Demand Futility Precludes Dismissal for Failure to Make Demand on Board of Managers

In an Opinion, dated August 25, 2022, in Uniloeb Holdings LLC v. Shamus, Justice Andrew Borrok largely denied Defendants’ motion to dismiss. In particular, with respect to defendants’ claim that the action should be dismissed due to plaintiff’s failure to make a demand on the Board of Managers, the Court explained:

The argument fails. Under Delaware law, demand is excused where it is futile (United Food and Commercial Workers Union and Participating Food Industry Employers Tri-State Pension Fund v Zuckerberg, 262 A3d 1034, 1058 [Del 2021]). The premise being demand must be excused where the Board is not independent either by virtue of its financial interest, or because it is controlled by an interested party or because it would otherwise be called upon to sue itself. In analyzing whether demand is futile, courts consider the following factors on a director-by-director basis to determine: (i) whether the director received a material personal benefit from the alleged misconduct, (ii) whether the director would face a substantial likelihood of liability on any of the claims, and (iii) whether the director lacks independence from someone who received a material personal benefit or would face a substantial likelihood of liability (id.). As discussed above, the Individual Defendants control the Board of Managers and are alleged to have engaged in wrongdoing. As such, demand must be excused.

Written by:

Schlam Stone & Dolan LLP
Contact
more
less

Schlam Stone & Dolan LLP on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.