breach of fiduciary duty claim in Delaware

2025But see Nemec, 991 A.2d at 1129 (rejecting the argument that a breach of fiduciary duty claim was “grounded on an additional and distinct fact—namely, that the Directors were the persons responsible for the Company’s decision . . . and stood to gain personally from that decision[,]” because “the fiduciary duty claim still arises from a dispute relating to the exercise of a contractual right” (emphasis in original)). 15 occurred before they joined the Board, including improper changes to the Company’s balance sheet, the improper issuance of stock options to Harrington, and Plaintiff’s removal f

2024I have allowed a breach of fiduciary duty claim against the Founders, 228 Pl.’s AB Opp’n Quantum’s MTD 44 (citing SAC ¶¶ 203–08). 229 Nemec v. Shrader, 991 A.2d 1120, 1130 (Del. 2010).

2015Around the time the loan was amended for the fourth time, “at least two similarly situated auto suppliers, American Axle and Visteon, obtained unsecured debt financing of much longer duration at the substantially lower prevailing interest 53 Id. (internal quotation marks omitted). 54 Orman v. Cullman, 794 A.2d 5, 22 (Del.

2013Litig., 906 A.2d 27, 52 (Del.2006) (affirming director-by-director analysis); see also Orman v. Cullman, 794 A.2d 5 , 25 n. 50 (Del.Ch.2002) (explaining that materiality is required for a breach of fiduciary duty claim but not for a violation of 8 Del.

2016Generally speaking, “mere directorial approval of a transaction, absent particularized facts supporting a breach of fiduciary duty claim, or otherwise establishing the lack of independence or disinterestedness of a majority of the directors, is insufficient to excuse demand.” Aronson, 473 A.2d at 817 .

2016Generally speaking, “mere directorial approval of a transaction, absent particularized facts supporting a breach of fiduciary duty claim, or otherwise establishing the lack of independence or disinterestedness of a majority of the directors, is insufficient to excuse demand.” Aronson, 473 A.2d at 817 .

2019Enterprises, however, the Delaware Supreme Court distinguished Van de Walle as a breach of fiduciary duty case and observed that “[a] fair merger price in the context of a breach of fiduciary duty claim will not always be a fair value in the context of determining going concern value.” 731 A.2d at 797 .

2018Law. 729 (2008)) at 755 (“[A] pure go-shop can be a valuable tool for extracting the highest possible price in the sale of [a] company.”). 264 M.P.M Enters., Inc. v. Gilbert, 731 A.2d 790, 797 (Del. 1999) (“A fair merger price in the context of a breach of fiduciary duty claim will not always be a fair value in the context of determining going concern value.”); In re Traa'os Inc. S’holder Litig., 73 A.3d 17, 78 (Del.

2019While it is possible to issue securities as a dividend, the fact that stock 53 Brehm v. Eisner, 746 A.2d 244, 263 (Del. 2000) (dismissing a breach of fiduciary duty claim for excessive officer compensation); Tornetta v. Musk, 2019 WL 4566943 (Del.

2019A board’s decision to grant executive compensation is usually entitled to “great deference.”84 But Defendants acknowledge (for purposes of this motion only) that Musk is a controlling shareholder and that he dominated the Board and the Compensation Committee during the time the Award was negotiated and approved.85 Thus, in the absence of stockholder ratification, Defendants acknowledge (for purposes of this motion only) that the Court must review the Award for entire fairness.86 Citing seminal Delaware authority, however, Defendants maintain the Court must review the Award under the business j

2016For example, on page 19 of its brief, State Farm cites In re Tyson Foods, Inc., where the Court of Chancery determined that the statute of limitations for a breach of fiduciary duty claim against corporate fiduciaries "begins to run at the time that the cause of action accrues, which is generally when there has been a harmful act by a defendant,” 919 A.2d 563, 584 (Del.

