IN THE SUPREME COURT OF THE STATE OF DELAWARE

ERNESTO ESPINOZA, derivatively 

on behalf of JPMorgan Chase & Co.,

Plaintiff-Appellant,

v.

JAMES DIMON, DOUGLAS L. 

BRAUNSTEIN, MICHAEL J. 

CAVANAGH, ELLEN V. FUTTER, 

JAMES S. CROWN, DAVID M. 

COTE, LABAN P. JACKSON, JR., 

CRANDALL C. BOWLES, JAMES 

A. BELL, LEE R. RAYMOND, 

STEPHEN B. BURKE, WILLIAM 

C. WELDON, INA R. DREW, 

DAVID C. NOVAK,

Defendants-Appellees,

and

JPMORGAN CHASE & CO., 

Nominal Defendant-Appellee.

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§ No. 425, 2015

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§ Certification of Question of Law

§ from the United States Court of 

§ Appeals for the Second Circuit 

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§ Docket No. 14-754

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Submitted: August 13, 2015

Decided: September 15, 2015

Before STRINE, Chief Justice; HOLLAND, VALIHURA, VAUGHN and 

SEITZ, Justices, constituting the Court en Banc.

Upon Certification of Question of Law from the United States Court of Appeals for 

the Second Circuit: CERTIFIED QUESTION GRANTED.

STRINE, Chief Justice:
1

This Court has received the request from our distinguished colleagues on the 

United States Court of Appeals for the Second Circuit to answer the following 

question:

If a shareholder demands that a board of directors investigate both an 

underlying wrongdoing and subsequent misstatements by corporate 

officers about that wrongdoing, what factors should a court consider 

in deciding whether the board acted in a grossly negligent fashion by 

focusing its investigation solely on the underlying wrongdoing?1

The inspiration for this question is a contention by the plaintiffs in this case 

that they made a demand that the board of JPMorgan Chase & Co. investigate two 

related issues regarding a high-profile situation, what the Second Circuit has called

the ―London Whale debacle.‖2

According to the Second Circuit, these issues were: 1) the failure of 

JPMorgan‘s risk management policies to prevent the trading that resulted in 

corporate losses; and 2) supposed false and misleading statements made by 

JPMorgan management in the wake of the emergence of the problem. According 

to the plaintiffs, the investigative committee of the JPMorgan board only made 

findings as to the former issue3although the defendants in their brief take issue 

with that, by arguing that what management knew when it made disclosures was 

 

1

Espinoza ex rel. JPMorgan Chase & Co. v. Dimon, __ F.3d __, 2015 WL 4747068, at *11 (2d 

Cir. Aug. 12, 2015).

2

Id. at *1 (―This derivative action is one of many to arise out of the  ̳London Whale‘ trading 

debacle, which cost JPMorgan Chase billions.‖).

3 Brief and Special Appendix for Plaintiff-Appellant at 36, Espinoza ex rel. JPMorgan Chase & 

Co. v. Dimon, __ F.3d __, 2015 WL 4747068 (2d Cir. Aug. 12, 2015).
2

the subject of several pages of the report.4 What does appear undisputed is that the 

committee was comprised entirely of independent directors, was advised by

experts of its own choosing, and conducted a detailed investigation, involving the 

review of massive amounts of materials and the conduct of many witness 

interviews, culminating in the issuance of a detailed report explaining why it 

recommended refusal of the demand.5

We appreciate our colleagues‘ concern about applying principles of 

Delaware law with fidelity and their willingness to ask for our input.6In fact, we 

were honored to answer two prior requests from our colleagues on the Second 

Circuit within the past year.7In that same spirit, we accept our colleagues‘ current 

request for certification and we will try to be as helpful as we can, consistent with 

the careful and precise manner in which the tool of answering certified questions of 

law should be employed. The Delaware Supreme Court rule that governs our 

 

4 Brief for Defendants-Appellees at 35, Espinoza ex rel. JPMorgan Chase & Co. v. Dimon, __ 

F.3d __, 2015 WL 4747068 (2d Cir. Aug. 12, 2015).

5

Espinoza, __F.3d at __, 2015 WL 4747068, at *2–3.

