IN THE UNITED STATES DISTRICT COURT 

FOR THE NORTHERN DISTRICT OF ILLINOIS 

EASTERN DIVISION 

MARVIN H. MAURRAS REVOCABLE 

TRUST, DERIVATIVELY AND ON 

BEHALF OF ACCRETIVE HEALTH, INC., 

PLAINTIFF, 

vs. 

EDGAR M. BRONFMAN, JR., J. MICHAEL 

CLINE, STEVEN N. KAPLAN, STANLEY 

N. LOGAN, DENIS J. NAYDEN, ARTHUR 

H. SPIEGEL, III, MARY A. TOLAN, MARK 

A. WOLFSON, 

DEFENDANTS, 

and 

ACCRETIVE HEALTH, INC. 

NOMINAL DEFENDANT. 

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Case No. 12-cv-03395 

Judge: Hon. Gary Feinerman 

Oral Argument Requested Pursuant to 

Local Rule 47.1(b) 

MEMORANDUM OF LAW IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS

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Table of Contents 

Page 

INTRODUCTION..........................................................................................................................1

BACKGROUND ............................................................................................................................2

ARGUMENT ..................................................................................................................................6

I. Plaintiff Fails To Meet Pre-Suit Demand Requirements. ..............................................7

A. Legal Standard. ........................................................................................................7

B. Plaintiff Fails To Plead With Particularity Why Demand Was Excused. ................9

II. Plaintiff Fails To State A Claim For Breach Of The Fiduciary Duty Of 

Loyalty. .............................................................................................................................11

A. Legal Standard. ......................................................................................................11

B. Plaintiff’s Complaint Does Not Contain Sufficient Allegations To Support 

Its Claim That The Director Defendants Breached Any Fiduciary Duties. ...........12

CONCLUSION ............................................................................................................................15

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Table of Authorities 

Page(s) 

Cases

Aronson v. Lewis, 

473 A.2d 805 (Del. 1984) .......................................................................................... passim 

Ashcroft v. Iqbal, 

556 U.S. 662 (2009) .......................................................................................................... 13 

Beam ex rel. Martha Stewart Living Omnimedia, Inc. v. Stewart, 

845 A.2d 1040 (Del. 2004) ............................................................................................... 11 

Bell Atl. Corp. v. Twombly, 

550 U.S. 544 (2007) .......................................................................................................... 13 

Breakaway Solutions, Inc. v. Morgan Stanley & Co. Inc., 

2004 WL 1949300 (Del. Ch. Aug. 27, 2004) ................................................................... 16 

Brehm v. Eisner, 

746 A.2d 244 (Del. 2000) ................................................................................................... 8 

Desimone v. Barrows, 

924 A.2d 908 (Del. Ch. 2007).................................................................................... passim 

Fink v. Weill, 

No. 02 Civ. 10250 (LTSRLE), 2005 WL 2298224 (S.D.N.Y. Sept. 19, 2005) ................ 10 

Garza ex rel. Navistar Int’l Corp. v. Belton, 

No. 08C1387, 2010 WL 3324881 (N.D. Ill. Aug. 13, 2010) .................................. 8, 11, 12 

Guttman v. Huang, 

823 A.2d 492 (Del. Ch. 2003)........................................................................................... 15 

Hernandez v. Midland Credit Mgmt., Inc., 

2006 WL 695451 (N.D. Ill. Mar. 14, 2006) ........................................................................ 3 

In re Abbott Labs. Derivative Shareholders Litig., 

325 F.3d 795 (7th Cir. 2003) .................................................................................... 8, 9, 12 

In re Alloy, Inc., 

No. 5626-VCP, 2011 WL 4863716 (Del. Ch. Oct. 13, 2011) .......................................... 14 

In re Morgan Stanley Derivative. Litig., 

542 F. Supp. 2d 317 (S.D.N.Y. 2008) ............................................................................... 10 

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Kamen v. Kemper Fin. Servs., Inc., 

500 U.S. 90 (1991) .............................................................................................................. 8 

Mitchell ex rel. Broadwind Energy, Inc. v. Reiland, 

No. 11C1059, 2012 WL 1755677 (N.D. Ill. May 15, 2012) .............................................. 7 

Oakland Cnty. Emps’ Ret. Sys. v. Massaro, 

736 F. Supp. 2d 1181 (N.D. Ill. 2010) .......................................................................... 8, 13 

Quereguan v. New Castle County, 

Civil Action No. 20298-NC, 2006 WL 2522214 (Del. Ch. Aug. 18, 2006). .................... 16 

Rales v. Blasband, 

634 A.2d 927 (Del. 1993) ....................................................................................... 9, 10, 11 