2014To challenge whether a particular director acted loyally, the Plaintiffs need to allege that the director was interested, not independent, or not acting in good faith.210 The Plaintiffs failed to plead that, other than possibly Raina,211 any member of the Board who approved the 2010 Proxy Statement was interested, not 208 See, e.g., In re Tyson Foods, Inc., 919 A.2d at 598 (“It is too early for me to conclude that the alleged failures to disclose do not implicate the duty of loyalty.”); see also Orman, 794 A.2d at 41 (“Unfortunately for the defendants, however, because Orman has pled facts whi

2014Accordingly, the court concludes that contract, and not fiduciary, principles should govern the analysis and dismisses the fiduciary duty claims against the directors.”). 103 See Schuss, 2008 WL 2433842 , at *10; see also PT China LLC, 2010 WL 761145 (inferring at the motion to dismiss stage that allegations that the sole manager and member of a Delaware LLC “usurped business opportunities,” used “confidential and proprietary information for his personal self-interest,” and “misappropriated . . . resources for his own benefit” gave rise to a breach of fiduciary duty claim independent of a brea

2014To challenge whether a particular director acted loyally, the Plaintiffs need to allege that the director was interested, not independent, or not acting in good faith.210 The Plaintiffs failed to plead that, other than possibly Raina,211 any member of the Board who approved the 2010 Proxy Statement was interested, not 208 See, e.g., In re Tyson Foods, Inc., 919 A.2d at 598 (“It is too early for me to conclude that the alleged failures to disclose do not implicate the duty of loyalty.”); see also Orman, 794 A.2d at 41 (“Unfortunately for the defendants, however, because Orman has pled facts whi

2026Feb. 28, 2020) (explaining that where “allegations focus on self-dealing payments [the defendant] caused [the corporation] to make . . . the claim is exclusively derivative”); infra Section II.B.2. 178 Compl. ¶¶ 121, 124-27. 179 See Savor, Inc. v. FMR Corp., 812 A.2d 894, 896 (Del. 2002). 41 reasonably conceivable set of circumstances susceptible of proof.180 I first assess the breach of fiduciary duty claim against the Compensation Committee directors who approved the 2022 to 2024 director compensation packages (other than the Equity Grant).

2023ANALYSIS A. Motion to Dismiss under 12(b)(6) The moving Defendants seek dismissal under Court of Chancery Rule 12(b)(6) for: “failure to state a claim upon which relief can be granted.” The standard of review under Rule 12(b)(6) is settled: (i) all well-pleaded factual allegations are accepted as true; (ii) even vague allegations are “well-pleaded” if they give the opposing party notice of the claim; (iii) the Court must draw all reasonable inferences in favor of the non-moving party; and (iv) dismissal is inappropriate unless the “plaintiff would not be entitled to recover under any reasonabl

2021Sept. 20, 1996) (distinguishing rights of current versus remainder beneficiaries and holding that remainder beneficiaries “have no standing to assert the breach of fiduciary duty claim to restore the allegedly diverted profits from the sale of” trust property). 204 See Restatement Second § 232 cmt. b. 205 McNeil v. McNeil, 798 A.2d 503, 509 (Del. 2002); see also 12 Del.

2019Sept. 20, 2019) (denying a motion to dismiss a breach of fiduciary duty claim for excessive officer compensation). 54 Guth v. Loft, 5 A.2d 503 (Del. 1939). 55 McNeil v. McNeil, 798 A.2d 503, 506 (Del. 2002). 56 Joint App. at 1665. 57 8 Del.

2020See Ross, 2019 WL 960212 , at *6 (disallowing a fiduciary duty claim to proceed in parallel with an implied covenant claim based on the same wrongful acts). 204 H-M Wexford LLC v. Encorp, Inc., 832 A.2d 129, 140 (Del.

2020Finally, Plaintiff’s efforts to muddy the waters by claiming that Mussafer and Patrick “lack independence due to their direct and indirect pecuniary interest in 109 H-M Wexford, 832 A.2d at 149 (observing, “it is more or less universally the case that when a corporation pays value to settle a claim, it demands and receives releases in favor of its directors, officers and other agents.”).

2019Plaintiff alleges the same “grossly unfair” terms of the Preferred Stock and “unauthorized financial benefits” from the Equity Grants, as its breach of fiduciary duty claims.160 I therefore reach the same conclusion as I did for the breach of fiduciary duty claim: Plaintiff’s unjust enrichment claim is derivative under Tooley.161 “To state a claim, the complaint must allege sufficient facts plausibly to show: (1) an enrichment, (2) an impoverishment, (3) a relation between the enrichment and impoverishment, (4) the absence of justification, and (5) the absence of a remedy 159 Ryan v. Gifford,

2014See, e.g., Ryan v. Gifford, 918 A.2d 341, 349-51 (Del.Ch.2007); In re Topps Co. S’holders Litig., 924 A.2d 951, 956-61 (Del.Ch. 2007); In re Chambers Dev.

