IN THE SUPREME COURT OF THE STATE OF DELAWARE

UNITED FOOD AND 

COMMERCIAL WORKERS UNION 

AND PARTICIPATING FOOD 

INDUSTRY EMPLOYERS TRISTATE PENSION FUND,

Plaintiff-Below,

Appellant,

v.

MARK ZUCKERBERG, MARC 

ANDREESSEN, PETER THIEL, 

REED HASTINGS, ERSKINE B. 

BOWLES, and SUSAN D. 

DESMOND-HELLMANN,

Defendants-Below,

Appellees

and

FACEBOOK, INC.,

Nominal Defendant-Below,

Appellee.

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 No. 404, 2020

 Court Below – Court of Chancery 

 of the State of Delaware

 No. 2018-0671-JTL

Submitted: June 30, 2021

Decided: September 23, 2021

Before SEITZ, Chief Justice; VALIHURA, VAUGHN, TRAYNOR, and 

MONTGOMERY-REEVES, Justices, constituting the Court en banc.

Upon appeal from the Court of Chancery. AFFIRMED.
2

P. Bradford deLeeuw, Esquire, DELEEUW LAW LLC, Wilmington, Delaware; 

Robert C. Schubert, Esquire, Willem F. Jonckheer, Esquire (argued), SCHUBERT 

JONCKHEER & KOLBE LLP, San Francisco, California; James E. Miller, Esquire, 

SHEPHERD FINKELMAN MILLER & SHAH, LLP, Chester, Connecticut; Attorneys for 

Appellant United Food and Commercial Workers Union and Participating Food Industry 

Employers Tri-State Pension Fund.

Kevin R. Shannon, Esquire, Berton W. Ashman, Jr., Esquire, Tyler J. Leavengood, Esquire, 

POTTER ANDERSON & CORROON LLP, Wilmington, Delaware; William Savitt, 

Esquire (argued), Ryan A. McLeod, Esquire, Anitha Reddy, Esquire, Kevin M.Jonke, 

Esquire, WACHTELL, LIPTON, ROSEN & KATZ, New York, New York; Attorneys for 

Appellees Marc L. Andreessen, Erskine B. Bowles, Susan D. Desmond-Hellman, Reed 

Hasting, and Peter Thiel.

Raymond J. DiCamillo, Esquire, Kevin M. Gallagher, Esquire, RICHARDS, LAYTON & 

FINGER, P.A., Wilmington, Delaware; George M. Garvey, Esquire, Laura Lin, Esquire, 

MUNGER, TOLLES & OLSON LLP, Los Angeles, California; Attorneys for Appellee 

Mark Zuckerberg.

David E. Ross, Esquire, Garrett B. Moritz, Esquire, R. Garrett Rice, Esquire, ROSS 

ARONSTAM & MORITZ LLP, Wilmington, Delaware; Attorneys for Appellee 

Facebook, Inc.
3

MONTGOMERY-REEVES, Justice:

In 2016, the board of directors of Facebook, Inc. (“Facebook”) voted in favor of a 

stock reclassification (the “Reclassification”) that would allow Mark Zuckerberg—

Facebook’s controller, chairman, and chief executive officer—to sell most of his Facebook 

stock while maintaining voting control of the company. Zuckerberg proposed the 

Reclassification to allow him and his wife to fulfill a pledge to donate most of their wealth 

to philanthropic causes. With Zuckerberg casting the deciding votes, Facebook’s 

stockholders approved the Reclassification. 

Not long after, numerous stockholders filed lawsuits in the Court of Chancery,

alleging that Facebook’s board of directors violated their fiduciary duties by negotiating and 

approving a purportedly one-sided deal that put Zuckerberg’s interests ahead of the 

company’sinterests. The trial court consolidated more than a dozen of these lawsuits into a 

single class action. At Zuckerberg’s request and shortly before trial, Facebook withdrew the 

Reclassification and mooted the fiduciary-duty class action. Facebook spent more than 

$20 million defending against the class action and paid plaintiffs’ counsel more than 

$68 million in attorneys’ fees under the corporate benefit doctrine.

Following the settlement, another Facebook stockholder—the United Food and 

Commercial Workers Union and Participating Food Industry Employers Tri-State Pension 

Fund (“Tri-State”)—filed a derivative complaint in the Court of Chancery. This new action 
4

rehashed many of the allegations made in the prior class action but sought compensation for 

the money Facebook spent in connection with the prior class action. 

Tri-State did not make a litigation demand on Facebook’s board. Instead, Tri-State

pleaded that demand was futile because the board’s negotiation and approval of the 

Reclassification was not a valid exercise of its business judgment and because a majority of 

the directors were beholden to Zuckerberg. Facebook and the other defendants moved to 

dismiss Tri-State’s complaint under Court of Chancery Rule 23.1, arguing that Tri-State did 

not make demand or prove that demand was futile. Both sides agreed that thedemand futility 

test established in Aronson v. Lewis1applied to Tri-State’s complaint.

In October 2020, the Court of Chancery dismissed Tri-State’s complaint under 

Rule 23.1. The court held that exculpated care claims do not excuse demand under 

Aronson’s second prong because they do not expose directors to a substantial likelihood of 

liability. The court also held that the complaint failed to raise a reasonable doubt that a 

majority of the demand board lacked independence from Zuckerberg. In reaching these 

conclusions, the Court of Chancery applied a three-part test for demand futility that blended

the Aronson test with the test articulated in Rales v. Blasband.

2

Tri-State has appealed the Court of Chancery’s judgment. For the reasons provided 

below, this Court affirms the Court of Chancery’s judgment. The second prong of Aronson 

1 473 A.2d 805 (Del. 1984).

2 634 A.2d 927 (Del. 1993).
5

focuses on whether the derivative claims would expose directors to a substantial likelihood 

of liability. Exculpated claims do not satisfy that standard because they do not expose 

directors to a substantial likelihood of liability. Further, the complaint does not plead with 

particularity that a majority of the demand board lacked independence. Thus, the Court of 

Chancery properly dismissed Tri-State’s complaint for failing to make a demand on the 

board.

Additionally, this Opinion adopts the Court of Chancery’s three-part test for demand 

futility. When the Court decided Aronson, raising a reasonable doubt that the business 

judgment standard of review would apply exposed directors to a substantial likelihood of 

liability for care violations. The General Assembly’s enactment of Section 102(b)(7) and 

other developments in corporate law have weakened the connection between rebutting the 

business judgment standard and exposing directors to a risk that would sterilize their 

judgment with respect to a litigation demand. Further, the Aronson test has proved difficult 

to apply in many contexts, such as where there is turnover on a corporation’s board. The 

Court of Chancery’s refined articulation of the Aronson standard helps to address these 

issues. Nonetheless, this refined standard is consistent with Aronson, Rales, and their 

progeny. Thus, cases properly applying those holdings remain good law.
6

I. RELEVANT FACTS AND PROCEDURAL BACKGROUND

A. The Parties and Relevant Non-Parties

Appellee Facebook is a Delaware corporation with its principal place of business in 

California.3 Facebook is the world’s largest social media and networking service and one of

the ten largest companies by market capitalization.4

Appellant Tri-State has continuously owned stock in Facebook since 

September 2013.5

Appellee Mark Zuckerberg founded Facebook and has served as its chief executive 

officer since July 2014.6 Zuckerberg controls a majority of Facebook’s voting power and 

has been the chairman of Facebook’s board of directors since January 2012.

7

Appellee Marc Andreessen has served as a Facebook director since June 2008.8 

Andreessen was a member of the special committee that negotiated and recommended that 

the full board approve the Reclassification.

9

 In addition to his work as a Facebook director, 

Andreessen is a cofounder and general partner of the venture capital firm Andreessen 

Horowitz.10

3 App. to Opening Br. 19 (hereinafter, “A_”).

4 A19-20.

5 A19.

6 A20.

7

Id.

8

Id.

9

Id.

10 A51.
7

Appellee Peter Thiel has served as a Facebook director since April 2005.11 Thiel 

voted in favor of the Reclassification.

12

 In addition to his work as a Facebook director, Thiel 

is a partner at the venture capital firm Founders Firm.13

Appellee Reed Hastings began serving as a Facebook director in June 2011 and was 

still a director when Tri-State filed its complaint.

14

 Hastings voted in favor of the 

Reclassification.

15

 In addition to his work as a Facebook director, Hastings founded and 

serves as the chief executive officer and chairman of Netflix, Inc. (“Netflix”).

