To properly plead demand futility, as required by FRCP 23.1 and Delaware law, a plaintiff must allege specific facts that support an inference of conscious inaction by each of a majority of the corporation’s directors. In other words, a derivative complaint must plead facts specific to each director, demonstrating that at least half of them could not have exercised disinterested business judgment in responding to a demand. Here, the complaint failed to meet that tough standard. Alleging that high corporate officers (who were not directors) were part of the antitrust conspiracy to avoid poaching employees from other high tech companies was insufficient to show that directors knew of the conspiracy. There was no evidence to show that the corporation’s CEO shared his knowledge of the conspiracy with other directors. Finally, no inference of knowledge of the conspiracy could be drawn from the fact that employment issues were discussed at a board of directors meeting in connection with an acquisition of the company that first engaged in the conspiracy.
Ninth Circuit Court of Appeals (Smith, M., J.); December 26, 2018; 2018 U.S. App. LEXIS 36461