Zuckerberg test in Delaware

2025A. Material Personal Benefit Under prong one of the Zuckerberg test, a director is disabled for demand futility purposes if the director received a material personal benefit from the 29 Id. at 1059 (quoting Zuckerberg I, 250 A.3d at 890). 30 Id. 31 Id.

2025A. Material Personal Benefit Under prong one of the Zuckerberg test, a director is disabled for demand futility purposes if the director received a material personal benefit from the 29 Id. at 1059 (quoting Zuckerberg I, 250 A.3d at 890). 30 Id. 31 Id.

2025In this case, therefore, the Zuckerberg analysis hinges on whether Plaintiff has stated a claim under Rule 12(b)(6) against the Demand Board members. “[T]he governing pleading standard in Delaware to survive a motion to dismiss is reasonable ‘conceivability.’”56 When considering such a motion, the court must 54 In re INFOUSA, Inc. S’holders Litig., 953 A.2d 963 , 989-90 (Del. Ch. 2007) (“Plaintiffs must show that a majority—or in a case where there are an even number of directors, exactly half—of the board was incapable of considering demand.”). 55 Plaintiff also raises first and third prong Z

2025In this case, therefore, the Zuckerberg analysis hinges on whether Plaintiff has stated a claim under Rule 12(b)(6) against the Demand Board members. “[T]he governing pleading standard in Delaware to survive a motion to dismiss is reasonable ‘conceivability.’”56 When considering such a motion, the court must 54 In re INFOUSA, Inc. S’holders Litig., 953 A.2d 963 , 989-90 (Del. Ch. 2007) (“Plaintiffs must show that a majority—or in a case where there are an even number of directors, exactly half—of the board was incapable of considering demand.”). 55 Plaintiff also raises first and third prong Z

2025Myopically focusing on the profits a board made selling stock, without regard to the circumstances, would lower the bar to Brophy liability and upset the “incentive[s] that holding company stock provides directors.”226 226 Zimmerman v. Braddock, 2005 WL 2266566 , at *7 (Del. Ch. Sept. 8, 2005) (“Not permitting directors adequate opportunities . . . to liquidate their holdings (or placing potential insider trading liability upon them without sufficient allegations of fault) destroys the very incentive that holding company stock provides directors.”), rev’d on other grounds, 906 A.2d 776 (Del. 2

2025Myopically focusing on the profits a board made selling stock, without regard to the circumstances, would lower the bar to Brophy liability and upset the “incentive[s] that holding company stock provides directors.”226 226 Zimmerman v. Braddock, 2005 WL 2266566 , at *7 (Del. Ch. Sept. 8, 2005) (“Not permitting directors adequate opportunities . . . to liquidate their holdings (or placing potential insider trading liability upon them without sufficient allegations of fault) destroys the very incentive that holding company stock provides directors.”), rev’d on other grounds, 906 A.2d 776 (Del. 2

2025See In re: Amendments to Rules 7, 10, 17-25, and 171 of the Court of Chancery Rules, Sections, III, IV, and XVI (Del. Ch. Sept. 25, 2023) (ORDER). 38 Braddock v. Zimmerman, 906 A.2d 776, 786 (Del. 2006). 39 See Harris v. Carter, 582 A.2d 222, 231 (Del. Ch. 1990) (“When claims have been properly laid before the court and are in litigation, neither Rule 23.1 nor the policy it implements requires that a court decline to permit further litigation of those claims upon the replacement of the interested board with a disinterested one.”); Park Empls.’ & Ret.

2025See In re: Amendments to Rules 7, 10, 17-25, and 171 of the Court of Chancery Rules, Sections, III, IV, and XVI (Del. Ch. Sept. 25, 2023) (ORDER). 38 Braddock v. Zimmerman, 906 A.2d 776, 786 (Del. 2006). 39 See Harris v. Carter, 582 A.2d 222, 231 (Del. Ch. 1990) (“When claims have been properly laid before the court and are in litigation, neither Rule 23.1 nor the policy it implements requires that a court decline to permit further litigation of those claims upon the replacement of the interested board with a disinterested one.”); Park Empls.’ & Ret.