16

Appellee ErskineB. Bowles began serving as a Facebook director in September 2011 

and was still a director when Tri-State filed its complaint.

17

 Bowles was a member of the 

special committee that negotiated and recommended that the full board approve the

Reclassification.

18

Appellee Susan D. Desmond-Hellman began serving as a Facebook director in 

March 2013 and was still a director when Tri-State filed its complaint.

19

 Desmond-Hellman 

was the chair of the special committee that negotiated and recommended that the full board 

11 A21.

12 Id.

13 A57.

14 See id.

15 Id.

16 A60.

17 See id.

18 Id.

19 See id.
8

approve the Reclassification.

20

 In addition to her work as a Facebook director, DesmondHellman served as the chief executive officer of the Bill and Melinda Gates Foundation (the 

“Gates Foundation”) during the events relevant to this appeal.

21

Sheryl Sandberg has been Facebook’s chief operating officer since March 2018 and 

has served as a Facebook director since January 2012.22

Kenneth I. Chenault began serving as a Facebook director in February 2018 and was 

still a director when Tri-State filed its complaint.

23 Chenault was not a director when 

Facebook’s board voted in favor of the Reclassification in 2016.24

Jeffery Zients began serving as a Facebook director in May 2018 and was still a 

director when Tri-State filed its complaint.

25

 Zients was not a director when Facebook’s 

board voted in favor of the Reclassification in 2016.26

B. Zuckerberg Takes the Giving Pledge

According to the allegations in the complaint, in December 2010, Zuckerberg took 

the Giving Pledge, a movement championed by Bill Gates and Warren Buffet that challenged 

wealthy business leaders to donate a majority of their wealth to philanthropic causes.27 

20 Id.

21 A27.

22 A46.

23 See id.

24 See A46; A41.

25 See A46.

26 See A46; A41.

27 A23.
9

Zuckerberg communicated widely that he had taken the pledge and intended to start his 

philanthropy at an early age.28

In March 2015, Zuckerberg began working on an accelerated plan to complete the 

Giving Pledge by making annual donations of $2 to $3 billion worth of Facebook stock.29 

Zuckerberg asked Facebook’s general counsel to look into the plan.

30

 Facebook’s legal team

cautioned Zuckerberg that he could only sell a small portion of his stock—$3 to $4 billion

based on the market price—without dipping below majority voting control.31 To avoid this 

problem, the general counsel suggested that Facebook could follow the “Google playbook” 

and issue a new class of non-voting stock that Zuckerberg could sell without significantly 

diminishing his voting power.32 The legal team recommended that the board form a special 

committee of independent directors to review and approve the plan and noted that litigation 

involving Google’s reclassification resulted in a $522 million settlement.33 Zuckerberg 

instructed Facebook’s legal team to “start figuring out how to make this happen.”34

28 Id.

29 A24.

30 Id. 

31 Id.

32 Id.

33 Id.

34 Id.
10

C. The Special Committee Approvesthe Reclassification

At an August 20, 2015 meeting of Facebook’s board, Zuckerberg formally proposed 

that Facebook issue a new class of non-voting shares, which would allow him to sell a 

substantial amount of stock without losing control of the company.

35

 Zuckerberg also 

disclosed that he had hired Simpson Thacher & Bartlett LLP (“Simpson Thacher”) to give 

him personal legal advice about “what creating a new class of stock might look like.”36

A couple of days later, Facebook established a special committee, which was 

composed of three purportedly-independent directors: Andreessen, Bowles, and DesmondHellman (the “Special Committee”).

37

 The board charged the Special Committee with 

evaluating the Reclassification, considering alternatives, and making a recommendation to 

the full board.

38

 The board also authorized the Special Committee to retain legal counsel, 

financial advisors, and other experts.39 

Facebook management recommended and the Special Committee hired Wachtell, 

Lipton, Rosen & Katz (“Wachtell”) as the committee’s legal advisor.40 Before meeting with 

the Special Committee, Wachtell called Zuckerberg’s contacts at Simpson Thacher to discuss 

the potential terms of the Reclassification.41 Simpson Thacher rejected as non-starters 

35 A26.

36 Id.

37 Id.

38 Id.

39 Id.

40 A27.

41 A29.
11

several features from the Google playbook, such as a stapling provision that would have 

required Zuckerberg to sell a share of his voting stock each time that he sold a share of the 

non-voting stock, and a true-up payment that would compensate Facebook’s other 

stockholdersfor the dilution of their voting power.

42

 By the timeWachtell first met with the 

Special Committee, the key contours of the Reclassification were already taking shape, and 

the Special Committee anticipated that the Reclassification would occur. Thus, the Special 

Committee focused on suggesting changes to the Reclassification rather than considering 

alternatives or threatening to reject the plan.43

Following the recommendation of Bowles, the Special Committee hired Evercore 

Group L.L.C. (“Evercore”) as its financial advisor.

44

 Evercore was founded by Roger 

Altman, a personal friend of Bowles who had helped him with various political efforts.45 

Evercore’s team leader observed that it had been hired “in the second inning” and that 

negotiations were well underway before it began to advise the Special Committee on the 

Reclassification.

46

As the negotiations progressed, the Special Committee largely agreed to give 

Zuckerberg the terms that he wanted and did not consider alternatives or demand meaningful 

42 Id.; see United Food & Commercial Workers Union v. Zuckerberg, 250 A.3d 862, 871 (Del. Ch. 

2020) (hereinafter, “Op. at__”).

43 Id.

44 A30.

45 Id.

46 Id.
12

concessions.47 For example, the Special Committee did not ask Zuckerberg to revisit any of

the terms that Simpson Thacheridentified as non-starters and did not try to place restrictions

on Zuckerberg’s ability to sell as much stock as he wanted, for whatever purpose, on any 

timetable that he desired.48 Similarly, the Special Committee asked for only small 

concessions from Zuckerberg, such as a sunset provision that was designed to discourage 

Zuckerberg from leaving the company despite the absence of any demonstrable reason to 

believe that Zuckerberg would step away from his existing Facebook duties.49

On November 9, 2015, Zuckerberg publicly reaffirmed the Giving Pledge.

50

 The 

next day, Zuckerberg circulated a draft announcement within Facebook that would disclose 

his intent to begin making large annual donations to complete the pledge.

51

 Zuckerberg 

asked for feedback on the announcement from various people, including DesmondHellman.52

 Zuckerberg also informed Bowles and Andreessen of his planned 

announcement.

53

 Bowles and Andreessen told Zuckerberg that they were “proud” of him 

for taking the Giving Pledge and announcing his plan to begin donating his wealth to 

philanthropic causes.54 Zuckerberg also told Warren Buffett, Bill Gates, and Melinda Gates 

47 See A30-40.

48 A31-32.

49 A41.

50 A33.

51 Id.

52 Id.

53 Id.

54 Id.
13

of his planned announcement.55 Melinda Gates forwarded an email that she received from 

Zuckerberg to Desmond-Hellman, adding a smiley-face emoji.56 At that time, DesmondHellman was the chief executive officer of the Gates Foundation.57

A few weeks later, Zuckerberg published a post on his Facebook page announcing 

that he planned to begin making large donations of his Facebook stock.

58

 The post noted 

that Zuckerberg intended to “remain Facebook’s CEO for many, many years to come”59 and 

did not mention that his plan hinged on the Special Committee’s approval of the 

Reclassification.

60

 The Special Committee did not try to use the public announcement as 

leverage to extract more concessions from Zuckerberg.61

Throughout the negotiations about the Reclassification, Andreessen engaged in 

facially dubious back-channel communications with Zuckerberg about the Special 

Committee’s deliberations.62 For example, during a March 2016 teleconference with the 

Special Committee, Zuckerberg pushed for an eight-year leave of absence.63 Andreessen 

sent Zuckerberg text messages during the meeting that provided live updates on which lines 

55 Id.

56 A34.

57 A27.

58 A34.

59 Id.

60 Id.

61 Id.

62 A36-40.

63 A38.
14

of argument were working64 and which were not.

65

 When confronted with these text 

messages later on, Desmond-Hellmann agreed that it appeared Andreessen had been 

“coaching” Zuckerberg through the negotiations.66

On April 13, 2016, the Special Committee recommend that the full board approve the 

Reclassification.

67

 The next day, Facebook’s full board accepted the Special Committee’s 

recommendation and voted to approve the Reclassification.

68

 Zuckerberg and Sandberg 

abstained from voting on the Reclassification.

