Title: Orrock v. Appleton Shareholder derivative action

State: idaho

Issuer: Idaho Supreme Court (civil)

Document:

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Appeal from the Fourth Judicial District of the State of Idaho, Ada County.  Hon. 
Darla Williamson, District Judge. 
 
 
The decision of the district court is affirmed. 
 
Rossman Law Group, Boise, and Robins Umeda, San Diego, California, for 
appellant.  Mark Umeda argued. 
 
Greener, Burke & Shoemaker, Boise, Douglas W. Greene, Seattle, Washington, 
and Davie Lansky, Palo Alto, California,  for respondents.  Barry Kaplan argued. 
____________________________________ 
 
 
W. JONES, Justice 
 
This case stems from a shareholder derivative action filed by Scott Orrock (Orrock) on 
behalf of Micron Technology, Inc. (Micron) against the officers and directors of Micron.  The 
complaint alleged that some of the officers and directors violated state law, breached their 
fiduciary duties, abused their control, engaged in gross mismanagement, wasted corporate assets 
and were unjustly enriched thereby causing substantial loss and damages to Micron.  The district 
court dismissed the action pursuant to I.R.C.P. 12(b)(6) for failure to state a claim upon which 
relief may be granted.  Orrock appeals to this Court. 
IN THE SUPREME COURT OF THE STATE OF IDAHO 
 
 
Docket No.  35064 
 
SCOTT ORROCK, derivatively on behalf of 
MICRON TECHNOLOGY, INC. 
 
                                    Plaintiff/Appellant,                                                                                     
v.                                                       
                                                         
STEVEN R. APPLETON, WILBUR G. 
STOVER, JR., MICHAEL W. SADLER, 
JAMES W. BAGLEY, ROBERT A. 
LOTHROP, GORDON C. SMITH, 
WILLIAM P. WEBER, THOMAS T. 
NICHOLSON and  DON J. SIMPLOT, 
                                                        
                                  Defendants/Respondents.                                    
                                                          
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Boise, June 2009 Term of Court 
 
2009 Opinion No. 100 
 
Filed:  July 16, 2009 
 
Stephen W. Kenyon 
 
 
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FACTUAL AND PROCEDURAL BACKGROUND 
 
The complaint generally alleges that members of the Micron board and Micron officers 
were engaged in a scheme to manipulate the price of Dynamic Random Access Memory 
(DRAM) products.  Orrock brought this derivative action for injuries suffered as a result of 
breaches of fiduciary duty, abuse of control, gross mismanagement, waste of corporate assets and 
unjust enrichment, and aiding and abetting thereof.  Orrock names Steven R. Appleton 
(Appleton), Wilbur G. Stover, Jr. (Stover), Michael W. Sadler (Sadler), James W. Bagley 
(Bagley), Robert A. Lothrop (Lothrop), Gordon C. Smith (Smith), William P. Weber (Weber), 
Thomas T. Nicholson (Nicholson), and Don J. Simplot (Simplot) as defendants in this action.  
Prior to filing a shareholder derivative action the plaintiff must demand that the board of the 
corporation take action.  A derivative action may not be maintained unless the plaintiff can show 
that demand would be futile.  The district court found that Orrock had failed to sufficiently plead 
facts showing that demand on the board would have been futile.  Therefore, the district court 
dismissed this action pursuant to I.R.C.P. 12(b)(6) for failure to state a claim upon which relief 
may be granted. 
The third amended complaint alleged the following facts1 in relation to whether demand 
on the board would be futile: 
 
Micron is a manufacturer of memory technology and produces DRAM products.  DRAM 
constitutes 95% of Micron‟s revenue.  Appleton, Bagley, Lothrop, Smith and Weber served on 
the Board during the relevant period.2  These five members constitute a majority of the Board. 
 
A Micron representative, in a 2001 email, stated that Micron would “be increasing prices 
to all of the [Original Equipment Manufacturer] customers.” 
 