6

The Delaware Constitution grants our Court jurisdiction to consider certified questions of law. 

Del. Const. art. IV, § 11(8) (granting the Delaware Supreme Court jurisdiction ―[t]o hear and 

determine questions of law certified to it by . . . a Court of Appeals of the United States . . . 

where it appears to the Supreme Court that there are important and urgent reasons for an 

immediate determination of such questions by it. The Supreme Court may, by rules, define 

generally the conditions under which questions may be certified to it and prescribe methods of 

certification.‖).

7

See NAF Holdings, LLC v. Li & Fung (Trading) Ltd., __ A.3d __, 2015 WL 3896792 (Del. 

June 24, 2015); Official Comm. of Unsecured Creditors of Motors Liquidation Co. v. JPMorgan 

Chase Bank, N.A., 103 A.3d 1010 (Del. 2014). 
3

consideration of certified questions of law is Rule 41.

8

 Because this tool can cause 

more harm than benefit if not used with precision, Rule 41(b) contemplates that a 

certification will pose a specific question of law, based on a stipulated set of facts.9 

This approach allows us to focus on a relevant question of Delaware law against 

the backdrop of established facts, which are not the subject of dispute among the 

parties. The certification request before us is not tailored in that way. As a result, 

we will endeavor to be as helpful as we can be without risking giving overbroad 

and potentially misleading guidance because of the absence of stipulated facts, 

against which a precisely tailored question is framed. Indeed, in providing an 

answer, we feel obliged to decline to answer the question as formulated or to try to 

reformulate the question more narrowly. Instead, we provide these thoughts and 

an explanation of why we do not go further.

In our view, Delaware law on the relevant topic is settled, and requires that 

the decision of an independent committee to refuse a demand should only be set 

aside if particularized facts are pled supporting an inference that the committee, 

despite being comprised solely of independent directors, breached its duty of 

loyalty, or breached its duty of care, in the sense of having committed gross 

 

8

See Supr. Ct. R. 41(a)(ii) (allowing a United States Court of Appeals to certify a question of 

law to the Delaware Supreme Court).

9

See Supr. Ct. R. 41(b) (―A certification will not be accepted if facts material to the issue 

certified are in dispute.‖); DONALD J. WOLFE, JR. & MICHAEL A. PITTENGER, CORPORATE AND 

COMMERCIAL PRACTICE IN THE DELAWARE COURT OF CHANCERY § 14.07, at 14-14 (Matthew 

Bender & Co. 2013) (―The question must truly be one of law, as Rule 41(b) expressly prohibits 

certification if facts material to the issue are disputed.‖). 
4

negligence.10 The burden to plead gross negligence is a difficult one, particularly 

when, as seems to be undisputed here, the independent committee did a timeconsuming investigation with the advice of its own advisors, and prepared a 

detailed written report of its investigation.

Under Delaware law, the determination of what constitutes gross negligence 

in the circumstances by definition requires a review of the relevant circumstances 

facing the directors charged with acting.11 In the typical case, our Court, albeit

acting under a de novo standard of review, would have the benefit of a 

determination by our Court of Chancery as to whether the plaintiff pled facts that 

support an inference that the independent board committee acted with gross 

negligence. If the contention of gross negligence was founded on the proposition 

that the committee ignored a material aspect of the demand letter, we would have 

 

10 ―[T]o survive a motion to dismiss, the plaintiff stockholder asserting wrongful refusal of a 

demand must allege with particularity in the complaint facts that give rise to a reasonable doubt 

as to the good faith or reasonableness of that investigation.‖ WOLFE & PITTENGER, supra note 9, 

§ 9.02[b][3], at 9-108; see also Levine v. Smith, 591 A.2d 194, 207 (Del. 1991); Spiegel v. 

