Derivative Claims of Improper Demand Refusal for Grossly Negligent Investigations and Bad Faith Must Be Adequately Pled
By: Megan Wotherspoon and Calvin Kennedy
The court found that a board of directors’ decision to refuse demand in connection with a stockholder derivative claim satisfies the business judgment rule if the board’s investigation is reasonable and the board acts in good faith. By this opinion, the court granted the defendants’ motion to dismiss under Court of Chancery Rule 23.1 in light of plaintiff’s failure to adequately plead improper demand refusal.