Robotti & Co. v. Liddell, 

No. 3128-VCN, 2010 WL 157474 (Del. Ch. Jan. 14, 2010) ............................................ 17 

RSM Prod. Corp. v. Fridman, 

643 F.Supp. 2d 382 (S.D.N.Y. 2009) ................................................................................ 15 

Saginaw Police & Fire Pension Fund v. Hewlett-Packard Co., 

No. 10-cv-4720 EJD, 2012 WL 967063 (N.D. Cal. Mar. 21, 2012) ................................ 16 

Seminaris v. Landa, 

662 A.2d 1350 (Del. Ch. 1995)........................................................................................... 9 

Speigel v. Buntrock, 

571 A.2d 767 (Del. 1990) ................................................................................................... 8 

Starrels v. First Nat’l Bank of Chi., 

870 F.2d 1168 (7th Cir. 1989) .................................................................................... 12, 13 

State of Minnesota v. Accretive Health, Inc., 

No. 12-00145 (D. Minn. 2012) ........................................................................................... 5 

Stone v. Ritter, 

911 A.2d 362 (Del. 2006) ................................................................................................... 9 

Tooley v. Donaldson, Lufkin & Jenrette, Inc., 

845 A.2d 1031, 1035 (Del. 2004) ....................................................................................... 2 

Weinberger v. UOP, Inc., 

457 A.2d 701 (Del. Ch. 1983), aff’d, 497 A.2d 792 (Del. 1985) ...................................... 13 

Other Authorities

8 Del. C. § 141(a) ............................................................................................................................ 8 

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Defendants Edgar M. Bronfman, Jr., J. Michael Cline, Steven N. Kaplan, Stanley N. 

Logan, Denis J. Nayden, Arthur H. Spiegel, III, Mary A. Tolan, Mark A. Wolfson (collectively 

“Director Defendants”) and Accretive Health, Inc. (“Accretive” or the “Company,” and with 

Director Defendants, the “Defendants”) submit this Memorandum of Law In Support Of 

Defendants’ Motion To Dismiss. 

INTRODUCTION

Relying solely on disputed claims against Accretive made by a single state attorney 

general, Plaintiff Marvin H. Maurras Revocable Trust (“Plaintiff”) brings this derivative action 

against the Company (as nominal defendant) and against the members of the Accretive Health 

Board of Directors (the “Board,” which comprises the Director Defendants). Plaintiff’s Verified 

Shareholder Derivative Complaint (“Complaint”) asserts two claims: one for purported 

violations by the Director Defendants of their fiduciary duties of loyalty and another seeking 

contribution and indemnification from the Director Defendants on behalf of the shareholders of 

the Company. Plaintiff’s Complaint suffers from critical pleading defects that warrant dismissal 

of all of Plaintiff’s claims on at least two independent grounds: 

First, to assert derivative claims on behalf of Accretive, Plaintiff must either demand that 

the Accretive Board address the misconduct that Plaintiff seeks to remedy by its suit or state with 

particularity in its Complaint why making such a demand would be futile. Plaintiff concedes that 

it did not make any demand on the Accretive Board; but Plaintiff also fails to allege any facts 

suggesting that the Board was not independent—a Board for which seven of the eight directors 

were independent—or that the Board could not fairly assess such a demand. Put simply, 

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Plaintiff cannot show that demand was futile. On this basis alone, Plaintiff’s Complaint should 

be dismissed in its entirety.1 

Second, for all of Plaintiff’s bluster concerning the disputed claims at issue, its Complaint 

lacks a critical component for a shareholder derivative suit: any tie, whatsoever, between the 

alleged misconduct and the Accretive Board. The fact is that none of the “Substantive 

Allegations” found in Section V of the Complaint identify any failure by the Director Defendants 

to discharge properly their fiduciary duties. Indeed, Plaintiff’s sources do not mention 

Accretive’s Directors at all. The Complaint utterly lacks any particularized allegations regarding 

the alleged breach of the duties of loyalty by the Director Defendants, thereby failing to state a 

claim for which relief can be granted. With no claim remaining on which to base liability against 

the Director Defendants, Plaintiff’s second count for contribution and indemnification is not ripe. 

It, too, must fail, and the Complaint dismissed in its entirety. 