2018Ch. 2013) (“A court could conclude that a price fell within the range of fairness and would not support fiduciary liability, yet still find that the point calculation demanded by the appraisal statute yields an award in excess of the merger price.”); Reis v. Hazelett Strip- Castz`ng Corp., 28 A.3d 442, 466 (Del.

2016Ch. 2014) (―A price may fall within the range of fairness for purposes of the entire fairness test even though the point calculation demanded by the appraisal statute yields an award in excess of the merger price.‖); Trados II, 73 A.3d at 78 (―A court could conclude that a price fell within the range of fairness and would not support fiduciary liability, yet still find that the point calculation demanded by the appraisal statute yields an award in excess of the merger price.‖); Reis, 28 A.3d at 466 (―A court readily could conclude that a price fell within the range of fairness and would not su

2018Law. 729 (2008)) at 755 (“[A] pure go-shop can be a valuable tool for extracting the highest possible price in the sale of [a] company.”). 264 M.P.M Enters., Inc. v. Gilbert, 731 A.2d 790, 797 (Del. 1999) (“A fair merger price in the context of a breach of fiduciary duty claim will not always be a fair value in the context of determining going concern value.”); In re Traa'os Inc. S’holder Litig., 73 A.3d 17, 78 (Del.

2016Ch. 2014) (―A price may fall within the range of fairness for purposes of the entire fairness test even though the point calculation demanded by the appraisal statute yields an award in excess of the merger price.‖); Trados II, 73 A.3d at 78 (―A court could conclude that a price fell within the range of fairness and would not support fiduciary liability, yet still find that the point calculation demanded by the appraisal statute yields an award in excess of the merger price.‖); Reis, 28 A.3d at 466 (―A court readily could conclude that a price fell within the range of fairness and would not su

2016But this is an appraisal action, not a fiduciary duty action, and although I have little reason to doubt [respondent’s] assertion that no buyer was willing to pay Dimensional $25 million for the preferred stock and an attractive price for [respondent’s] common stock in 2009, an appraisal must be focused on [respondent’s] going concern value”); see also M.P.M., 731 A.2d at 797 (“A fair merger price in the context of a breach of fiduciary duty claim will not always be a fair value in the context of determining going concern value.”); In re Orchard Enters., Inc. S’holder Litig., 88 A.3d 1, 30 (De

2016Enters., Inc. v. Gilbert, 731 A.2d 790, 797 (Del. 1999) (―A fair merger price in the context of a breach of fiduciary duty claim will not always be a fair value in the context of determining going concern value.‖); In re Orchard Enters., Inc. S’holder Litig., 88 A.3d 1, 30 (Del.

2026For a breach of fiduciary duty claim, the Plaintiff needed to prove that the Defendant owed and breached duties.171 The Plaintiff argues that the Defendant 167 JX22. 168 JX2; JX86. 169 JX3; JX62; JX63. 170 JX126; JX127. 171 See Beard Research, Inc. v. Kates, 8 A.3d 573, 601 (Del.

2024In May 2021, about a month before her last (Nautic Zoom invite to James for Aug. 25, 2020 meeting); JX 196 (James forwarding the Zoom invite to his personal email address). 353 Beard Rsch., 8 A.3d at 602 (citing Summagraphics, 425 A.2d at 965 ). 354 James Tr. 1051; see Walker Tr. 1516-19, 1521-24. 355 Anthony Tr. 694-701; Coltharp Tr. 404-05; Schuppan Tr. 1736-42, 1800-01; cf. United States v. Contorinis, 692 F.3d 136, 143-44 (2d Cir. 2012) (holding that confirmation a board was actively considering a strategic review was material non-public information).

2024Apr. 21, 1995) (explaining that a plaintiff cannot simply “weave[] together a tangle of conclusions about fairness and coercion, etc.” to state a breach of fiduciary duty claim), aff’d, 672 A.2d 35 (Del. 1996); see also Capella Hldgs, Inc. v. Anderson, 2015 WL 4238080 , at *5-6 (Del.

2008E.g., Malpiede v. Townson, 780 A.2d 1075, 1083 (Del.2001) (citing Solomon v. Pathe Commons Corp., 672 A.2d 35, 38 (Del.1996)). 16 .

