Law.com Subscribers SAVE 30%

Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.

The Corporate CounselorFeaturesGeneral Counsel and In House CounselLitigationLJN Newsletters

Director Independence to Consider Pre-Suit Demand

By Joseph M. McLaughlin and Yafit Cohn

Universally known as the demand requirement, Delaware Chancery Rule 23.1 compels dismissal of any shareholder derivative complaint that does not allege with particularity the efforts taken by the plaintiff to demand the desired action by the board or, alternatively, facts explaining that a demand was not made because it would have been futile.

In a decision written by Chief Justice Leo E. Strine Jr., for the second time in 15 months, the Delaware Supreme Court in December 2016 reversed a Court of Chancery decision dismissing a derivative complaint for failure to plead demand excusal. In Sandys v. Pincus, 2016 WL 7094027 (Del. Dec. 5, 2016), the court held that the shareholder plaintiff had offered allegations creating reasonable doubt as to a majority of the board's independence to consider a demand to bring suit. Like the Delaware Supreme Court's 2015 decision in Delaware County Employees Retirement Fund v. Sanchez, 124 A.3d 1017 (Del. 2015), Sandys signals that Delaware courts will closely scrutinize personal and business relationships that are asserted as compromising a director's ability to consider a pre-suit demand impartially.

This premium content is locked for Entertainment Law & Finance subscribers only

  • Stay current on the latest information, rulings, regulations, and trends
  • Includes practical, must-have information on copyrights, royalties, AI, and more
  • Tap into expert guidance from top entertainment lawyers and experts

For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473

Read These Next
Why So Many Great Lawyers Stink at Business Development and What Law Firms Are Doing About It Image

Why is it that those who are best skilled at advocating for others are ill-equipped at advocating for their own skills and what to do about it?

Bankruptcy Sales: Finding a Diamond In the Rough Image

There is no efficient market for the sale of bankruptcy assets. Inefficient markets yield a transactional drag, potentially dampening the ability of debtors and trustees to maximize value for creditors. This article identifies ways in which investors may more easily discover bankruptcy asset sales.

The DOJ's Corporate Enforcement Policy: One Year Later Image

The DOJ's Criminal Division issued three declinations since the issuance of the revised CEP a year ago. Review of these cases gives insight into DOJ's implementation of the new policy in practice.

A Lawyer's System for Active Reading Image

Active reading comprises many daily tasks lawyers engage in, including highlighting, annotating, note taking, comparing and searching texts. It demands more than flipping or turning pages.

Protecting Innovation in the Cyber World from Patent Trolls Image

With trillions of dollars to keep watch over, the last thing we need is the distraction of costly litigation brought on by patent assertion entities (PAEs or "patent trolls"), companies that don't make any products but instead seek royalties by asserting their patents against those who do make products.