Category

Demand Futility

16 December 2021

The Refined Demand Futility Standard Takes Shape

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Over the past several months, a number of decisions released by the Delaware courts have begun to grapple with the new Zuckerberg three-part demand futility standard announced by the Delaware Supreme Court in September. Many cases spotlight the need to assess demand futility on a director-by-director basis. But at least one recent decision has highlighted another aspect of the test, and instead turns on the need to assess demand futility on a transaction-by-transaction basis. In In re Vaxart, Inc. Stockholder Litigation, Vice Chancellor Fioravanti dismissed several claims from a shareholder derivative suit purportedly filed on behalf of Vaxart, Inc. because the plaintiffs failed to allege that a majority of the directors received a material personal benefit or faced a substantial likelihood of liability from the specific transaction that would have been the subject of the pre-suit demand. (more…)

06 October 2021

Delaware Supreme Court Clarifies the Standards for Demand Futility

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A pair of opinions released by the Delaware Supreme Court in a single week have revisited longstanding precedent governing shareholder suits that claim corporate wrongdoing. As discussed in a companion post on this blog, the first of those opinions, Brookfield Asset Management Inc. v. Rosson, restricted the ability of shareholders to bring direct claims under certain circumstances, instead forcing them to pursue more procedurally challenging derivative suits. In the second case, United Food & Commercial Workers Union & Participating Food Industry Employers Tri-State Pension Fund v. Zuckerberg, the Delaware Supreme Court adopted a new three-part demand-futility test that clarifies the standard shareholders must meet to file such derivative suits, without first taking their complaints to the company’s board of directors. (more…)