69

D. Facebook Settles a Class Action Challenging the Reclassification

On April 27, 2016, Facebook revealed the Reclassification to the public.70 The 

announcement was timed to coincide with the company’s best-ever quarterly earnings 

report.71 Evercore’s project leader, Altman, sent Desmond-Hellmann an email remarking, 

“Anytime [Facebook] announces earnings like that, no one will care about an equity 

recapitalization.”72

On April29, 2016,the first class action was filed in the Court of Chancery challenging 

the Reclassification.

73

 Several more similar complaints were filed, and in May 2016 the 

64 See, e.g., id. (“NOW WE’RE COOKING WITH GAS.”).

65 See, e.g., id. (“This line of argument is not helping . . . .”).

66 Id.

67 A41.

68 Id.

69 A41 n.4.

70 A42.

71 Id.

72 A43.

73 Id.
15

Court of Chancery consolidated thirteen cases into a single class action (the “Reclassification 

Class Action”).74

On June 20, 2016, Facebook held its annual stockholders meeting.75 Among other 

things, the stockholders were asked to vote on the Reclassification.

76

 Zuckerberg voted all 

of his stock in favor of the plan.77 Including Zuckerberg’s votes, a majority of Facebook’s 

stockholders approved the Reclassification.

78

 More than three-quarters of the minority 

stockholders voted against the Reclassification.

79

 

On June 24, 2016, Facebook agreed that it would not go forward with the 

Reclassification while the Reclassification Class Action was pending.80 The Court of 

Chancery certified the Reclassification Class Action in April 2017 and tentatively scheduled 

the trial for September 26, 2017.81 About a week before the trial was scheduled to begin, 

Zuckerberg asked the board to abandon the Reclassification.

82

 The board agreed, and the 

next day Facebook filed a Form 8-K with the Securities and Exchange Commission 

disclosing that the company had abandoned the Reclassification and mooted the Class 

74 Id.

75 Id.

76 Id.

77 Id.

78 Id.

79 Id.

80 Id.

81 Id.

82 Id.
16

Action.83 The Form-8K also disclosed that despite abandoning the Reclassification, 

Zuckerberg planned to sell a substantial number of shares over the coming 18 months.84 

In a companion Facebook post, Zuckerberg explained that he “knew [the 

Reclassification] was going to be complicated and [that] it wasn’t a perfect solution.” The 

post continued, “Today I think we have a better one” that would allow Zuckerberg and his 

wife to “fully fund [our] philanthropy and retain voting control of Facebook for 20 years or 

more.”85 The post also clarified that this new plan would not “change [our] plans to give 

away 99% of our Facebook shares during our lives. In fact, we now plan to accelerate our 

work and sell more of those shares sooner.”86 By January 3, 2019, Zuckerberg had sold 

about $5.6 billion worth of Facebook stock without the Reclassification.

E. Tri-State Files a Class Action Seeking to Recoup the Money that 

Facebook Spent Defending and Settling the Reclassification Class Action

Facebook spent about $21.8 million defending the Reclassification Class Action, 

including more than $17 million on attorneys’ fees. Additionally, Facebook paid $68.7 

million to the plaintiff’s attorneys in the Reclassification Class Action to settle a claim under 

the corporate benefit doctrine.87

83 A43-44.

84 A44.

85 Id.

86 Id.

87 A45.
17

On September 12, 2018, Tri-State filed a derivative action in the Court of Chancery 

seeking to recoup the money that Facebook spent defending and settling the Reclassification 

Class Action.88 The complaint asserted a single count alleging that Zuckerberg, Andreessen, 

Thiel, Hastings, Bowles, and Desmond-Hellmann (collectively, the “Director Defendants”) 

breached their fiduciary duties of care and loyalty by improperly negotiating and approving 

the Reclassification.

89

 When Tri-State filed its complaint, Facebook’s board was composed 

of nine directors: Zuckerberg, Andreessen, Bowles, Desmond-Hellman, Hastings, Thiel, 

Sandberg, Chenault, and Zients(collectively, the “Demand Board”).90

The complaint alleged that demand was excused as futile under Court of Chancery 

Rule 23.1 because “the Reclassification was not the product of a valid exercise of business 

judgment” and because “a majority of the Board face[d] a substantial likelihood of liability[]

and/or lack[ed] independence.”91 Facebook and the Director Defendants moved to dismiss 

the complaint under Court of Chancery Rule 23.1 for failing to comply with the demand 

requirement.92

On October 26, 2020, the Court of Chancery issued a memorandum opinion 

dismissing the complaint for failing to comply with Rule 23.1. The court held that demand 

was required because the complaint did not contain particularized allegations raising a 

88 Op. at 875.

89 Id.

90 A46.

91 Id.

92 Op. at 869.
18

reasonable doubt that a majority of the Demand Board received a material personal benefit 

from the Reclassification, faced a substantial likelihood of liability for approving the 

Reclassification, or lacked independence from another interested party.

93

 

Tri-State appeals the Court of Chancery’s judgment dismissing the derivative 

complaint under Rule 23.1 for failing to make a demand on the board or plead with 

particularity facts establishing that demand would be futile.

II. STANDARD OF REVIEW

“[O]ur review of decisions of the Court of Chancery applying Rule 23.1 is de novo 

and plenary.”94 

III. ANALYSIS

“A cardinal precept” of Delaware law is “that directors, rather than shareholders, 

manage the business and affairs of the corporation.”95 This precept is reflected in 

Section 141(a) of the Delaware General Corporation Law (“DGCL”), which provides that 

“[t]he business and affairs of every corporation organized under this chapter shall be 

managed by or under the direction of a board of directors except as may be otherwise 

provided in this chapter or in [a corporation’s] certificate of incorporation.”96 The board’s 

authority to govern corporate affairs extends to decisions about what remedial actions a 

93 Id. at 890-900.

94 Brehm v. Eisner, 746 A.2d 244, 253 (Del. 2000).

95 Aronson v. Lewis, 473 A.2d 805, 811 (Del. 1984), overruled on other grounds 746 A.2d 244 

(Del. 2000).

96 8 Del C. § 141(a) (emphasis added).
19

corporation should take after being harmed, including whether the corporation should file a 

lawsuit against its directors, its officers, its controller, or an outsider.

97

“In a derivative suit, a stockholder seeks to displace the board’s [decision-making]

authority over a litigation asset and assert the corporation’s claim.”

98

 Thus, “[b]y its very 

nature[,] the derivative action” encroaches “on the managerial freedom of directors” by 

seeking to deprive the board of control over a corporation’s litigation asset.99 “In order for 

a stockholder to divest the directors of their authority to control the litigation asset and bring 

a derivative action on behalf of the corporation, the stockholder must” (1) make a demand 

on the company’s board of directorsor (2) show thatdemand would be futile.100 The demand 

requirement is a substantive requirement that “‘[e]nsure[s] that a stockholder exhausts his 

intracorporate remedies,’ ‘provide[s] a safeguard against strike suits,’ and ‘assure[s] that the 

stockholder affords the corporation the opportunity to address an alleged wrong without 

litigation and to control any litigation which does occur.’”

101

97 See, e.g., Lenois v. Lawal, 2017 WL 5289611, at *9 (Del. Ch. Nov. 7, 2017) (The board’s 

“managerial decision making power . . . encompasses decisions whether to initiate, or refrain from 

entering, litigation.” (quoting Zapata Corp. v. Maldonado, 430 A.2d 779, 782 (Del. 1981)) (citing 

Levine v. Smith, 591 A.2d 194, 200 (Del. 1991); Spiegel v. Buntrock, 571 A.2d 767, 772-73 

(Del. 1990); Aronson, 473 A.2d at 811)).