The Department of Justice (DOJ) issued a federal grand jury subpoena to Micron 
demanding documents relating to the pricing and sales of DRAM chips.  In response to the 
DOJ‟s subpoena Appleton, Bagley, Lothrop, Smith and Weber allowed Micron to alter 
handwritten notes and other documents relating to the pricing and sales of DRAM products.  In 
November of 2004 Appleton responded to the allegations and investigation by publicly stating 
that it was “not possible to control prices in [the DRAM] industry” and that the DOJ‟s 
                                                 
1 Any conclusory statements are not listed in order to evaluate whether sufficient facts were pled to support the 
allegation that demand on the board would have been futile. 
2 The “Relevant Period” is defined as February 2001 to the present. 
 
3 
investigation was merely “theoretical.”  Micron would be subject to billions of dollars in liability 
for any violations of applicable securities and antitrust laws. 
 
Sadler met with CEO‟s of DRAM manufacturing companies and discussed cutting 
DRAM production.  In October 2001, Sadler traveled to Munich, Tokyo, Taiwan and Seoul.  
Appleton had knowledge of Sadler‟s actions.  Appleton scheduled a visit to Munich to meet with 
the CEO‟s of Infineon and Samsung regarding cut backs in DRAM production.3  In June 2002, 
Appleton, Bagley, Lothrop, Smith and Weber were aware that Micron was likely involved in the 
DRAM price-fixing conspiracy based on the DOJ‟s announcement and investigation into 
Micron‟s role and numerous news articles in the Idaho Statesman, the New York Times, and the 
Wall Street Journal.  The Articles collectively contain the following information: (1) the CEO of 
Dell Computers blamed the skyrocketing prices of memory chips on “cartel-like behavior by a 
couple of DRAM suppliers;” (2) industry experts believed the DOJ investigation to be focused 
on “companies artificially pushing prices up;” (3) Micron was being investigated by a grand jury 
for anticompetitive practices which implied that criminal charges may follow; (4) Micron cut 
DRAM supply by 20% between September 2001 and March 2002, which is one of the most 
dramatic cuts made by a DRAM manufacturer; (5) DRAM prices were on average $1.97 each in 
the fourth quarter of “last year” and  $4.50 each in the first quarter of 2002; (6) the vice president 
of Mosel-Vitelic “confirmed that his company had reached an agreement with Hynix and 
Samsung Electronics to push up DRAM prices to $3 a chip by stopping dumping of the chip;” 
and (7) twenty-six class action lawsuits had been filed naming Micron as a defendant with 
allegations of secrecy and conspiracy to fix memory prices.  Micron‟s Board took no 
investigatory action in response to these allegations by the news sources.  Specifically, Appleton, 
Bagley, Lothrop, Smith and Weber conducted no investigation as to whether any of Micron‟s 
employees were involved in the alleged conspiracy or whether Micron would be subjected to 
liability if such a conspiracy existed. 
 
Forbes magazine called Appleton the “worst performing boss in America.”  Forbes listed 
Appleton‟s annual compensation based on a six-year average at $7.8 million despite an overall 
decrease in Micron‟s stock. 
 
Micron has an on-going business relationship with Lam Research Corporation (Lam) for 
semiconductor manufacturing equipment and related services.  Over a five-year period Micron 
                                                 
3 The wording in the complaint indicates that this trip never occurred. 
 
4 
paid Lam $326.5 million for semiconductor manufacturing equipment and related services.  
Bagley is the current Executive chairman and former CEO of Lam.  Mercedes Johnson 
(Johnson)4 served as Senior Vice President of Finance for Lam. 
 
Lothrop, Smith and Simplot were business associates at the J.R. Simplot Company which 
is an agribusiness company.  Lothrop served as Senior Vice President from 1986-1991.  Smith 
served in various management positions from 1980-1994, including three years as President and 
CEO and seven years as CFO.  Simplot served as President of Simplot Financial Corporation 
from 1985-1992, which is a wholly owned subsidiary of the J.R. Simplot Company.  Simplot has 
also worked for the J.R. Simplot Company since 1955 in various capacities, including director. 
 
