Delaware state Supreme Court.

The Delaware Supreme Court on Monday upheld the dismissal of derivative litigation against the directors of a health care technology company in a case that tested the Delaware Court of Chancery's adherence to a general rule governing its approach to derivative litigation.

In a brief order, the high court let stand Vice Chancellor Sam Glasscock III's May 2016 decision to depart from the principle that the court should evaluate demand futility based on the composition of a company's at the time that a derivative complaint is filed.

Instead, Glasscock found that major changes to board makeup in the days after the lawsuit was filed meant that the new directors, and not the old, were in a better position to assess the complaint, which stemmed from drug kickback and insider-trading scandals at BioScrip Inc., a pharmacy services company that manages benefits and provides home intravenous therapy to patients.

The justices did not elaborate on their reasoning in affirming Glasscock's decision.

The vice chancellor, however, said last year in a 35-page memorandum opinion that the unique nature of the case warranted the unusual approach, and he refused the plaintiff's request to adopt a bright-line rule that demand must be assessed as of the day of the filing.

“Typically, this rule is of straightforward application; the court must analyze the ability of the board to appropriately respond to a litigation demand as of the time the suit was filed,” Glasscock wrote. “As with any equitable rule, however, exceptions arise where equity dictates; equity drives the rule, not the reverse.”

The plaintiff, a Chicago pension fund, had sued BioScrip's directors on May 7, 2015, just four days before a scheduled board election produced almost an entirely new slate of directors. According to court documents, the changes occurred before the complaint could be served, and the majority of the new directors were not named in the lawsuit.

The defendants moved to dismiss the suit, arguing the fund had to plead demand futility with respect to the new board of directors.

The fund, meanwhile, argued for strict application of the Chancery Court rule. Straying from a bright-line rule, it warned, would lead to a “slippery slope of a standard susceptible to manipulation,” such as intentional delays or sudden removal of a company's directors.

But Glasscock found little merit in the argument, and dismissed the complaint but with the opportunity for the fund to amend.

“I have every confidence that this court can sniff out and pre-empt improper manipulation of board composition in this context,” Glasscock wrote. “The fear of gamesmanship falls well short, in my mind, of justifying indulgence in the fiction that the May 7 board would be the body charged with evaluating a demand here.”

The fund's later attempt to fix the pleading failed, and it argued the case Nov. 15 before Delaware's high court.

An attorney for the plaintiffs did not return a call seeking comment, and an attorney representing the directors declined to comment on Tuesday.

The fund was represented by Carol V. Gilden and Richard A. Speirs of Cohen Milstein Sellers & Toll and Pamela S. Tikellis, A. Zachary Naylor, Vera G. Belger and Catherine Pratsinakis of Chimicles & Tikellis.

The directors were represented by teams of attorneys from Paul, Weiss, Rifkind, Wharton & Garrison, O'Melveny & Myers, Kirkland & Ellis, Young Conaway Stargatt & Taylor and Richards, Layton & Finger.

The case was captioned Park Employees' and Retirement Board Employees' Annuity and Benefit Fund of Chicago v. Smith.