98 Op. at 16. 

99 Aronson, 473 A.2d at 811.

100 Lenois, 2017 WL 5289611 at *9.

101 Id. (alterations in original) (first quoting Aronson, 473 A.2d at 811-12; and then quoting Kaplan 

v. Peat, Marwick, Mitchell & Co., 540 A.2d 726, 730 (Del. 1988)).
20

Court of Chancery Rule 23.1 implements the substantive demand requirement at the 

pleading stage by mandating that derivative complaints “allege with particularity the efforts, 

if any, made by the plaintiff to obtain the action the plaintiff desires from the directors or 

comparable authority and the reasons for the plaintiff’s failure to obtain the action or for not 

making the effort.” To comply with Rule 23.1, the plaintiff must meet “stringent 

requirements of factual particularity that differ substantially from . . . permissive notice 

pleadings.”102 When considering a motion to dismiss a complaint for failing to comply with 

Rule 23.1, the Court does not weigh the evidence, must accept as true all of the complaint’s 

particularized and well-pleaded allegations, and must draw all reasonable inferences in the 

plaintiff’s favor.103

The plaintiff in this action did not make a pre-suit demand. Thus, the question before 

the Court is whether demand is excused as futile. This Court has articulated two tests to 

determine whether the demand requirement should be excused as futile: the Aronson test 

and the Rales test.104 The Aronson test applies where the complaint challenges a decision 

made by the same board that would consider a litigation demand.105 Under Aronson, 

demand is excused as futile if the complaint alleges particularized facts thatraise a reasonable 

doubt that “(1) the directors are disinterested and independent[,] [or] (2) the challenged 

102 Brehm, 746 A.2d at 254.

103 See, e.g., White v. Panic, 783 A.2d 543, 549 (Del. 2001).

104 Aronson, 473 A.2d at 805; Rales, 634 A.2d at 927.

105 See, e.g., Rales, 634 A.2d at 933.
21

transaction was otherwise the product of a valid business judgment.”106 This reflects the 

“rule . . . that where officers and directors are under an influence which sterilizes their 

discretion, they cannot be considered proper persons to conduct litigation on behalf of the 

corporation. Thus, demand would be futile.”107 

The Rales test applies in all other circumstances. Under Rales, demand is excused as 

futile if the complaint alleges particularized facts creating a “reasonable doubt that, as of the 

time the complaint is filed,” a majority of the demand board “could have properly exercised 

its independent and disinterested business judgment in responding to a demand.”108 

“Fundamentally, Aronson and Rales both ‘address the same question of whether the board 

can exercise its business judgment on the corporat[ion]’s behalf’ in considering demand.”109 

For this reason, the Court of Chancery has recognized that the broader reasoning of Rales 

encompasses Aronson, and therefore the Aronson test is best understood as a special 

application of the Rales test.110 

While Delaware law recognizes that there are circumstances where making a demand 

would be futile because a majority of the directors “are under an influence which sterilizes 

their discretion” and “cannot be considered proper persons to conduct litigation on behalf of 

106 Aronson, 473 A.2d at 814.

107 Id. (citations omitted).

108 Rales, 634 A.2d at 934.

109 Lenois, 2017 WL 5289611, at *9 (quoting Kaplan, 540 A.2d at 730).

110 See, e.g., Hughes v. Hu, 2020 WL 1987029, at *12 (Del. Ch. Apr. 27, 2020); In re Wal-Mart 

Stores, Inc. Del. Deriv. Litig., 2016 WL 2908344, at *11 (Del. Ch. May 13, 2016); David B. Shaev 

Profit Sharing Account v. Armstrong, 2006 WL 391931, at *4 (Del. Ch. Feb. 13, 2006).
22

the corporation,”111 the demand requirement is not excused lightly because derivative 

litigation upsets the balance of power that the DGCL establishes between a corporation’s 

directors and its stockholders. Thus, the demand-futility analysis provides an important 

doctrinal check that ensures the board is not improperly deprived of its decision-making 

authority, while at the same time leaving a path for stockholders to file a derivative action 

where there is reason to doubt that the board could bring its impartial business judgment to 

bear on a litigation demand. 

In this case, Tri-State alleged that demand was excused as futile for several reasons, 

including that the board’s negotiation and approval of the Reclassification would not be 

“protected by the business judgment rule” because “[t]heir approval was not fully informed” 

or “duly considered,”112 and that a majority of the directors on the Demand Board lacked 

independence from Zuckerberg.113 The Court of Chancery held that Tri-State failed to plead 

with particularity facts establishing that demand was futile and dismissed the complaint

because it did not comply with Court of Chancery Rule 23.1.114

111 Aronson, 473 A.2d at 814.

112 A47. The complaint also contains conclusory allegations that the Director Defendants acted in 

bad faith. Id. (The Director Defendants’ “approval was not fully informed, not duly considered, and 

was not made in good faith for the best interests of Facebook.”). On appeal, Tri-State concedes that 

the complaint did not plead with particularity that a majority of the Demand Board was subject to 

liability for acting in bad faith. Compare Op. at 895-900 (holding that the complaint did not allege 

with particularity bad faith claims against Hastings, Thiel, or Bowles) with Opening Br. (not 

contesting this holding). Accordingly, the Court does not address whether demand is excused as 

futile under the second prong of the Aronson test because a majority of the Demand Board 

committed non-exculpated breaches of their fiduciary duties.

113 See A45-63.

114 Op. at 900-01.
23

On appeal, Tri-State raises two issues with the Court of Chancery’s demand-futility 

analysis. First, Tri-State argues that the Court of Chancery erred by holding that exculpated 

care violations do not satisfy the second prong of the Aronson test.115 Second, Tri-State 

argues that its complaint contained particularized allegations establishing that a majority of 

the directors on the Demand Board were beholden to Zuckerberg.116

For the reasons provided below, this Court affirms the Court of Chancery’s judgment. 

A. Exculpated Care Violations Do Not Satisfy Aronson’s Second Prong

The directors and officers of a Delaware corporation owe two overarching fiduciary 

duties—the duty of care and the duty of loyalty.

117

 “[P]redicated upon concepts of gross 

negligence,” the duty of care requires that fiduciaries inform themselves of material 

information before making a business decision and act prudently in carrying out their 

duties.118 The duty of loyalty “‘requires an undivided and unselfish loyalty to the 

corporation’ and ‘demands that there shall be no conflict between duty and self-interest.’”119 

Tri-State alleges that the Director Defendants breached their duty of care in 

negotiating and approving the Reclassification. Section 102(b)(7) of the DGCL authorizes 

115 Opening Br. 23-36.

116 Id. at 37-47.

117 See, e.g., Dohmen v. Goodman, 234 A.3d 1161 (Del. 2020) (“Directors of Delaware corporations 

owe duties of care and loyalty to the corporation and its stockholders.” (citing Stone ex 

rel. AmSouth Bancorporation v. Ritter, 911 A.2d 362, 370 (Del. 2006))); Gantler v. Stephens, 965 

A.2d 695, 708-709 (Del. 2009) (holding “that corporate officers owe fiduciary duties that are 

identical to those owed by corporate directors”).

118 See, e.g., Aronson, 473 A.2d at 812.

119 City of Fort Myers Gen. Emps.’ Pension Fund v. Haley, 235 A.3d 702, 721 (Del. 2020)(citations 

omitted) (quoting Guth v. Loft, 5 A.2d 503, 510 (Del. 1939)).
24

corporations to adopt a charter provision insulating directors from liability for breaching their 

duty of care:

“[T]he certificate of incorporation may . . . contain any or all of 

the following matters:

(7) A provision eliminating or limiting the personal 

liability of a director to the corporation or its stockholders for 

monetary damages for breach of fiduciary duty as a director, 

provided that such provision shall not eliminate or limit the 

liability of a director: (i) For any breach of the director’s duty of 

loyalty to the corporation or its stockholders; (ii) for acts or 

omissions not in good faith or which involve intentional 

misconduct or a knowing violation of law; . . . or (iv) for any 

transaction from which the director derived an improper 

personal benefit.

Facebook’s charter contains a Section 102(b)(7) clause;120 as such, the Director 

Defendants face no risk of personal liability from the allegations asserted in this action. Thus, 

Tri-State’s demand-futility allegations raise the question whether a derivative plaintiff can 

rely on exculpated care violations to establish that demand is futile under the second prong 

of the Aronson test. The Court of Chancery held that exculpated care claims do not excuse 

demand because the second prong of the Aronson test focuses on whether a director faces a 

substantial likelihood of liability.

121

 Tri-State argues that this analysis was wrong because 

120 App. to Answering Br. 77 (“Limitation of Liability. To the fullest extent permitted by law, no 

director of the corporation shall be personally liable to the corporation or its stockholders for 

monetary damages for breach of fiduciary duty as a director. Without limiting the effect of the 

preceding sentence, if the General Corporation Law is hereafter amended to authorize the further 

elimination or limitation of the liability of a director, then the liability of a director of the corporation 

shall be eliminated or limited to the fullest extent permitted by the General Corporation Law, as so 

amended.” (emphasis removed)).