Smith had access to internal corporate documents, conversations and other non-public 
information.  While in possession of this information Smith sold 10,000 shares of Micron stock 
for proceeds of $352,400.5  On July 20, 2007, Smith made certain accusatory statements to the 
Idaho Statesman, such as: (1) Micron is in need of new management and potentially a new 
Board; (2) this “change at the top” should have been made a long time ago; (3) the Board was 
not prepared to make any necessary changes; (4) the Board is “very passive” and not “well-
informed;” (5) if the Board had been more “aggressive” and “inquiring” any damage caused to 
Micron due to faulty management could have been avoided; (6) Smith was equally at fault for his 
failure to timely speak out against Appleton and other members of the Board; and (7) the 
business relationship between Bagley and Lam is so strong that Bagley would not speak out 
against Appleton.  On July 25, 2007 Smith resigned from the Micron Board. 
 
The Governance and Compensation Committee at Micron reviews and approves the 
CEO‟s compensation.  This Committee is responsible for: (1) evaluating director and Board 
committee member compensation, (2) recommending the appropriate level of director 
compensation, (3) reviewing and approving corporate goals and objectives relevant to the CEO‟s 
compensation, (4) evaluating the CEO‟s performance in light of the goals and objectives, (5) 
determining the CEO‟s compensation level, (6) reviewing performance of the individual 
directors, (7) determining whether a director should be nominated for an additional term, and (8) 
oversight of the Board‟s evaluation of it‟s performance and the performance of management.  
Lothrop and Weber consist of two-thirds of the Governance and Compensation Committee. 
                                                 
4 Johnson was a board member at the time this complaint was filed, but not a named defendant in the action. 
5 Smith is one of the named directors accused by Orrock of engaging in illegal insider selling for proceeds obtained 
from the sale of Micron stock. 
 
5 
 
The Audit Committee is responsible for, (1) conducting a quarterly review of the 
Company‟s system of internal controls, and (2) periodically reviewing, along with Micron‟s 
General Counsel, Micron‟s compliance with legal and regulatory requirements.  Lothrop, Smith 
and Weber were all members of the Audit Committee at some point during the relevant period.6 
 
Smith and Weber have received an additional $10,000 in compensation for holding 
positions as chairmen of the Audit Committee and Governance and Compensation Committee.  
Bagley, Lothrop, Smith and Weber each receive an annual retainer of $50,000.7 
 
Appleton is primarily employed by Micron.  Over a five-year period Micron paid 
Appleton $1,268,128 in bonus compensation, $2,696,114 in salary, $851,900 in restricted stock 
awards and granted Appleton options to purchase 2,350,000 shares of stock.  Compensation for 
Appleton is determined by the Governance and Compensation Committee. 
 
Orrock further alleged that demand on the individual shareholders of Micron would be 
futile because, (1) Micron is a publicly held company with over 618 million shares outstanding, 
(2) such demand would be impossible because Orrock has no means to discover names, 
addresses or phone numbers of the shareholders, and (3) regardless if the shareholders could be 
discovered, demand would cause Orrock a huge expense. 
 
Orrock then alleges the following conclusions follow from the above stated facts: 
 
Demand on Appleton, Bagley, Lothrop, Smith and Weber would be futile because they 
each face a substantial likelihood of liability for their breaches of fiduciary duties to Micron as a 
result of their involvement and conduct relating to the price-fixing conspiracy.  Each of the 
above directors knew or consciously ignored Micron‟s role in the DRAM price-fixing conspiracy 
and took no action to prevent liability on behalf of Micron, thereby subjecting the named 
directors to personal liability.  As information developed as to the existence of a DRAM price-
fixing scheme the above named directors failed to investigate if employees were involved and 
failed to mitigate any damages on behalf of Micron. 
 
Demand on Lothrop, Smith and Weber would be futile because they would be subjected 
to liability pursuant to their roles on the Audit Committee.  The members of the Audit 
Committee may be subject to liability for breach of fiduciary duties of due care, loyalty and good 
                                                 
6 Orrock cites Micron‟s Proxy Statement as filed with the SEC as the source of this information. 
7 The pleadings do not indicate the purpose of this retainer. 
 
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faith because the Audit Committee failed to take action or prevent directors, officers or 
employees from engaging in DRAM price-fixing. 
 
Demand on Appleton, Bagley and Smith would be futile because they lack independence 
from Lothrop and Weber; as members of the Governance and Compensation Committee Lothrop 
and Weber determine each director‟s salary.  Appleton, Bagley and Smith lack independence 
because it would jeopardize their personal financial compensation.8  Demand on Bagley, 
Lothrop, Smith and Weber would be futile because they lack independence because of their 
interest in maintaining their positions on the Board and to preserve their substantial 
compensation. 
 
