Thursday, November 21, 2013

Aronson v. Lewis case brief

Aronson v. Lewis case brief summary
473 A.2d 805 (1984)

Defendant directors appealed a decision in favor of plaintiff shareholder from the Court of Chancery (Delaware) which held that plaintiff sufficiently alleged a complaint of demand futility under Del. Ch. Ct. R. 23.1.

Plaintiff shareholder alleged that certain transactions conducted by defendant directors in connection with a subsidiary corporation violated the business judgment rule. Specifically, plaintiff asserted that defendants involved the corporation in providing unjustified benefits to a financial consultant. Defendants responded by moving to dismiss the claim in its entirety. The chancery court denied the motion and held that under Del. Ch. Ct. R. 23.1, plaintiff successfully alleged demand futility in that he allowed defendants to correct the alleged wrong.

  • The court reversed and remanded, holding that plaintiff's failure to allege facts implicating director bias, lack of independence, or involvement in activities contrary to corporate interest acted as a bar to meeting the requirement of demand futility. 
  • Accordingly, plaintiff was granted an opportunity to amend his complaint.

The court reversed and remanded to the chancery court, holding that plaintiff's complaint alleging demand futility was fatally deficient since he did not allege sufficient facts to implicate defendant directors for bias. Plaintiff was thus allowed to amend his complaint.

Recommended Supplements for Corporations and Business Associations Law

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