not Perfect” Home Depot’s Shareholder Derivative Litigation Arising from Data Breach Dismissed; Demand Was Not Excused Under Delaware Law

    Morris James LLPChuck Kunz IIIDecember 8, 2016

    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.

  10. 10th Circuit Highlights Difference Between Delaware And Nevada Exculpatory Statutes

    Allen Matkins Leck Gamble Mallory & Natsis LLPKeith P. BishopJune 22, 2016

    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).