Demand on Bagley would be futile because he lacks independence in evaluating 
Appleton‟s behavior because of Bagley‟s business involvement with Lam and Lam‟s business 
relationship with Micron. 
 
Demand on a majority of the Board, that is Appleton, Bagley, Lothrop, Smith and Weber, 
would be futile because they have not exercised independent objective judgment in deciding 
whether to bring this action or whether to vigorously prosecute this action because its members 
are interested personally in the outcome because their actions have subjected Micron to liability, 
thereby subjecting themselves to personal liability.  The above individuals, due to their inter-
related business, professional and personal relationships, have conflicts of interest that prevent 
the Board from taking action on behalf of Micron. 
ISSUE ON APPEAL 
Whether the district court erred in granting defendant‟s motion to dismiss pursuant to 
I.R.C.P. 12(b)(6). 
STANDARD OF REVIEW 
 
Both parties state that Delaware law applies in this case because Delaware is the state of 
incorporation for Micron.  See Kamen v. Kemper Fin. Services, Inc., 500 U.S. 90, 101 (1991) 
(holding that the law of the state of incorporation generally governs the internal matters and 
governance of a corporation and that whether demand is required relates directly to the internal 
governance of the corporation); See also Sword v. Sweet, 140 Idaho 242, 246, 92 P.3d 492, 496 
(2004) (one of the factors used to determine the proper choice of law for contracting parties 
                                                 
8 In the complaint, Orrock lists the names of all the members of the Board who served at any point during the 
Relevant Period.  To prevent confusion, this opinion only discusses the members of the board named as defendants. 
 
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would be the state of incorporation).  However, the parties go a step further and state that 
Delaware employs a de novo review, and that is the appropriate standard of review for this case.9  
This Court declines to apply a foreign jurisdiction‟s procedural law regardless if we are applying 
that jurisdiction‟s substantive law.  See Sword, 140 Idaho at 247, 92 P.3d at 497 (where this 
Court applied Idaho‟s standard of review to the procedural aspect of the claim and Indiana‟s law 
for the substantive portions of the claim).  Therefore, Idaho law will dictate the procedural 
aspects of this case and Delaware law applies to the substantive claims. 
“[T]he following defenses shall be made by motion: . . . (6) to dismiss for failure of the 
pleading to state a claim upon which relief can be granted[.]”  I.R.C.P. 12(b)(6).  “In reviewing a 
ruling on a motion to dismiss for failure to state a claim upon which relief may be granted, the 
question is whether the non-movant has alleged sufficient facts in support of his claim, which if 
true, would entitle him to relief.”  Rincover v. Dep’t of Fin., 128 Idaho 653, 656, 917 P.2d 1293, 
1296 (1996).  This Court makes “every reasonable intendment” in order to “sustain a complaint 
against a motion to dismiss for failure to state a claim.”  Idaho Comm’n on Human Rights v. 
Campbell, 95 Idaho 215, 217, 506 P.2d 112, 114 (1973).  In a derivative action “[t]he complaint 
shall . . . allege with particularity the efforts, if any, made by the plaintiff to obtain the action 
which plaintiff desires from the directors . . . and the reasons for the plaintiff‟s failure to obtain 
the action or for not making the effort.”  I.R.C.P. 23(f) (emphasis added). 
ANALYSIS 
The district court did not err in granting defendant’s motion to dismiss pursuant to 
I.R.C.P. 12(b)(6). 
A stockholder‟s derivative action is an action brought by one or more 
stockholders of a corporation to enforce a corporate right or remedy a wrong to 
the corporation in cases where the corporation, because it is controlled by the 
wrongdoers or for other reasons fails and refuses to take appropriate action for its 
own protection. 
 