121 Op. at 878-86.
25

Aronson’s second prong focuses on whether the challenged transaction “satisfies the 

applicable standard of review,” not on whether directors face a substantial likelihood of 

liability.122

The following discussion is divided into three parts. The first part affirms the Court 

of Chancery’s holding that, in light of subsequent developments, exculpated care claims do 

not excuse demand under Aronson’s second prong. The second part explains why Tri-State’s 

counterarguments do not change our analysis. The third part adopts the Court of Chancery’s 

three-part test as the universal test for demand futility. 

1. The second prong of Aronson focuses on whether the directors face 

a substantial likelihood of liability

The main question on appeal is whether allegations of exculpated care violations can 

establish that demand is excused under Aronson’s second prong. According to Tri-State, the 

second prong excuses demand whenever the complaint raises a reasonable doubt that the 

challenged transaction was a valid exercise of business judgment, regardless of whether the 

directors face a substantial likelihood of liability for approving the challenged transaction. 

Thus, exculpated care violations can establish that demand is futile.123

Tri-State’s argument hinges on the plain language of Aronson’s second prong, which 

focuses on whether “the challenged transaction was . . . the product of a valid business 

judgment”:

122 Opening Br. 26.

123 See id. at 23-36.
26

[I]n determining demand futility, the Court of Chancery 

. . . must decide whether, under the particularized facts alleged, 

a reasonable doubt is created that: (1) the directors are 

disinterested and independent and (2) the challenged 

transaction was otherwise the product of a valid business 

judgment. Hence, the Court of Chancery must make two 

inquiries, one into the independence and disinterestedness of the 

directors and the other into the substantive nature of the 

challenged transaction and the board’s approval thereof.

124

Later opinions issued by this Court contain similar language that can be read to 

suggest that Aronson’s second prong focuses on the propriety of the challenged 

transaction.

125

 These passages do not address, however, why Aronson used the standard of 

review as a proxy for whether the board could impartially consider a litigation demand. The 

likely answer is that, before the General Assembly adopted Section 102(b)(7) in 1995,126

rebutting the business judgment rule through allegations of care violations exposed directors 

to a substantial likelihood of liability. Thus, even if the demand board was independent and 

124 Aronson, 473 A.2d at 814 (emphasis added).

125 See, e.g., Levine v. Smith, 591 A.2d 194, 205-06 (Del. 1991) (“Assuming a plaintiff cannot prove 

that directors are interested or otherwise not capable of exercising independent business judgment, a 

plaintiff in a demand futility case must plead particularized facts creating a reasonable doubt as to 

the ‘soundness’ of the challenged transaction sufficient to rebut the presumption that the business 

judgment rule attaches to the transaction.”), overruled on other grounds by Brehm v. Eisner, 

746 A.2d 244 (Del. 2000); C.L. Grimes v. Donald, 673 A.2d 1207, 1216 (Del. 1996) (One ground 

for alleging with particularity that demand would be futile is that a ‘reasonable doubt’ exists that the 

board is capable of making an independent decision to assert the claim if demand were made. The 

basis for claiming demand excusal would normally be that . . . the underlying transaction is not the 

product of a valid exercise of business judgment.” (citations omitted)), overruled on other grounds

by Brehm, 746 A.2d at 244. But see Kaplan, 540 A.2d at 732 (“The demand futility test established 

in Aronson provides a standard for determining whether the directors who approved the challenged 

transaction are under an influence which precludes them from being ‘considered the proper persons 

to conduct the litigation on behalf of the corporation.” (quoting Aronson, 473 A.2d at 814)).

126 1995 Delaware Laws Ch. 79 (S.B. 175).
27

disinterested with respect to the challenged transaction, the litigation presented a threat that 

would “sterilize [the board’s] discretion” with respect to a demand.127

Aronson supports this conclusion. For example, in Aronson the Court noted that,

although naming directors as defendants is not enough to establish that demand would be 

futile, “in rare cases a transaction may be so egregious on its face that board approval cannot 

meet the test of business judgment, and a substantial likelihood of liability therefore 

exists. . . . [I]n that context demand is excused.”128 This passage helps to illuminate the 

connection that the Court drew between rebutting the business judgment rule and the board’s 

ability to consider a litigation demand. At that time, if the business judgment rule did not 

apply, allowing the derivative litigation to go forward would expose the directors to a 

substantial likelihood of liability for breach-of-care claims supported by well-pleaded factual 

allegations. It is reasonable to doubt that a director would be willing to take that personal 

risk. Thus, demand is excused. 

On the other hand, if the business judgment rule would apply, allowing the derivative 

litigation to go forward would expose the directors to a minimal threat of liability. A remote 

threat of liability is not a good enough reason to deprive the board of control over the 

corporation’s litigation assets. Thus, demand is required. 

127 Aronson, 473 A.2d at 814.

128 Id. at 815 (emphasis added) (citing Gimbel v. Signal Cos., Inc., 316 A.2d 599 (Del. Ch. 1974), 

aff’d 316 A.2d 619; Cottrell v. Pawcatuck, Co., 128 A.2d 225 (Del. 1956)).
28

Although not unanimous,129 the weight of Delaware authority since the enactment of 

Section 102(b)(7) supports holding that exculpated care violations do not excuse demand 

under Aronson’s second prong.130 For example, in Lenois, the Court of Chancery held that

the second prong focuses on whether director-defendants face a substantial likelihood of 

liability:

[W]here an exculpatory charter provision exists, demand is 

excused as futile under the second prong of Aronson with a 

showing that a majority of the board faces a substantial 

likelihood of liability for non-exculpated claims. That a nonexculpated claim may be brought against less than a majority of 

the board or some other individual at the company, or that the 

board committed exculpated duty of care violations alone, will 

not affect the board’s right to control a company’s litigation.131

In reaching that conclusion, Lenois examined several other Court of Chancery 

decisions holding that Section 102(b)(7) provisions are relevant when assessing whether 

demand should be excused under Aronson’s second prong:

• In Higher Education Management Group, Inc v. Matthews, the Court of 

Chancery noted that because the corporation’s charter contained a 

Section 102(b)(7) provision, and the complaint did “not support an inference of 

bad faith conduct by a majority of the Director Defendants,” demand was required 

because “there would be no recourse for Plaintiffs and no substantial likelihood of 

liability if the Director Defendants’ only failing was that they had not become fully 

informed.”

132

129 See McPadden v. Sidhu, 964 A.2d 1262, 1271-73 (Del. Ch. 2008) (holding that exculpated 

breach-of-care claims can excuse demand under the second prong of the Aronson test).

130 See, e.g., Lenois, 2017 WL 5289611, at *12-14 (collecting cases).

131 Id. at *14.

132 2014 WL 5573325, at *11, *11 n.63 (Del. Ch. Nov. 3, 2014).
29

• In Pfeiffer v. Leedle, the Court of Chancery held that demand was “excused under 

the second prong of Aronson” because the board committed “breaches of the duty 

of loyalty” that “cannot be exculpated” under the charter.133

• In In re Goldman Sachs, the Court of Chancery noted that where a corporation’s 

charter contains a Section 102(b)(7) provision, the second prong of Aronson 

requires that the plaintiff “plead particularized facts that demonstrate that the 

directors acted with scienter; i.e., there was an ‘intentional dereliction of duty’ or 

a ‘conscious disregard’ for their responsibilities, amount to bad faith.”134 In other 

words, to establish that making a demand would be futile under the second prong 

of Aronson a derivative complaint would have to raise a reasonable doubt that the 

directors faced a substantial likelihood of liability for committing non-exculpated 

breaches of their fiduciary duties.135

• In In re Lear, the Court of Chancery reached the same conclusion that where a 

corporation’s charter has a Section 102(b)(7) provision, “the plaintiffs [must] 

plead particularized facts supporting an inference that the directors committed a 

breach of their fiduciary duty of loyalty” by “act[ing] in bad faith.”136

• In Disney I, the Court of Chancery held that making a demand would be futile 

because the complaint raised a reasonable “doubt whether the board’s actions 

were taken honestly and in good faith,” exposing the directors to liability for nonexculpated breaches of their fiduciary duties.137

Several opinions issued after Lenois support the same analysis:

138

• In Ellis v. Gonzalez, the Court of Chancery held that because the corporation’s 

charter contained a Section 102(b)(7) provision, “under either Aronson or Rales, 

the question . . . is the same: Does the Complaint adequately allege that a majority 

of . . . [the] board faces a substantial likelihood of liability for breaching the duty 

of loyalty?”139

133 2013 WL 5988416, at *9 (Del. Ch. Nov. 8, 2013).

