Lewis H. Lazarus partner with Morris James. Courtesy Photo Court Dismisses Derivative Complaint Where Plaintiff Fails to Plead a Risk of Personal Liability by Directors
A plaintiff seeking to bring derivative claims on behalf of a Delaware corporation bears a heavy burden if she has not made demand and seeks to demonstrate that demand would be futile based on directors' alleged substantial risk of personal liability from approving the transaction under attack.
December 08, 2021 at 09:00 AM
5 minute read
CommentaryA plaintiff seeking to bring derivative claims on behalf of a Delaware corporation bears a heavy burden if she has not made demand and seeks to demonstrate that demand would be futile based on directors' alleged substantial risk of personal liability from approving the transaction under attack. When the subject company's certificate of incorporation includes a provision exculpating directors for liability for monetary damages to the fullest extent of Delaware law, a plaintiff's burden is even harder, as she must plead particularized facts showing bad faith, a standard that requires a showing of intentional misconduct. As demonstrated in Equity-League Pension Trust Fund v. Great Hill Partners, C. A. No. 2020-0992-SG (Del. Ch. Nov. 23, 2021), a mere failure to ask for additional information will not suffice to show the directors' conduct was against the corporate interest if the pleaded facts do not otherwise reflect a "we don't care about the risks" attitude in approving the transaction.
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