McCann v. McCann, 138 Idaho 228, 233, 61 P.3d 585, 590 (2002) (quoting 19 Am. Jur. 2d 
Corporations § 2250, 151-52 (1986)).  “To prevent abuse of [a shareholder derivative suit] . . . 
equity courts established as a precondition „for the suit‟ that the shareholder demonstrate „that 
the corporation itself had refused to proceed after suitable demand, unless excused by 
                                                 
9 Delaware does review the sufficiency of the pleadings in a stockholder derivative action de novo.  Brehm v. Eisner, 
746 A.2d 244, 253 (Del. 2000). 
 
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extraordinary conditions.‟”  Kamen, 500 U.S. at 95-96 (quoting Ross v. Bernhard, 396 U.S. 531, 
534, 1970)).  The demand requirement “affords the directors an opportunity to exercise their 
reasonable business judgment[.]”  Daily Income Fund, Inc. v. Fox, 464 U.S. 523, 533 (1984).  
“[T]he function of the demand doctrine in delimiting the respective powers of the individual 
shareholder and of the directors to control corporate litigation clearly is a matter of „substance,‟ 
not „procedure.‟”  Kamen, 500 U.S. at 96-97. 
 
Any factual allegations will be accepted as true, unless they are purely conclusory.  Rales 
v. Blasband, 634 A.2d 927, 931 (Del. 1993).  The test in a shareholder derivative action is 
whether the plaintiff alleged “particularized facts to creating a reasonable doubt that a majority 
of the Board would be disinterested or independent in making a decision on a demand.”  Id. at 
930.  To determine whether demand is futile the court must decide “whether, under the 
particularized facts alleged, a reasonable doubt is created that: (1) the directors are disinterested 
and independent [or] (2) the challenged transaction was otherwise the product of a valid exercise 
of business judgment.”  Brehm v. Eisner, 746 A.2d at 253-54 (citing Aronson v. Lewis, 473 A.2d 
805, 814 (Del. 1984) (overruled on other grounds)). 
 
Accepting all the facts alleged as true, Orrock insufficiently pled that demand on a 
majority of the Board at Micron would be futile.  The facts generally show that Appleton has a 
significant financial interest at stake in the matter and may be subjected to personal liability for 
his failure to act in light of allegations of Micron‟s involvement in price-fixing.  However, there 
are insufficient facts which tend to show that a majority of the other board members had 
knowledge of any DRAM price-fixing among DRAM manufacturers as reported in the news 
sources, that any of the board members consciously disregarded any of the “red flags,”10 or that 
the Board members failed to investigate or take remedial action.11 
Orrock did not request access to the books and records of Micron to investigate whether 
information existed within the company records which may tend to support his allegations.  A 
simple request for access to the company records might have indicated whether an investigation 
was in fact conducted by Micron‟s board or information was ignored by Micron‟s board, or 
whether Micron‟s board refuses access to the company records.  The complaint was insufficient 
                                                 
10 Orrock repeatedly referred to the “red flags” that should have warranted an investigation by the board as to 
whether Micron was engaged in any DRAM price-fixing scheme.  Those “red flags” consist of the newspaper 
articles, the DOJ investigation, and various other statements made to the public. 
11 Orrock alleges that the Board failed to investigate or take remedial action but does not state what, if any, action he 
took to discover what the Board may or may not have done in either regard. 
 
9 
to withstand an I.R.C.P. 12(b)(6) motion for failure to state a claim upon which relief may be 
granted.  Shareholder derivative actions require the plaintiff to plead with particularity; Orrock‟s 
third amended complaint insufficiently pled that demand on the Board would be futile. 
CONCLUSION 
 
For the foregoing reasons, this Court affirms the decision of the district court.  Costs to 
Respondent. 
 
Chief Justice EISMANN, Justices BURDICK and HORTON, CONCUR. 
 
J. JONES, J., specially concurring. 
 
I concur in the Court‟s opinion because, even after four tries, the plaintiff was unable to 
adequately plead that he was excused from the requirement of making demand upon the board of 
directors to take remedial action.  Several aspects of the plaintiff‟s case, particularly the timing 
aspects, present concerns that deserve mention.   
 