2025The Rule 12(b)(6) standard in Delaware “is reasonable ‘conceivability.’”50 When considering such a motion, the court must “accept all well-pleaded factual allegations in the [c]omplaint as true . . . , draw all reasonable inferences in favor of the plaintiff, and deny the motion unless the plaintiff could not recover under any reasonably conceivable set of circumstances susceptible of proof.”51 The court, however, need not “accept conclusory allegations unsupported by specific facts or . . . draw unreasonable inferences in favor of the non-moving party.”52 48 See Grabski on behalf of Coinbase

2025The Rule 12(b)(6) standard in Delaware “is reasonable ‘conceivability.’”50 When considering such a motion, the court must “accept all well-pleaded factual allegations in the [c]omplaint as true . . . , draw all reasonable inferences in favor of the plaintiff, and deny the motion unless the plaintiff could not recover under any reasonably conceivable set of circumstances susceptible of proof.”51 The court, however, need not “accept conclusory allegations unsupported by specific facts or . . . draw unreasonable inferences in favor of the non-moving party.”52 48 See Grabski on behalf of Coinbase

2025Yet a strict application of the Zuckerberg test yields a counterintuitive result.32 As Brola concedes, any disabling conflict rests only on the second prong: whether 27 See Pogostin v. Rice, 480 A.2d 619, 624 (Del. 1984) (“[T]he requirement of [Court of Chancery] Rule 23.1 exists at the threshold to prevent abuse and to promote intercorporate dispute resolution.”), overruled on other grounds by, Brehm v. Eisner, 746 A.2d 244 (Del. 2000). 28 See United Food & Com.

2025Yet a strict application of the Zuckerberg test yields a counterintuitive result.32 As Brola concedes, any disabling conflict rests only on the second prong: whether 27 See Pogostin v. Rice, 480 A.2d 619, 624 (Del. 1984) (“[T]he requirement of [Court of Chancery] Rule 23.1 exists at the threshold to prevent abuse and to promote intercorporate dispute resolution.”), overruled on other grounds by, Brehm v. Eisner, 746 A.2d 244 (Del. 2000). 28 See United Food & Com.

2025Plaintiff alleges that each of the Demand Board members who approved the Public Offering—Paradise, Chafkin, and Wakeford—face a substantial likelihood of 44 See In re MultiPlan Corp. S’holders Litig., 268 A.3d 784 , 813 (Del. Ch. 2022) (“A greater than half-million-dollar payout is presumptively material at the motion to dismiss stage.”); Orman v. Cullman, 794 A.2d 5, 31 (Del. Ch. 2002) (“I think it would be naïve to say, as a matter of law, that $3.3 million is immaterial.”); see also Coinbase, 2024 WL 390890 , at *7 (observing that a presumptively material gain from challenged stock sale is

2025Plaintiff alleges that each of the Demand Board members who approved the Public Offering—Paradise, Chafkin, and Wakeford—face a substantial likelihood of 44 See In re MultiPlan Corp. S’holders Litig., 268 A.3d 784 , 813 (Del. Ch. 2022) (“A greater than half-million-dollar payout is presumptively material at the motion to dismiss stage.”); Orman v. Cullman, 794 A.2d 5, 31 (Del. Ch. 2002) (“I think it would be naïve to say, as a matter of law, that $3.3 million is immaterial.”); see also Coinbase, 2024 WL 390890 , at *7 (observing that a presumptively material gain from challenged stock sale is

2023The stockholder must satisfy Rule 23.1 and the Zuckerberg test with particularity.134 Even when a stockholder clears those hurdles and obtains 131 Triton Const., 2009 WL 1387115 , at *23; Metro Storage, 275 A.3d at 844 (footnote and citation omitted); 3 Am. Jur. 2d Agency § 214. 132 Restatement (Third) of Agency §§ 8.09-8.10 (2006). 133 Id. § 8.10 cmt. b. 134 See, e.g., supra note 88 and accompanying text; In re Citigroup Inc. S’holder Deriv.

2023The stockholder must satisfy Rule 23.1 and the Zuckerberg test with particularity.134 Even when a stockholder clears those hurdles and obtains 131 Triton Const., 2009 WL 1387115 , at *23; Metro Storage, 275 A.3d at 844 (footnote and citation omitted); 3 Am. Jur. 2d Agency § 214. 132 Restatement (Third) of Agency §§ 8.09-8.10 (2006). 133 Id. § 8.10 cmt. b. 134 See, e.g., supra note 88 and accompanying text; In re Citigroup Inc. S’holder Deriv.

2023Litig., 964 A.2d 106, 120 (Del. Ch. 2009) (“The pleadings, however, are held to a higher 36 authority over a derivative claim, her control over the claim terminates when the claim is monetized.

2023Litig., 964 A.2d 106, 120 (Del. Ch. 2009) (“The pleadings, however, are held to a higher 36 authority over a derivative claim, her control over the claim terminates when the claim is monetized.