134 2011 WL 4826104, at *12 (Del. Ch. Oct. 12, 2011).

135 See id.

136 967 A.2d 640, 657 (Del. Ch. 2008).

137 825 A.2d 275, 286 (Del. Ch. 2003).

138 The Court acknowledges that some of the opinions applied the Rales test for demand futility.

139 2018 WL 3360816, at *6 (Del. Ch.July 10, 2018) (citations omitted).
30

• In Steinberg v. Bearden, the Court of Chancery’s demand-futility analysisfocused 

on whether “a majority of the Board face[d] a substantial threat of personal 

liability . . .such that the Board could not consider a demand impartially.”

140

This Court’s opinion in In re Cornerstone Therapeutics, Inc. Stockholder Litigation, 

changed the landscape even more.

141

 BeforeCornerstone, there was some uncertainty about 

how to apply a Section 102(b)(7) provision when deciding a motion to dismiss under Court 

of Chancery Rule 12(b)(6). Some courts held that an exculpation clause could warrant 

dismissing a complaint alleging care claims.142 Others, particularly where the entire fairness 

standard of review might apply, ruled that more factual development was needed to 

determine whether the director’s breach would be exculpated.143 Thus, a complaint alleging 

exculpated care violations might compromise a director’s ability to impartially consider a 

litigation demand by exposing them to the distraction of protracted litigation, public scrutiny, 

and potential reputational harm, even if the risk was low that the director would be found 

liable for breaching their fiduciary duties.

140 2018 WL 2434558, at *8-9 (Del. Ch. May 30, 2018).

141 115 A.3d 1173, 1186-87 (Del. 2015) (“[W]hen the plaintiffs have pled no facts to support an 

inference that any of the independent directors breached their duty of loyalty, fidelity to the purpose 

of Section 102(b)(7) requires dismissal of the complaint against those directors.”).

142 See, e.g., Pfeiffer, 2013 WL 5988416, at *9 (considering a 102(b)(7) provision when deciding to 

dismiss a complaint for failing to comply with Rule 23.1); Malpiede v. Townson, 780 A.2d 1075, 

1094-96 (holding that the Court could apply a 102(b)(7) provision clause when considering a motion 

to dismiss a suit challenging an arm’s length merger approved by disinterested stockholders).

143 See, e.g., Emerald P’rs v. Berlin, 726 A.2d 1215, 1223 (Del. 1999) (holding that a 

Section 102(b)(7) provision did not justify granting summary judgment because there were disputed 

facts about whether the directors committed non-exculpated breaches of their fiduciary duties).
31

Cornerstone eliminated any uncertainty and held that where a corporation’s charter 

contains a Section 102(b)(7) provision, “[a] plaintiff seeking only monetary damages must 

plead non-exculpated claims against a director who is protected by an exculpatory charter 

provision to survive a motion to dismiss, regardless of the underlying standard of review for 

the board’s conduct.”

144

 Thus, under current law a Section 102(b)(7) provision removes the 

threat of liability and protracted litigation for breach of care claims. As such, Cornerstone 

eliminated “any continuing vitality from Aronson’s use of the standard of review for the 

challenged transaction as a proxy for whether directors face a substantial likelihood of 

liability sufficient to render demand futile.”

145

 

Accordingly, this Court affirms the Court of Chancery’s holding that exculpated care 

claims do not satisfy Aronson’s second prong. This Court’s decisions construing Aronson 

have consistently focused on whether the demand board has a connection to the challenged 

transaction that would render it incapable of impartially considering a litigation demand.146 

144 See Cornerstone, 115 A.3d at 1186-87.

145 Op. at 885. 

146 See, e.g., Levine, 591 A.2d at 205 (“The premise of a shareholder claim of futility of demand is 

that a majority of the board of directors either has a financial interest in the challenged transaction or 

lacks independence or otherwise failed to exercise due care. On either showing, it may be inferred 

that the Board is incapable of exercising its power and authority to pursue the derivative claims 

directly.”); C.L. Grimes, 673 A.2d at 1216 (“One ground for alleging with particularity that demand 

would be futile is that a ‘reasonable doubt’ exists that the board is capable of making an independent 

decision to assert the claim if demand were made.” (quoting Aronson, 473 A.2d at 814)); see also 

Wood v. Baum, 953 A.2d 136, 140 (Del. 2008) (“A stockholder may not pursue a derivative suit to 

assert a claim of the corporation unless the stockholder (a) [makes a demand] . . .; or (b) establishes 

that pre-suit demand is excused because the directors are deemed incapable of making an impartial 

decision regarding the pursuit of the litigation.” (citation omitted)).
32

When Aronson was decided, raising a reasonable doubt that directors breached their duty of 

care exposed them to a substantial likelihood of liability and protracted litigation, raising 

doubt as to their ability to impartially consider demand. The ground has since shifted, and 

exculpated breach of care claims no longer pose a threat that neutralizes director discretion. 

These developments must be factored into demand-futility analysis, and Tri-State has failed 

to provide a reasoned explanation of why rebutting the business judgment rule should 

automatically render directors incapable of impartially considering a litigation demand given 

the current landscape. For these reasons, the Court of Chancery’s judgment is affirmed. 

2. Tri-State’s other arguments do not change the analysis

Tri-State raises a few more counterarguments that do not change the Court’s analysis. 

First, Tri-State argues that construing the second prong of Aronson to focus on 

whether directors face a substantial likelihood of liability erases any distinction between the 

two prongs of the Aronson test.147 The argument goes like this. If directors face a substantial 

likelihood of liability for approving the challenged transaction, then they are interested with 

respect to the challenged transaction. The first prong of Aronson already addresses whether 

directors are interested in the challenged transaction. Thus, construing the second prong to 

require a substantial risk of liability makes it redundant.

148

 This argument misconstrues

Aronson. The first prong of Aronson focuses on whether the directors had a personal interest

147 See Opening Br. 27-28.

148 See id.
33

in the challenged transaction (i.e., a personal financial benefit from the challenged transaction 

that is not equally shared by the stockholders).149 This is a different consideration than 

whether the directors face a substantial likelihood of liability for approving the challenged 

transaction, even if they received nothing personal from the challenged transaction. The 

second prong excuses demand in that circumstance. Thus, the first and second prongs of 

Aronson perform separate functions, even if those functions are complementary. 

Second, Tri-State argues that this holding places an unfair burden on plaintiffs and 

will fail to deter controllers from pressuring boards to approve unfair transactions.150

Although not entirely clear, Tri-State appears to argue that because the entire fairness 

standard of review applies ab initio to a conflicted-controller transaction,151 demand is 

automatically excused under Aronson’s second prong. As the Court of Chancery noted 

below, some cases have suggested that demand is automatically excused under Aronson’s 

second prong if the complaint raises a reasonable doubt that the business judgment standard 

of review will apply, even if the business judgment rule isrebutted for a reason unrelated to 

the conduct or interests of a majority of the directors on the demand board.

152

 The Court of 

Chancery’s case law developed in a different direction, however, concluding that demand is 

not futile under the second prong of Aronson simply because entire fairness applies ab initio 

149 473 A.2d at 814.

150 See Opening Br. 35-36.

151 See, e.g., Kahn v. Tremont Corp., 694 A.2d 422, 428-29 (Del. 1997).

152 Op. 880-882.
34

to a controlling stockholder transaction. As the Court of Chancery has explained, the theory 

that demand should be excused simply because an alleged controlling stockholder stood on 

both sides of the transaction is “inconsistent with Delaware Supreme Court authority that 

focuses the test for demand futility exclusively on the ability of a corporation’s board of 

directors to impartially consider a demand to institute litigation on behalf of the 

corporation—including litigation implicating the interests of a controlling stockholder.”

153

 

Further, Tri-State’s argument presumes that a stockholder has a general right to 

control corporate claims. Not so. The directors are tasked with managing the affairs of the 

corporation, including whether to file action on behalf of the corporation. A stockholder can 

only displace the directorsif the stockholder alleges with particularity that “the directors are 

under an influence which sterilizes their discretion” such that “they cannot be considered 

proper persons to conduct litigation on behalf of the corporation.”154 As such, enforcing the 

demand requirement where a stockholder has only alleged exculpated conduct does not 

“undermine shareholder rights;” instead, it recognizes the delegation of powers outlined in 

the DGCL. 