It must first be acknowledged that shareholder derivative actions provide a useful tool for 
redress where corporate management wastes corporate assets or otherwise harms the interests of 
the corporation.  However, the remedy is designed for sparing use and various mechanisms have 
been put in place to winnow out cases where shareholder complaints lack substance.  In order to 
pursue a case, the shareholder must allege particularized facts that management engaged in 
conduct detrimental to the corporation, that the shareholder owned stock in the corporation at the 
time of such conduct, that the shareholder made demand upon the directors to take remedial 
action, and that no such action was taken.  While Orrock pointed to conduct by certain 
management personnel that was clearly detrimental to Micron – the price-fixing which resulted 
in a number of civil damage actions being filed against Micron – he failed to state any facts that 
would (1) indicate the defendant directors had sufficient contemporaneous knowledge of the 
price-fixing activity to do anything about it before it ended, or (2) indicate the directors took no 
investigative or remedial action thereafter.  None of the four versions of the complaint say what, 
if any, action Orrock took between June of 2002, when it became generally known the 
Department of Justice (DOJ) was investigating allegations that Micron had participated in a 
price-fixing conspiracy, and March of 2006, when Orrock filed his initial complaint. 
 
According to Orrock‟s third amended complaint, when it became known in June of 2002 
that the DOJ was investigating Micron‟s possible involvement in fixing the price of DRAM 
chips, there was “no doubt” the defendant directors were aware that Micron was likely involved 
 
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in the DRAM price-fixing conspiracy.  He alleges that, notwithstanding such awareness, the 
directors did nothing to investigate or pursue remedial action.  It would seem that the price-fixing 
was over and done with by the time the directors should have become aware of it, based on 
Orrock‟s allegations, but at that point the directors could do nothing to put a stop to it.  The horse 
had escaped the barn.  The only course of action available to the directors at that time was to 
look into the facts, find out what management personnel may have done, and, if in the best 
interest of the company at that point, pursue remedial action against them.  The directors had a 
responsibility to investigate once the DOJ inquiry became known but Orrock provides nothing, 
other than speculation, to show that they did not do so.  He does not allege in any of the four 
versions of his complaint that he sought to obtain information from the corporation, to examine 
corporate records, or to otherwise determine what, if anything, the corporation was doing or had 
done.  One might expect that a concerned shareholder, reading the news articles generated by the 
DOJ investigation, would have taken some action or demanded that the board of directors 
investigate and attempt to rectify the wrongdoing sometime earlier than almost four years later, 
when Orrock filed his initial complaint.  If Orrock was, indeed, a concerned shareholder between 
June 2002 and March 2006, it would not have taken a great deal of effort to write up a summary 
of the news accounts and send it to the board of directors to demand remedial action. 
 
Making a demand pursuant to I.R.C.P. 23(f) is not an extremely onerous undertaking.  As 
we have explained: 
The demand on the directors need not assume a particular form nor need it be 
made in any special language.  However, the stockholder must make an earnest 
and sincere, and not a feigned or simulated, effort to induce the directors to take 
remedial action in the corporate name.  Statements should be presented to the 
directors showing the wrong complained of, accompanied by sufficient 
responsible data which will enable the directors to determine whether litigation 
could be engaged in with some hope of success.  The shareholder must state facts, 
not mere general charge and conclusions. 
 
The demand should give the directors a fair opportunity to initiate the action 
which the shareholder wants to undertake, and name the potential defendants, as 
well as the shareholder making the demand.  
 
McCann v. McCann, 138 Idaho 228, 235, 61 P.3d 585, 592 (2002) (quoting 19 Am. Jur. 2d 
Corporations § 2278, 173-74 (1986)).   
 
The Delaware Supreme Court explains the purpose of making such a demand: 
 
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The demand requirement serves a salutary purpose.  First, by requiring exhaustion 
of intracorporate remedies, the demand requirement invokes a species of 
alternative dispute resolution procedure which might avoid litigation altogether.  
Second, if litigation is beneficial, the corporation can control the proceedings.  
Third, if demand is excused or wrongfully refused, the stockholder will normally 
control the proceedings. 
 
The jurisprudence of Aronson [v. Lewis, 473 A.2d 805 (Del. 1984)]  and its 
progeny is designed to create a balanced environment which will: (1) on the one 
hand, deter costly, baseless suits by creating a screening mechanism to eliminate 
claims where there is only a suspicion expressed solely in conclusory terms; and 
(2) on the other hand, permit suit by a stockholder who is able to articulate 
particularized facts showing that there is a reasonable doubt either that (a) a 
majority of the board is independent for purposes of responding to the demand, or 
(b) the underlying transaction is protected by the business judgment rule. 
 