2020Aiding and abetting and unjust enrichment claims often rise and fall together: “where a breach of fiduciary duty claim based on the same facts and circumstances fails, the Court often dismisses the corresponding unjust enrichment claim.” 99 So 96 Id. 97 Zebroski v. Progressive Direct Ins.

2015Br. 21; see also Compl. ¶ 45 (“Defendants were unjustly enriched as a result of the compensation and director remuneration they received while breaching fiduciary duties owed to Citrix.”). 131 Fleer Corp. v. Topps Chewing Gum, Inc., 539 A.2d 1060, 1062 (Del. 1988). 132 Nemec v. Shrader, 991 A.2d 1120, 1130 (Del. 2010). 133 Frank v. Elgamal, 2014 WL 957550 , at *31 (Del.

2019Plaintiffs alternatively plead that even if the Venture Capital Defendants did not owe fiduciary duties, they aided and abetted IDEV’s directors in breaching their fiduciary duties.154 The elements of an aiding and abetting a breach of fiduciary duty claim are “(i) the existence of a fiduciary relationship, (ii) a breach of the fiduciary’s duty, (iii) knowing participation in that breach by the defendants, and (iv) damages proximately caused by the breach.”155 “Prior decisions of this court have validated the unsurprising proposition that an aiding and abetting claim premised on a 152 Almond,

2019The elements of an aiding and abetting a breach of fiduciary duty claim are “(i) the existence of a fiduciary relationship, (ii) a breach of the fiduciary’s duty, (iii) knowing participation in that breach by the defendants, and (iv) damages proximately caused by the breach.”143 “Prior decisions of this court 141 Pfeiffer, 2013 WL 5988416 , at *9. 142 Id. 143 RBC Capital Mkts., LLC v. Jervis, 129 A.3d 816, 861 (Del. 2015). 50 have validated the unsurprising proposition that an aiding and abetting claim premised on a derivative cause of action is necessarily derivative itself.”144 Count III, th

2026Unjust Enrichment Finally, the plaintiff claims that the director defendants were unjustly enriched by accepting their “excessive” 2022, 2023, and 2024 compensation.212 The defendants seek dismissal of this theory as duplicative of the breach of fiduciary duty claim.213 Unjust enrichment is the “unjust retention of a benefit to the loss of another.”214 It requires: “(1) an enrichment; (2) an impoverishment; (3) a relation between the enrichment and impoverishment; [and] (4) the absence of justification.”215 At the pleading stage, an unjust enrichment claim that is duplicative of a breach of fi

2026Although the breach of fiduciary duty claim is dismissed as to the directors who only passively received the compensation, restitutionary relief for unjust enrichment may still be available against a defendant who retains a benefit, even if they are not a wrongdoer.218 As Vice Chancellor Glasscock explained in Knight v. Miller, where a fiduciary duty claim survives against committee defendants who approved compensation awards, an unjust enrichment claim against the passive recipients is not “truly duplicative” and may proceed based on the reasonable inference that those defendants were “enrich

2025Pl.’s Br. in Opp’n to Goyle 27 (citing Kronenberg v. Katz, 872 A.2d 568, 593 (Del.

2025Untimeliness The Court of Chancery looks to the statute of limitations by analogy when evaluating the application of laches.76 The statute of limitations for a breach of fiduciary duty claim is three years.77 The same limitations period applies to claims for aiding and abetting breaches of fiduciary duty and unjust enrichment.78 75 The plaintiff also complains about harm from the approval of the merger, but that occurred before the proxy was issued. 76 See Kraft v. WisdomTree Invs., Inc., 145 A.3d 969, 983 (Del.

2024In May 2021, about a month before her last (Nautic Zoom invite to James for Aug. 25, 2020 meeting); JX 196 (James forwarding the Zoom invite to his personal email address). 353 Beard Rsch., 8 A.3d at 602 (citing Summagraphics, 425 A.2d at 965 ). 354 James Tr. 1051; see Walker Tr. 1516-19, 1521-24. 355 Anthony Tr. 694-701; Coltharp Tr. 404-05; Schuppan Tr. 1736-42, 1800-01; cf. United States v. Contorinis, 692 F.3d 136, 143-44 (2d Cir. 2012) (holding that confirmation a board was actively considering a strategic review was material non-public information).