Finally, Tri-State’s argument collapses the distinction between the board’s capacity to 

consider a litigation demand and the propriety of the challenged transaction. It is entirely 

153 Teamsters Union 25 Health Servs. & Ins. Plan v. Baiera, 2015 WL 4192107, at *1 (Del. 

Ch.July 13, 2015); see, e.g., In re BGC P’rs, Inc., 2019 WL 4745121, at *7-9 (Del. Ch. Sept. 30, 

2019) (rejecting the plaintiff’s argument that demand was automatically excused under Aronson’s 

second prong because the derivative complaint challenged a conflicted-controller transaction). 

154Aronson, 473 A.2d at 814.
35

possible that an independent and disinterested board, exercising its impartial business 

judgment, could decide that it is not in the corporation’s best interest to spend the time and 

money to pursue a claim that is likely to succeed. Yet, Tri-State asks the Court to deprive 

directors and officers of the power to make such a decision, at least where the derivative 

action would challenge a conflicted-controller transaction. This rule may have its benefits, 

but it runs counter to the “cardinal precept” of Delaware law that independent and 

disinterested directors are generally in the best position to manage a corporation’s affairs, 

including whether the corporation should exercise its legal rights.155

For these reasons, Tri-State cannot satisfy the demand requirement by pleading—for 

reasons unrelated to the conduct or interests of a majority of the directors on the demand 

board—that the entire fairness standard of review would apply to the Reclassification. 

Rather, to satisfy Rule 23.1, Tri-State must plead with particularity facts establishing that a 

majority of the directors on the demand board are subject to an influence that would sterilize 

their discretion with respect to the litigation demand.

Third, Tri-State argues that this holding is contrary to Brehm v. Eisner,

156 H&N 

Management Group v. Couch,

157 and McPadden.158

 This Court’s opinion in Brehm contains 

language that can be read to suggest that the second prong of the Aronson test focuses on the 

155 See Aronson, 473 A.2d at 811.

156 746 A.2d 244 (Del. 2000).

157 2017 WL 3500245 (Del. Ch. Aug. 1, 2017).

158 964 A.2d at 1262.
36

propriety of the challenged transaction rather than on whether the directors face a substantial 

likelihood of liability for approving the transaction. For example, the Court’s demand-futility 

analysis focused on duty of care violations even though the opinion was issued after the 

legislature adopted Section 102(b)(7) and it appears that Disney’s corporate charter had an 

exculpation clause.159 Nonetheless, the Court did not hold that exculpated claims can 

establish demand futility,160 and on remand the plaintiff relied on non-exculpated claims to 

establish that demand was futile.161 Thus,Brehm did not hold that exculpated care violations 

can excuse demand under Aronson’s second prong.

H&N Management is inapposite because the corporation’s charter did not exculpate 

directors for breaches of the duty of care.

162

 Thus, the Court of Chancery did not address 

whether exculpated claims could excuse demand under the second prong of the Aronson test.

This leaves McPadden, which appears to be the only Delaware decision squarely 

holding that exculpated care violations can excuse demand under the second prong of 

Aronson.

163

 It is understandable that the Court of Chancery reached this holding given the 

159 See Brehm, 746 A.2d at 259 (“Pre-suit demand will be excused in a derivative suit only if the 

Court of Chancery in the first instance, and this Court in its de novo review, conclude that the 

particularized facts in the complaint create a reasonable doubt that the informational component of 

the directors’ decision[-]making process, measured by concepts of gross negligence, included 

consideration of all material information reasonably available.”); In re Walt Disney Co. Derivative 

Litig., 825 A.2d 275, 290 (Del. Ch. 2003) (stating that Disney had an exculpation clause).

160 Brehm, 746 A.2d at 262-63.

161 In re Walt Disney, 825 A.2d at 289-90.

162 2017 WL 3500245, at *7 (“Defendants do not benefit from a provision that exculpates them for 

grossly negligent conduct . . . .”).

163 964 A.2d at 1270-75 (holding that demand was excused under the second prong of Aronson 

“because plaintiff has pleaded a duty of care violation with particularity sufficient to create a 
37

plain language of Aronson. Nonetheless, given the subsequent developments in Delaware 

law, it is our view that exculpated care violations no longer pose a sufficient threat to excuse 

demand under the second prong of the Aronson test. Rather, the second prong requires 

particularized allegations raising a reasonable doubt that a majority of the demand board is 

subject to a sterilizing influence because directors face a substantial likelihood of liability for

engaging in the conduct that the derivative claim challenges.

3. This Court adopts the Court of Chancery’s three-part test for 

demand futility

This issue raises one more question—whether the three-part test for demand futility 

the Court of Chancery applied below is consistent with Aronson, Rales, and their progeny. 

The Court of Chancery noted that turnover on Facebook’s board, along with a director’s 

decision to abstain from voting on the Reclassification,made it difficult to apply the Aronson 

test to the facts of this case:

The composition of the Board in this case exemplifies the 

difficulties that the Aronson test struggles to overcome. The 

Board has nine members, six of whom served on the Board 

when it approved the Reclassification. Under a strict reading of 

Rales, because the Board does not have a new majority of 

directors, Aronson provides the governing test. But one of those 

six directors abstained from the vote on the Reclassification, 

meaning that the Aronson analysis only has traction for five of 

the nine. Aronson does not provide guidance about what to do 

with either the director who abstained or the two directors who 

joined the Board later. The director who abstained from voting 

on the Reclassification suffers from other conflicts that renders 

reasonable doubt that the transaction at issue was the product of a valid exercise of business 

judgment,” but dismissing the complaint as to certain directors due to a Section 102(b)(7) provision). 
38

her incapable of considering a demand, yet a strict reading of 

Aronson only focuses on the challenged decision and therefore 

would not account for those conflicts. Similarly, the plaintiff 

alleges that one of the directors who subsequently joined the 

Board has conflicts that render him incapable of considering a 

demand, but a strict reading of Aronson would not account for 

that either. Precedent thus calls for applying Aronson, but its 

analytical framework is not up to the task. The Rales test, by 

contrast, can accommodate all of these considerations.164

The court also suggested that in light of the developments discussed above, “Aronson 

is broken in its own right because subsequent jurisprudential developments have rendered 

non-viable the core premise on which Aronson depends—the notion that an elevated 

standard of review standing alone results in a substantial likelihood of liability sufficient to 

excuse demand. Perhaps the time has come to move on from Aronson entirely.”165

To address these concerns, the Court of Chancery applied the following three-part test 

on a director-by-director basis to determine whether demand should be excused as futile:

(i) whether the director received a material personal 

benefit from the alleged misconduct that is the subject of the 

litigation demand;

(ii) whether the director would face a substantial 

likelihood of liability on any of the claims that are the subject of 

the litigation demand; and 

(iii) whether the director lacks independence from 

someone who received a material personal benefit from the 

alleged misconduct that is the subject of the litigation demand 

164 Op. at 890.

165 Id. at 889-90.
39

or who would face a substantial likelihood of liability on any of 

the claims that are the subject of the litigation demand.166

This approach treated “Rales as the general demand futility test,” while “draw[ing] upon 

Aronson-like principles when evaluating whether particular directors face a substantial 

likelihood of liability as a result of having participated in the decision to approve the 

Reclassification.”167 

This Court adopts the Court of Chancery’s three-part test as the universal test for 

assessing whether demand should be excused as futile. When the Court decided Aronson, it 

made sense to use the standard of review to assess whether directors were subject to an 

influence that would sterilize their discretion with respect to a litigation demand. Subsequent 

changes in the law have eroded the ground upon which that framework rested. Those 

changes cannot be ignored, and it is both appropriate and necessary that the common law 

evolve in an orderly fashion to incorporate those developments. The Court of Chancery’s 

three-part test achieves that important goal. Blending the Aronson test with the Rales test is 

appropriate because “both ‘address the same question of whether the board can exercise its 

business judgment on the corporat[ion]’s behalf’ in considering demand”;

168 and the refined 

test does not change the result of demand-futility analysis.169 

166 Id. at 890.

167 Id.

168 Lenois, 2017 WL 5289611, at *9 (quoting Kaplan, 540 A.2d at 730). 

169 If a director is interested in the challenged transaction—or lacks independence from someone 

else who is interested in the transaction—then the first prong of Aronson excuses demand with 

respect to that director. Aronson, 473 A.2d at 814. The first and third prongs of the refined three-
40

Further, the refined test “refocuses the inquiry on the decision regarding the litigation 

demand, rather than the decision being challenged.”170 Notwithstanding text focusing on the 

propriety of the challenged transaction, this approach is consistent with the overarching 

concern that Aronson identified: whether the directors on the demand board “cannot be 

considered proper persons to conduct litigation on behalf of the corporation” because they 

“are under an influence which sterilizes their discretion.”171 The purpose of the demandfutility analysis is to assess whether the board should be deprived of its decision-making 

authority because there is reason to doubt that the directors would be able to bring their 

impartial business judgment to bear on a litigation demand. That is a different consideration 

than whether the derivative claim is strong or weak because the challenged transaction is 

likely to pass or fail the applicable standard of review. It is helpful to keep those inquiries 

separate. And the Court of Chancery’s three-part test is particularly helpful where, like here, 

board turnover and director abstention make it difficult to apply the Aronson test as written.

