Ariel J. Deckelbaum is a partner and deputy chair of the Corporate Department at Paul, Weiss, Rifkind, Wharton & Garrison LLP. This post is based on a Paul Weiss client memorandum by Mr. Deckelbaum, Justin G. Hamill, Stephen P. Lamb, Jeffrey D. Marell, Frances Mi, and Matthew D. Stachel. This post is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.
In Delaware County Employees Retirement Fund, et al. v. Sanchez, et al., the Delaware Supreme Court held that stockholder plaintiffs in a derivative action adequately alleged facts to support a pleading-stage inference that a director was not independent from an interested director due to their close, 50-year friendship and significant business relationships consistent with that friendship. The court thus reversed the Delaware Court of Chancery’s holding on the defendants’ motion to dismiss that the plaintiffs had failed to adequately plead demand excusal. The court emphasized that Delaware courts must analyze all the particularized facts pled by the plaintiffs “in their totality and not in isolation from each other.”