Brehm v. Eisner, 746 A.2d 244, 255 (Del. 2000) (quoting Grimes v. Donald, 673 A.2d 1207, 
1216-17 (Del. 1996)).   
 
So, the demand is necessary in order to give the board of directors the opportunity to do 
the right thing.  There is no indication as to what kept Orrock from making a demand, even at the 
late date he decided to take action against Micron‟s management.  In order to survive a motion to 
dismiss, it was Orrock‟s obligation to particularly allege the efforts he made to obtain the action 
which he desired from the directors and the reasons for his failure to obtain the action.  I.R.C.P. 
23(f).  While he cited articles that appeared in the media and speculated about what the board 
may or may not have done, he did not allege he took any action whatsoever to find out what the 
facts were or to get the directors to do something about it. 
 
The question also arises as to what action the directors might have taken when it became 
known that corporate management personnel had been involved in the DRAM price-fixing 
conspiracy.  Investigation by the directors was obviously required; their fiduciary obligations 
would have dictated that they search out the facts.  The complaint contains no fact-based 
allegation showing they failed to do so.  Orrock‟s complaint indicates that Micron suffered 
substantial damage because of the dozens of civil anti-trust lawsuits brought against it.  No doubt 
that is so.  Orrock‟s complaint assumes that the only remedial action the directors could have 
taken was to file suit against corporate management personnel who took part in the price-fixing 
conspiracy. However, the directors may have concluded that taking action against the responsible 
management personnel would have aggravated the situation, providing additional fodder to those 
 
12 
seeking anti-trust damages against the company.  In other words, the best strategy to protect 
Micron‟s interests, after the misconduct became known, may have been to hunker down until the 
litigation storm blew over.  Because Orrock apparently made no effort to find out what the 
directors may or may not have done to protect the company‟s interests and since we are provided 
with no particularized facts indicating that the directors did absolutely nothing, we can only 
speculate.  With no factual allegations indicating to the contrary, the business judgment rule 
presumes the directors‟ actions were in Micron‟s interest.   
 
Another difficulty with the complaint relates to the requirement that a shareholder 
derivative plaintiff allege he was a shareholder “at the time of the transaction of which the 
plaintiff complains.”  I.R.C.P. 23(f).  In his four versions of the complaint, Orrock merely alleges 
that he “is, and was at times relevant hereto, an owner and holder of Micron common stock.”  
The complaints define a “Relevant Period” as being February 2001 to the “present”, but do not 
allege Orrock was a shareholder during that defined period.  The actual period in which Orrock 
appears to allege the defendant directors failed to take action to investigate and remediate the 
price-fixing was June 2002 to March 2006.  It would have been easy enough to allege that this 
was the time period during which Orrock owned Micron stock.  Since a derivative action is only 
available to a person who was a shareholder at the time of the transaction that is complained of in 
the complaint, it is not asking too much that the shareholder wishing to pursue a derivative action 
assert, affirmatively, that he held the stock during that period of time.   
 
Orrock‟s failure to affirmatively allege his ownership of Micron stock during the 
“Relevant Period”, combined with the almost four years that elapsed between disclosure of the 
DOJ investigation and the filing of the initial complaint, gives the appearance of a Johnny-come-
lately lawsuit where the decision to sue was made only after most of the facts relating to the 
price-fixing conspiracy had become known and the time to make an effective demand for redress 
had long passed.  Again, without the necessary factual allegations, one can only speculate.   
 
The derivative action provides shareholders a useful and necessary avenue of redress 
where corporate management acts contrary to the interests of the corporation.  However, a 
shareholder pursuing this course must observe the limitations designed to prevent misuse of the 
derivative action.  Among other things, the shareholder must first give management the 
opportunity to correct the misconduct, unless excused for some lawful reason.  Here, Orrock 
simply has not made the necessary fact-based allegations, even after three amended versions of 
 
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the initial complaint, to show that he should be excused from making a demand.  Thus, the 
district court acted properly in dismissing the case.