BACKGROUND

Accretive Health is a Delaware corporation with its principal place of business in 

Chicago, Illinois. (Compl. ¶ 6.) Accretive provides services to hospitals and hospital systems in 

several states across the U.S. (Id. ¶ 34.) In particular, Accretive assists healthcare providers by 

improving their ability to manage the non-medical aspects of their business, such as patient 

registration, insurance and benefit verification, medical treatment documentation and coding, bill 

 

1 To the extent that Plaintiff’s breach of fiduciary duty claim is dismissed on this ground, so too will 

Plaintiff’s claim for indemnification and contribution fail. Although Count II is not captioned a 

derivative claim, the Complaint acknowledges that Plaintiff seeks indemnification and contribution 

“on behalf of Accretive Health,” (Compl. ¶ 51), i.e., derivatively, see Tooley v. Donaldson, Lufkin & 

Jenrette, Inc., 845 A.2d 1031, 1035 (Del. 2004) (“The analysis [of whether a claim is direct or 

derivative] must be based solely on the following questions: who suffered the alleged harm—the 

corporation or the suing stockholder individually—and who would receive the benefit of the recovery 

or other remedy?”), and that Plaintiff does so without first having made a demand, (Compl. ¶ 42). 

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preparation, and collections. (Id. ¶ 7.) By relying on Accretive to help with these non-medical 

services, healthcare providers can focus on what they do best—providing medical care and 

treatment to patients. (Id.) In addition to providing services to hospitals and hospital systems, 

Accretive also helps healthcare providers by working directly with patients to explain insurance 

and public assistance eligibility, thereby helping patients understand their own financial 

obligations for their medical care. (See, e.g., Ex. A, Accretive Form 10-K filed Feb. 29, 2012 at 

5, 7, 8.)2 

One of the states in which Accretive offers services is Minnesota. (See, e.g., Compl. 

¶ 26.) In connection with its work in the state, Accretive recently became the target of the 

Minnesota Attorney General’s Office, which launched an investigation into the Company and 

subsequently filed a related lawsuit. (See id. ¶¶ 24-25.) Not satisfied with its efforts against 

Accretive in Minnesota, however, the Minnesota Attorney General has orchestrated a nationwide 

media campaign against the Company, including giving numerous television and print interviews 

to trumpet her release of a so-called “Compliance Review,” in which she cherry-picked and 

mischaracterized selected quotations from dozens of confidential documents that were 

voluntarily produced by Accretive Health. (See, e.g., id. ¶ 34.) Although Accretive vehemently 

contests all allegations of wrongdoing asserted by the Attorney General, the unfortunate result of 

the publicity following the media campaign is that Accretive continues to be subjected to 

meritless, piggyback lawsuits—lawsuits just like this one. 

 

2 This Court may take judicial notice of the contents of public record disclosure documents filed with 

the U.S. Securities and Exchange Commission, such as attached Exhibit A. See, e.g., Hernandez v. 

Midland Credit Mgmt., Inc., 2006 WL 695451, at *4 (N.D. Ill. Mar. 14, 2006). 

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Plaintiff is an Accretive shareholder and files its suit derivatively on behalf of Accretive 

(named as a nominal defendant) against the Company’s directors. (Id. ¶¶ 1, 5.) Unfortunately 

for Plaintiff, in its rush to file this suit, it neglected to take any steps whatsoever to raise its 

claims with Accretive’s Directors. Failing to make a demand of the Board undermines the 

“cardinal precept” that “directors, rather than shareholders, manage the business and affairs of 

the corporation.” Aronson v. Lewis, 473 A.2d 805, 811 (Del. 1984) (citing 8 Del. C. § 141(a)). 

Plaintiff’s failure to make a demand upon the Board is particularly troubling here because—as 

specifically set out in the Company’s March 30, 2012 Proxy Statement cited in Plaintiff’s 

Complaint—seven out of the eight Director Defendants are independent directors and thus wellsuited to ferreting out problems within the Company. (Compl. ¶ 7; see also Ex. B, Accretive 

Proxy Statement issued Mar. 30, 2012 (“Proxy Statement”) at 17 (“Our board of directors has 

affirmatively determined that each of Messrs. Bronfman, Cline, Kaplan, Logan Nayden, Spiegel 

and Wolfson is ‘independent’ in accordance with Section 303A.02(b) of the NYSE Listed 

Company Manual.”).) In bypassing the demand process, Plaintiff has baselessly “impinge[d] on 

the managerial freedom of directors.” Aronson, 473 A.2d at 811. 

Plaintiff’s Complaint, filed May 3, 2012, asserts one claim against all Director 

Defendants for breach of the fiduciary duty of loyalty and one claim for contribution and 

indemnification related to the alleged breach. (Compl. ¶¶ 44-51.) In addition to several forms of 

declaratory relief, Plaintiff’s Complaint seeks to recover “hundreds of millions of dollars of 

financial and reputational damages” purportedly caused by the Director Defendants’ breach of 

their fiduciary duties. (Id. ¶ 1.) The Complaint alleges that the Director Defendants “were 

intentionally derelict and/or consciously disregarded” their fiduciary duties of loyalty “by 

making several decisions for which there was no valid business justification, including, but not 

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limited to, systematically and pervasively violating health privacy laws, state debt collection 

laws and state consumer protection laws.” (Id. at 2.) 

