The Delaware Court of Chancery has dismissed a derivative suit accusing the directors of technology company Richardson Electronics of hiding from investors the details of “flawed” stock buybacks by the firm's chief executive.

Chancellor Andre G. Bouchard on Wednesday said that while Richardson Electronics' board did mislead plaintiff Steven H. Busch in the run-up to the litigation, it was unclear whether Busch had actually relied on those representations in deciding whether to make a demand that the directors consider pursuing their own litigation.

Busch, who did make a pre-suit demand, argued that the decision should not qualify a concession that the directors were in a position to independently assess a potential suit. However, Bouchard found no evidence that the board was compromised and thus had secured the business judgment protections necessary for dismissal.

“Busch has failed to allege any particularized facts raising a reasonable doubt concerning the Special Committee's good faith and due care,” Bouchard said in a 41-page memorandum opinion.

The dispute stemmed from more than $3 million in stock repurchases that company chairman and CEO Edward J. Richardson and his charity, the Richardson Wildlife Foundation, made in 2013 and 2014. The buybacks, however, were not listed as related party transactions in the firm's public filings until August 2015.

After obtaining books and records from Richardson Electronics, Busch demanded that the company take action to unwind the deals or possibly file suit to rescind them. According to court documents, the board formed a special committee of outside directors, which retained the Delaware law firm Richards, Layton & Finger to aid in its investigation.

The special committee later complied a 30-page report, which expressed concerns about the accuracy of some of the company's disclosures but ultimately found no basis for litigation.

In his lawsuit, Busch said that the company's counsel had told him in letters that the transactions were done pursuant to a repurchase plan and administered by a third-party broker—statements that both turned out to be false, according to the report. Busch said in his complaint that had he known about those misrepresentations, he never would have made the demand, given the board's alleged potential for liability.

Busch argued that the case should be reviewed under the Chancery Court's Zapata standard for rejecting a motion to dismiss when the demand is excusable, challenging the committee's independence based on affirmative representations.

But Bouchard said the heart of Busch's complaint challenged the board's failure to disclose the transactions to stockholders, as opposed to actions that the directors declined to take.

“Although the complaint is not a model of clarity, the conduct it challenges appears to focus on the board's conduct when it rejected Busch's demand, shortly after the special committee completed its investigation,” Bouchard wrote.

“This is because the complaint asserts a single claim for breach of fiduciary duty against the five directors who were on the board when the demand was rejected for failing 'to properly disclose [the transactions] to stockholders or take action to recover damages as a result of Richardson's breaches of fiduciary duty.'”

Attorneys for both Busch and the board declined to comment Thursday on the ruling.

Busch was represented by Peter Safirstein and Elizabeth S. Metcalf of Safirstein Metcalf in New York and Peter B. Andrews, Craig J. Springer and David M. Sborz of Andrews & Springer in Wilmington.

Richards Layton attorneys Blake Rohrbacher, Kevin M. Gallagher and John M. O'Toole represented directors Paul Plante, James Benham and Kenneth Halverson. Richardson was represented by P. Clarkson Collins Jr. of Morris James in Wilmington.

The company was represented by Garrett B. Moritz and Roger S. Stronach of Wilmington's Ross Aronstam & Moritz.

The case was captioned Busch v. Richardson.