Buntrock, 571 A.2d 767, 777 (Del. 1990) (―[W]hen a board refuses a demand, the only issues to 

be examined are the good faith and reasonableness of its investigation.‖); Mt. Moriah Cemetery 

ex rel. The Dun & Bradstreet Corp. v. Moritz, 1991 WL 50149, at *4 (Del. Ch. Apr. 4, 1991), 

aff’d, 599 A.2d 413 (Del. 1991) (internal citations omitted) (―In deciding whether directors have 

made an informed decision, the standard is gross negligence. Thus, the alleged deficiencies in 

the [committee‘s] investigation must rise to the level of gross negligence if the directors‘ 

decision is to be condemned as uninformed.‖); Thorpe v. CERBCO, Inc., 611 A.2d 5, 11 (Del. 

Ch. 1991).

11 See Brehm v. Eisner, 746 A.2d 244, 259 (Del. 2000); Aronson v. Lewis, 473 A.2d 805, 812 

(Del. 1984); 1 R. FRANKLIN BALOTTI & JESSE A. FINKELSTEIN, THE DELAWARE LAW OF 

CORPORATIONS & BUSINESS ORGANIZATIONS § 4.15[A], at 4-111 (3d ed. 2014) (observing that in 

the decision-making context, which is governed by a gross negligence standard, ―the inquiry is 

necessarily fact-specific‖). 
5

the benefit of the Court of Chancery‘s typically learned and thoughtful 

consideration of that issue, and its assessment of the contextual importance of that 

issue in the overall scope of what the committee was charged with investigating.

We would also be obliged to read the entire record relevant to the question before 

us, informed by adversarial briefing focusing us on what the parties view as most 

critical.

We are uncomfortable giving further guidance to a respected sister court 

about the factors that apply to an inherently contextual analysis on an abstract 

question such as the one posed. Although the decision framing the question 

provides some context, it appears from the briefs of the parties to the Second 

Circuit that the plaintiffs spent very little of their opening brief on this question and 

we have no responsible way of determining the relative importance of the 

supposed misstatements in the context of the overall London Whale debacle. The 

only way for us to actually reformulate the question would be for us to essentially 

have the appeal decided by us, rather than by our colleagues on the Second 

Circuit. Because it appears undisputed that there are no facts supporting an 

inference of disloyalty of any kind, the resolution of this case turns solely on a 

settled legal inquiry under our law—whether the trial court erred in dismissing the 

complaint because the plaintiffs had not pled facts supporting an inference of gross 

negligence. 
6

We fear the risk of providing abstract guidance about a contextual 

application of principles of gross negligence when we do not have the leeway to 

decide the actual case, and where the question asked of us is so general. To make 

it more specific would necessarily make us make our own materiality decisions 

about the two categories to which the plaintiffs point, and their relationship. The 

only way we could do that is to review the complete record before the district 

court. In an important sense, however, we hope that our reply may be of limited 

aid to our colleagues. As the referral opinion makes clear, determining whether 

plaintiffs have pled gross negligence on the part of a committee charged with 

investigating a demand requires a ―classic line-drawing exercise.‖12 We agree with 

that. What we do not discern is any gap in our law that we can responsibly fill by 

answering the question as phrased, or coming up with a reformulated one. No 

doubt it is conceivable that an investigative committee that was charged with 

investigating two materially important and materially distinct subjects could be 

deemed grossly negligent if it did an indisputably careful job investigating one, and 

did no job at all of investigating the other. But, in this case, we cannot even fairly 

frame an abstract question, because it is neither clear to us that the supposedly 

distinct category the plaintiffs allege went uninvestigated (a disputed issue between 

the parties itself) was either distinct from the category that was indisputably 

 

12 Espinoza, __F.3d at __, 2015 WL 4747068, at *10.
7

investigated, and whether it was material, when viewed in the overall context of 

the ―debacle.‖ That is, the only way to determine the materiality of the issue that 

the plaintiffs contend went unaddressed, and whether and to what extent the 

committee‘s alleged failure to consider it supports an inference of gross 

negligence, is to tangle with the full record before the district court. In other 

words, this is not a situation where the parties and the referring court have agreed 

on a sufficiently precise set of agreed facts that frame a specific legal question we 

can answer more thoroughly in this context, without hazarding erroneous guidance 

that would risk prejudicing not only the parties in this case, but others who rely 

upon our law. The Clerk of the Court is directed to transmit this opinion to the 

Second Circuit.