Plaintiff’s vague references are as far as its allegations go; its Complaint is otherwise bare 

of any details regarding the “decisions” of the Director Defendants that supposedly form the 

basis for Plaintiff’s claim. Nowhere in the Complaint does Plaintiff identify what these 

“decisions” were, when they were made, or by whom—much less does Plaintiff allege conduct 

so severe as to constitute “intentional[]” dereliction or “conscious[]” disregard of fiduciary 

duties. In place of specific allegations, Plaintiff quotes extensively from a report released by the 

Minnesota Attorney General and related press coverage. (See id. ¶¶ 24-25, 28, 29, 31, 33, 34.) 

That report alleged that Accretive violated certain provisions of the Health Insurance Portability 

and Accountability Act (“HIPAA”), Pub. L. No. 104-191, 110 Stat. 1936, as well as the Health 

Information Technology for Economic and Clinical Health Act (“HITECH”), amending HIPAA, 

Pub. L. No. 111-5, 123 Stat. 226, in addition to certain federal and state consumer protection and 

debt collection laws. (Id. ¶¶ 24-25.) But the Minnesota Attorney General’s allegations are just 

that: allegations; they are not properly relied upon by Plaintiff as the basis for a derivative suit. 

Additionally, as discussed, the Company has vigorously and publicly denied the allegations 

raised by the Attorney General, filing a motion to dismiss the lawsuit. See Ex. C, Motion to 

Dismiss, State of Minnesota v. Accretive Health, Inc., No. 12-00145 (D. Minn. 2012). But 

perhaps most relevant to these proceedings, neither the Minnesota Attorney General’s report nor 

any related press coverage even hint at any failure by the Director Defendants to discharge 

properly their fiduciary duties. Indeed, they do not mention Accretive’s Directors at all. 

In fact, the only allegations in the Complaint that are directed at the Director Defendants 

consist of a series of bare, conclusory statements—unsupported by a single factual allegation—

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aimed at excusing Plaintiff from its legal obligation to demand that the Company assert this suit 

on its own behalf. Specifically, Plaintiff alleges that a “majority of the Board is interested and 

lacks independence,” thereby excusing Plaintiff from making a pre-suit demand. (Compl. ¶ 43.) 

But not surprisingly, Plaintiff—having raced to the courthouse and having failed to investigate 

its claims—does not cite any evidence demonstrating that the Director Defendants are interested 

or lack independence, presumably because seven of the eight Director Defendants are 

independent directors. (Id. ¶¶ 9-17, 43; see also Ex. B, Proxy Statement at 17.) As a second 

justification offered by Plaintiff to excuse it from making a pre-suit demand, Plaintiff states that 

“all current Board members have demonstrated their unwillingness and inability to address the 

claims alleged herein.” (Compl. ¶ 43.) Yet again, Plaintiff does not cite even a single fact to 

support its claim, and it does not allege any efforts on its part (e.g., correspondence or 

communications with anyone at Accretive, including the Board) that led it to reach these 

conclusions about the Board’s alleged “unwillingness” to address Plaintiff’s concerns. Instead, 

having failed to make any effort at all to engage the Board, Plaintiff simply declares the 

existence of a “reasonable doubt that a majority of the Director Defendants could have properly 

exercised independent and disinterested business judgment in responding to such a demand.” 

(Id.) As set forth below, these conclusory allegations do not form the basis of a proper derivative 

suit and Plaintiff’s Complaint should be dismissed in its entirety. 

ARGUMENT

Plaintiff’s Complaint is devoid of the type of plausible allegations necessary to survive a 

motion to dismiss, and it should be dismissed for two independent reasons: first, Plaintiff fails to 

meet pre-suit demand requirements, and second, Plaintiff fails to state a claim for breach of the 

fiduciary duty of loyalty. As discussed further below, the Complaint should be dismissed in ites 

entirety for either and both of these reasons. 

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I. Plaintiff Fails To Meet Pre-Suit Demand Requirements. 

Plaintiff concedes that it did not demand that the Accretive Board address any alleged 

misconduct. And its Complaint fails to plead with any particularity why such a demand, 

presented to a Board with seven out of eight independent Directors, would have been futile. That 

is the beginning and end of it. To assert a derivative claim on behalf of the Company, Plaintiff 

must either make a demand on the Accretive Board or plead with particularity why such a 

demand would be futile. Because Plaintiff fails to do either, its Complaint should be dismissed. 

