Wachtell Lipton Discusses Delaware Supreme Court’s New Demand Futility Test

In what promises to be a landmark decision, the Delaware Supreme Court last week reframed the rules governing derivative litigation.  United Food & Commercial Workers Union v. Zuckerberg, No. 404, 2020 (Del. Sept. 23, 2021).

A Facebook stockholder sued current and former directors to recover costs the company had incurred in connection with a proposed stock reclassification.  The Court of Chancery dismissed the suit, finding that the plaintiff had failed to establish that at least half of the current directors were incapable of independently evaluating whether to pursue the suit.

The Delaware Supreme Court affirmed.  Writing for the … Read more