A. Legal Standard. 

Plaintiff concedes that it did not make any demand on the Accretive Board before 

bringing this suit. (Compl. ¶ 42.) Accordingly, to survive a motion to dismiss, the heightened 

pleading standard set out in Federal Rule of Civil Procedure (“FRCP”) 23.1(b)(3) requires that 

Plaintiff “state with particularity” “the reasons for . . . not making the effort.” (emphasis added); 

see also Mitchell ex rel. Broadwind Energy, Inc. v. Reiland, No. 11C1059, 2012 WL 1755677, at 

*3 (N.D. Ill. May 15, 2012). Plaintiff has not—and cannot—do so. 

The demand requirement “is a recognition of the fundamental precept that directors 

manage the business and affairs of corporations,” Aronson v. Lewis, 473 A.2d 805, 814 (Del. 

1984), which includes controlling litigation brought on the corporation’s behalf, Speigel v. 

Buntrock, 571 A.2d 767, 773 (Del. 1990).

3

 The requirement is “more than a pleading 

requirement, it is a substantive right of the shareholder and the directors.” In re Abbott Labs. 

Derivative Shareholders Litig., 325 F.3d 795, 804 (7th Cir. 2003). It prevents “a stockholder 

 

3 Because Accretive is a Delaware corporation, the substantive law of Delaware governs whether 

failure to make demand is excused. See Kamen v. Kemper Fin. Servs., Inc., 500 U.S. 90, 108–09 

(1991); see also Oakland Cnty. Emps’ Ret. Sys. v. Massaro, 736 F. Supp. 2d 1181, 1188-89 (N.D. Ill. 

2010); Garza, 2010 WL 3324881, at *4. 

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[from] caus[ing] the corporation to expend money and resources in discovery and trial in the 

stockholder’s quixotic pursuit of a purported corporate claim based solely on conclusions, 

opinions or speculation.” Brehm v. Eisner, 746 A.2d 244, 255 (Del. 2000). Indeed, shareholder 

demand is excused only under “extraordinary conditions.” Kamen, 500 U.S. at 96. 

Thus, to satisfy the requirement that a plaintiff plead demand futility with particularity, a 

plaintiff must do more than simply state “in conclusory terms that [plaintiff] made no demand 

because it would have been futile.” Garza ex rel. Navistar Int’l Corp. v. Belton, No. 08C1387, 

2010 WL 3324881, at *4 (N.D. Ill. Aug. 13, 2010); see also In re Abbott Labs., 325 F.3d at 804 

(stating same). Rather, the plaintiff must allege particularized facts about the challenged 

wrongdoing such as what the board did, when it did it, what it discussed, what conclusions it 

reached, and why it did or did not act. See Desimone v. Barrows, 924 A.2d 908, 951 (Del. Ch. 

2007) (finding plaintiffs had not shown demand futility because they did not allege particularized 

facts “about what the [target board] did, when they did it, what they discussed, what conclusions 

they reached, and why the board did or did not do anything.”) 

Here, Plaintiff’s claims are not based on any specific transaction, and as a result, the 

demand futility test articulated in Rales v. Blasband applies. 634 A.2d 927 (Del. 1993); see also 

Stone v. Ritter, 911 A.2d 362, 367 (Del. 2006) (applying Rales to oversight claim). That 

standard requires that a plaintiff asserting demand futility plead particularized factual allegations 

raising “a reasonable doubt that, as of the time the complaint is filed, the board of directors could 

have properly exercised its independent and disinterested business judgment in responding to a 

demand.” Rales, 634 A.2d at 934.4 Plaintiff’s Complaint does not contain particularized 

 

4 Where a specific transaction is challenged, demand is excused as futile where “the particularized facts 

alleged [create] a reasonable doubt . . . that: (1) the directors are disinterested and independent [or] 

(Continued...) 

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allegations that raise a reasonable doubt that the Board could properly exercise its independent 

and disinterested business judgment in responding to a demand; accordingly, it does not plead 

demand futility, and the Complaint should be dismissed. See id. at 933. 

B. Plaintiff Fails To Plead With Particularity Why Demand Was Excused. 

The Complaint contains no factual allegations explaining the basis for Plaintiff’s failure 

to make a demand upon the Board, much less particularized allegations that go to supporting 

Plaintiff’s claim. Plaintiff’s claim of demand futility is based on two conclusory assertions: 

first, that “[a] majority of the Board is interested and lacks independence,” and second, that “all 

current Board members have demonstrated an unwillingness and inability to address the claims 

alleged herein.” (Compl. ¶ 43.) As neither of these assertions is supported by any facts, much 

less particularized facts, Plaintiff’s Complaint should be dismissed. See Rales, 634 A.2d at 933. 

First, Plaintiff alleges that a “majority of the Board is interested and lacks independence,” 

thereby excusing Plaintiff from making a pre-suit demand. (Compl. ¶ 43.) Yet Plaintiff fails to 

plead even a single fact explaining which Directors are interested or lack independence or why

this is so. Courts typically dismiss such unsupported, conclusory allegations as failing to state 

 

(2) the challenged transaction was otherwise the product of a valid exercise of business judgment.” 

Aronson, 473 A.2d at 812. The Complaint contains a generalized statement that the Director 

Defendants made “several decisions for which there was no valid business justification” (Compl. at 

2), but nowhere does the Complaint challenge—or even identify—any specific action taken by even a 

single Director Defendant. Accordingly, Aronson does not apply. See Seminaris v. Landa, 662 A.2d 

1350, 1354 (Del. Ch. 1995) (applying Rales where board allegedly “signed misleading 

statements . . . and conspired . . . to misrepresent the value of the corporation’s stock” but complaint 

failed to “challenge any specific board action that approved or ratified these alleged wrongdoings”); 

see also In re Morgan Stanley Derivative. Litig., 542 F. Supp. 2d 317, 322 (S.D.N.Y. 2008) (applying 

Rales where derivative plaintiff’s allegations were “insufficiently particularized to allege a specific 

board decision” to omit information in SEC filings); Fink v. Weill, No. 02 Civ. 10250 (LTSRLE), 

2005 WL 2298224, at *3 n.6 (S.D.N.Y. Sept. 19, 2005) (applying Rales where plaintiff proffered 

“generalized allegations that the defendant board members . . . participated” in the challenged 

activity). 

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demand excusal requirements with particularity, as required by the FRCP. See Desimone, 924 

A.2d at 951; see also Garza, 2010 WL 3324881, at *6 (dismissing complaint for failure to allege 

demand futility where plaintiff “failed to plead any particularized facts suggesting that a majority 

of the members of the Board at the time he filed his complaint lacked disinterest or 

independence” and instead “repeatedly allege[d] in an entirely conclusory fashion that various 

Individual Defendants were incapable of disinterestedly and independently considering a 

demand”). 

More significantly, Plaintiff’s assertion that a “majority of the Board is interested and 

lacks independence” likely stands unsupported because it is simply not true. With respect to 

independence—and as the lone facts set out in Plaintiff’s Complaint on this point assert—seven 

of the eight Accretive Board members are identified as independent directors. (Compl. ¶¶ 9-17, 

43; see also Ex. B, Proxy Statement at 17.) It is well-established that where, as here, a majority 

of independent directors exists to determine whether to bring suit on behalf of a company, 

demand is not futile. See, e.g., Beam ex rel. Martha Stewart Living Omnimedia, Inc. v. Stewart, 

845 A.2d 1040, 1046 (Del. 2004). Additionally, directors are considered to be interested only 

when they “will receive a personal benefit from a transaction that is not equally shared by the 

stockholders,” or when “a corporate decision will have a materially detrimental impact on a 

director, but not on the corporation and the stockholders.” Rales, 634 A.2d at 936. Plaintiff’s 

Complaint contains no allegations to support the assertion that a majority of the Accretive Board 

is somehow “interested” so as to make demand futile. 

Second, Plaintiff also alleges that “all current Board members have demonstrated an 

unwillingness and inability to address the claims alleged herein.” (Compl. ¶ 43.) Yet Plaintiff 

again fails to plead even a single fact alleging when, where, or how “all” or, indeed, any Board 

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members demonstrated their supposed “unwillingness.” The law on this point is also clear: 

Plaintiff’s conclusory allegations “need not be considered true in determining demand futility 

unless they are supported by specific facts.” Starrels v. First Nat’l Bank of Chi., 870 F.2d 1168, 

1171 (7th Cir. 1989) (citations omitted). Courts routinely dismiss complaints based on such 

insufficiently particularized claims, as this Court should do here. See Desimone, 924 A.2d at 

951; Garza, 2010 WL 3324881, at *6-7. 

Put simply, the Complaint makes only a passing attempt to justify Plaintiff’s claim of 

demand futility—an attempt that fails as a matter of law and compels dismissal of this case. See 

In re Abbott Labs, 325 F. 3d at 807 (rejecting plaintiff’s assertion of demand futility where 

“[t]here were no allegations of improper motives of conflicts of interest,” no “specific facts to 

indicate that any of the directors had divided loyalties,” and little “presented allegations that any 

of the other directors profited in any way by their actions, or lack thereof”); Aronson, 473 A.2d 

at 814 (rejecting plaintiff’s argument that demand was futile because, among other reasons, all 

current directors were named as defendants). 

II. Plaintiff Fails To State A Claim For Breach Of The Fiduciary Duty Of Loyalty. 

In addition to failing to satisfy demand requirements, Plaintiff’s Complaint also lacks any 

facts to support Plaintiff’s claim that the Director Defendants breached their duties of loyalty, 

thereby failing to state a claim for which relief can be granted. For this independent reason and 

because Plaintiff’s second count for contribution and indemnification is not ripe, as discussed 

below, the Complaint should be dismissed in its entirety. 

A. Legal Standard. 

Under FRCP 12(b)(6), a complaint that does not “contain sufficient factual matter, 

accepted as true, to ‘state a claim to relief that is plausible on its face’” must be dismissed. 

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 

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570 (2007)). A claim is “plausible” only if it contains “factual content that allows the court to 

draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. 

Allegations consisting of nothing more than “[t]hreadbare recitals of the elements of a cause of 

action, supported by merely conclusory statements,” are insufficient as a matter of law. Id. 

Moreover, complaints with allegations that raise only “the mere possibility of misconduct,” do 

not state a plausible claim for relief and must be dismissed. Id. at 679. Here, Plaintiff fails to 

meet this pleading standard and its Complaint must be dismissed. 

B. Plaintiff’s Complaint Does Not Contain Sufficient Allegations To Support Its 

Claim That The Director Defendants Breached Any Fiduciary Duties. 

As part of their fiduciary role, directors of Delaware corporations have a responsibility to 

adhere to a duty of loyalty, which requires “an undivided and unselfish loyalty to the corporation 

that demands that there shall be no conflict between duty and self-interest.” Weinberger v. UOP, 

Inc., 457 A.2d 701, 710 (Del. Ch. 1983), aff’d, 497 A.2d 792 (Del. 1985).5 To plead a breach of 

the duty of loyalty under Delaware law, a plaintiff must allege facts supporting a reasonable 

inference that a director was “not both disinterested and independent” or “intentionally fail[ed] to 

act in the face of a known duty to act, demonstrating a conscious disregard for [his or her] 

duties.’” In re Alloy, Inc., No. 5626-VCP, 2011 WL 4863716, at *7 (Del. Ch. Oct. 13, 2011) 

(citations omitted). Absent allegations to support such an inference, Delaware courts are 

extremely deferential to director action under the business judgment rule, on the presumption 

that “in making a business decision the directors of a corporation acted on an informed basis, in 

 

5 As with demand futility, Delaware law applies to any breach of fiduciary duty analysis because 

Accretive is a Delaware corporation. See Oakland Cnty., 772 F. Supp. 2d at 976 (law of the state of 

incorporation applies); see also Starrels, 870 F.2d at 1170. 

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good faith and in the honest belief that the action taken was in the best interests of the company.” 

Aronson, 473 A.2d at 812. 

Plaintiff has utterly failed to plead facts sufficient to state a claim that the Director 

Defendants breached their fiduciary duty of loyalty. As discussed, Plaintiff must allege facts 

sufficient to support a reasonable inference that a director was either not interested and 

independent or that a director intentionally failed to act in the face of a known duty to act, 

thereby demonstrating a conscious disregard for his or her duties. See in re Alloy, 2011 WL 

4863716, at *7. For the reasons described in Section I, Plaintiff has made no showing that the 

Director Defendants were interested or not independent. See supra at Section I.B. Accordingly, 

if Plaintiff’s breach of fiduciary duty claim is to survive a motion to dismiss, it must plead facts 

sufficient to allow a reasonable inference that the Director Defendants acted in bad faith to 

sustain a claim for breach of the fiduciary duty of loyalty. See In re Alloy, 2011 WL 4863716, at 

*7 (“In general, ‘bad faith will be found if a fiduciary intentionally fails to act in the face of a 

known duty to act, demonstrating a conscious disregard for his duties.’” (citations omitted)); see 

also Guttman v. Huang, 823 A.2d 492, 506 (Del. Ch. 2003) (stating that breach of duty of loyalty 

claim “requires a showing that the directors breached their duty of loyalty by failing to attend to 

their duties in good faith. Put otherwise, the decision premises liability on a showing that the 

directors were conscious of the fact that they were not doing their jobs.”). Plaintiff has not made 

this showing and its Complaint should be dismissed on this independent ground as well. 

For its “Substantive Allegations,” Plaintiff’s Complaint relies entirely on information 

copied from public filings, the unproven allegations of the Minnesota Attorney General, and 

related press coverage. (See Compl. § V.) As a threshold matter, it is not proper for Plaintiff to 

assert a derivative suit on the basis of unproven allegations in a complaint that has not yet been 

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adjudicated. See RSM Prod. Corp. v. Fridman, 643 F.Supp. 2d 382, 403 (S.D.N.Y. 2009) 

(“[P]aragraphs in a complaint that are either based on, or rely on, complaints in other actions that 

have been dismissed, settled, or otherwise not resolved, are, as a matter of law, immaterial within 

the meaning of [FRCP] 12(f)”).6 Additionally, the mere fact that the company is being 

investigated—even if it is found to have engaged in wrongdoing—does not state a claim for 

breach of the duty of loyalty by the Accretive Directors. See Desimone, 924 A.2d at 940 

(“Delaware courts routinely reject the conclusory allegation that because illegal behavior 

occurred, internal controls must have been deficient, and the board must have known so.”); 

Saginaw Police & Fire Pension Fund v. Hewlett-Packard Co., No. 10-cv-4720 EJD, 2012 WL 

967063, at *7 (N.D. Cal. Mar. 21, 2012) (“The fact that HP was named as a defendant in the 

DOJ litigation or was the subject of FCPA investigations is not enough to conclude that the 

Director Defendants acted improperly and face a substantial risk of liability.”) (Delaware law). 

The fact remains that none of the “Substantive Allegations” found in Section V of the 

Complaint identify any failure by the Director Defendants to discharge properly their fiduciary 

duties. Indeed, Plaintiff’s sources do not mention Accretive’s Directors at all. The Complaint is 

utterly devoid of any factual allegations connecting the Director Defendants to any of 

Accretive’s alleged misdeeds, much less allegations suggesting that the Director Defendants 

knowingly breached their duties. Accordingly, Plaintiff’s claim for breach of fiduciary duties 

should be dismissed on this independent ground as well, as should Plaintiff’s Complaint in its 

 

6 Should the Court deny the instant motion, Defendants move in the alternative pursuant to FRCP 12(f) 

to strike portions of Plaintiff’s Complaint that are based on, or rely on, unproven allegations of the 

Minnesota Attorney General. This would include, at a minimum, the following paragraphs of 

Plaintiff’s Complaint: 24, 25, 28, and 29. 

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entirety.7 See Desimone, 924 A.2d at 931 (dismissing complaint for breach of fiduciary duty 

where plaintiff “pled no facts to suggest even the hint of a culpable state of mind on the part of 

any director.”); Robotti & Co. v. Liddell, No. 3128-VCN, 2010 WL 157474, at *5 (Del. Ch. Jan. 

14, 2010) (dismissing duty of loyalty claim because plaintiff did not plead sufficient facts to 

support inference that the actions of the Directors “worked a material personal gain to the 

Defendants at the expense of [the company] or the public stockholders.”). 

CONCLUSION

For the reasons stated above, Defendants respectfully request that the Court dismiss 

Plaintiff’s Complaint in its entirety. 

 

7 With no claim remaining on which to base liability against the Defendant Directors, Plaintiff’s claim 

for indemnification and contribution has not accrued. See Quereguan v. New Castle County, Civil 

Action No. 20298-NC, 2006 WL 2522214, at *5 (Del. Ch. Aug. 18, 2006). Accordingly, this Court 

should dismiss Plaintiff’s Count II as unripe for adjudication. See Breakaway Solutions, Inc. v. 

Morgan Stanley & Co. Inc., 2004 WL 1949300, at *15-16 (Del. Ch. Aug. 27, 2004) (dismissing claim 

for indemnification in a shareholder class action where claim depended on underlying facts being 

litigated in other suits and where “[n]o ‘judicial economy’ would be achieved in this different forum 

consideration [plaintiff’s] request at this time”). 

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Dated: July 25, 2012 Respectfully submitted, 

/s/_Leonid Feller________________________ 

Leonid Feller 

KIRKLAND & ELLIS LLP 

300 North LaSalle Drive 

Chicago, IL 60654 

Telephone: (312) 862-2954 

Facsimile: (312) 862-2200 

leonid.feller@kirkland.com 

Andrew B. Clubok (admitted pro hac vice) 

Adam T. Humann (admitted pro hac vice) 

Melody Wells (admitted pro hac vice) 

KIRKLAND & ELLIS LLP 

601 Lexington Avenue 

New York, NY 10022 

Telephone: (212) 446-6400 

Facsimile: (212) 446-6460 

andrew.clubok@kirkland.com 

adam.humann@kirkland.com 

melody.wells@kirkland.com 

Attorneys for All Defendants

Moses Silverman (admitted pro hac vice) 

Thomas B. Sullivan (admitted pro hac vice) 

PAUL, WEISS, RIFKIND, WHARTON & 

GARRISON LLP 

1285 Avenue of the Americas 

New York, NY 10019 

Telephone: (212) 373-3355 

Facsimile: (212) 492-0355 

msilverman@paulweiss.com 

tsullivan@paulweiss.com

Attorneys for Director Defendants

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CERTIFICATE OF SERVICE 

I, Leonid Feller, an attorney, hereby certify that I filed the MEMORANDUM OF LAW 

IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS using the CM/ECF system on 

this 25th day of July, 2012. Notice of this filing will be sent to all counsel of record by 

operation of the Court’s electronic filing system. 

/s/ Leonid Feller 

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