Finally, because the three-part test is consistent with and enhances Aronson, Rales, 

and their progeny, the Court need not overrule Aronson to adopt this refined test, and cases 

properly construing Aronson, Rales, and their progeny remain good law.

part test yield the same result. Op. at 890. Similarly, if the derivative litigation would expose a 

director to a substantial likelihood of liability, then the demand requirement is excused as futile with 

respect to that director under the second prong of the Aronson test and the second prong of the refined 

test. See Aronson, 473 A.2d at 814; Op. at 890. Thus, the refined three-part test excuses demand 

whenever the Aronson test would excuse demand.

170 Op. at 887.

171 Aronson, 473 A.2d at 814.
41

Accordingly, from this point forward, courtsshould ask the following three questions 

on a director-by-director basis when evaluating allegations of demand futility:

(i) whether the director received a material personal 

benefit from the alleged misconduct that is the subject of the 

litigation demand;

(ii) whether the director faces a substantial likelihood of 

liability on any of the claims that would be the subject of the 

litigation demand; and 

(iii) whether the director lacks independence from 

someone who received a material personal benefit from the 

alleged misconduct that would be the subject of the litigation 

demand or who would face a substantial likelihood of liability 

on any of the claims that are the subject of the litigation demand.

If the answer to any of the questionsis “yes” for at least half of the members of the demand 

board, then demand is excused as futile. It is no longer necessary to determine whether the 

Aronson test or the Rales test governs a complaint’s demand-futility allegations. 

B. The Complaint Does Not Plead with Particularity Facts Establishing that 

Demand Would Be Futile 

The second issue on appeal is whether Tri-State’s complaint pleaded with 

particularity facts establishing that a litigation demand on Facebook’s board would be futile. 

The Court resolves this issue by applying the three-part test adopted above on a director-bydirector basis.

The Demand Board was composed of nine directors. Tri-State concedes on appeal 

that two of those directors, Chenault and Zients, could have impartially considered a 
42

litigation demand.

172

 And Facebook does not argue on appeal that Zuckerberg, Sandberg, 

or Andreessen could have impartially considered a litigation demand.173 Thus, in order to 

show that demand is futile, Tri-State must sufficiently allege that two of the following 

directors could not impartially consider demand: Thiel, Hastings, Bowles, and DesmondHellmann. 

Tri-State concedes on appeal that neither Thiel, Hastings, Bowles, nor DesmondHellmann had a personal interest in the Reclassification.

174

 This eliminates the possibility 

that demand could be excused under the first prong of the demand-futility test, as none of the 

remaining four directors obtained a material personal benefit from the alleged misconduct 

that is the subject of the litigation demand.

Similarly, there is no dispute that Facebook has a broad Section 102(b)(7) 

provision;

175 and Tri-State concedes on appeal that the complaint does not plead with 

particularity that Thiel, Hastings, Bowles, or Desmond-Hellmann committed a nonexculpated breach of their fiduciary duties with respect to the Reclassification.

176

 This 

172 Compare Op. at 895-900 (holding that the complaint did not establish that Chenault or Zients 

lacked independence) with Opening Br. (not challenging that holding).

173 Compare Op. at 893 (assuming that Zuckerberg, Sandberg, and Andreessen were incapable of 

impartially considering a litigation demand) with Answering Br. (neither conceding nor challenging 

that assumption for the purpose of considering the motion to dismiss).

174 Compare Op. 892-901 (holding that the complaint did not allege that these directors had a 

personal interest); with Opening Br. (not contesting that holding).

175 See, e.g., App. to Answering Br. 77.

176 Compare Op. 892-901(holding that the complaint did not allege with particularity that these 

directors committed non-exculpated breaches of their fiduciary duties); with Opening Br. (not 

contesting that holding).
43

eliminates the possibility that demand could be excused under the second prong of the 

demand-futility test, as none of the remaining four directors would face a substantial 

likelihood of liability on any of the claims that would be the subject of the litigation demand. 

This leaves one unanswered question: whether the complaint pleaded with

particularity facts establishing that two of the four remaining directors lacked independence 

from Zuckerberg. 

“The primary basis upon which a director’s independence must be measured is 

whether the director’s decision is based on the corporate merits of the subject before the 

board, rather than extraneous considerations or influences.”177 Whether a director is 

independent “is a fact-specific determination” that depends upon “the context of a particular 

case.”178 To show a lack of independence, a derivative complaint must plead with 

particularity facts creating “a reasonable doubt that a director is . . . so ‘beholden’ to an 

interested director . . . that his or her ‘discretion would be sterilized.’”179 

177 Beam ex rel. Martha Stewart Living Omnimedia, Inc. v. Stewart, 845 A.2d 1040, 1049 

(Del. 2004) (citing Rales, 634 A.2d at 936); see also Sandys v. Pincus, 152 A.3d 124, 128 

(Del. 2016) (“At the pleading stage, a lack of independence turns on ‘whether the plaintiffs have pled 

facts from which the director’s ability to act impartially on a matter important to the interested party 

can be doubted because that director may feel either subject to the interested party’s dominion or 

beholden to that interested party.’” (quoting Del. C’ty Empls. Ret. Fund v. Sanchez, 124 A.3d 1017, 

1024 n.25 (Del. 2015))).

178 Beam, 845 A.2d at 1049.

179 Id. at 1050 (quoting Rales, 634 A.2d at 936).
44

“A plaintiff seeking to show that a director was not independent must satisfy a 

materiality standard.”

180 The plaintiff must allege that “the director in question had ties to 

the person whose proposal or actions he or she is evaluating that are sufficiently substantial 

that he or she could not objectively discharge his or her fiduciary duties.”181 In other words, 

the question is “whether, applying a subjective standard, those ties were material, in the sense 

that the alleged ties could have affected the impartiality of the individual director.”182 “Our 

law requires that all the pled facts regarding a director’s relationship to the interested party 

be considered in full context in making the, admittedly imprecise, pleading stage 

determination of independence.”183 And while “the plaintiff is bound to plead particularized 

facts in . . . a derivative complaint, so too is the court bound to draw all inferences from those 

particularized facts in favor of the plaintiff, not the defendant, when dismissal of a derivative 

complaint is sought.”184

“A variety of motivations, including friendship, may influence the demand futility 

inquiry. But, to render a director unable to consider demand, a relationship must be of a bias180 Kahn v. M&F Worldwide Corp., 88 A.3d 635, 649 (Del. 2014) (citing Cinerama, Inc. v. 

Technicolor, Inc., 663 A.2d 1156, 1167 (Del. 1995)); Brehm, 746 A.2d at 259 n.49), overruled on 

other grounds by Flood v. Synutra Int’l, Inc., 88 A.3d 635 (Del. 2018).

181 Id.

182 Id. (citing Cinerama, Inc. v. Technicolor, Inc., 663 A.2d 1156 (Del.1995); Cede & Co. v. 

Technicolor, Inc., 634 A.2d 345, 363 (Del.1993); Grimes v. Donald, 673 A.2d 1207, 1216 

(Del. 1996)).

183 Sandys, 152 A.3d at 128 (quoting Sanchez, 124 A.3d at 1024 n.25).

184 Id.
45

producing nature.”185 Alleging that a director had a “personal friendship” with someone else, 

or that a director had an “outside business relationship,” are “insufficient to raise a reasonable 

doubt” that the director lacked independence.186 “Consistent with [the] predicate materiality 

requirement, the existence of some financial ties between the interested party and the 

director, without more, is not disqualifying.”187

Like the Court of Chancery below, we hold that Tri-State failed to raise a reasonable 

doubt that either Thiel, Hastings, or Bowles was beholden to Zuckerberg.188

1. Hastings

The complaint does not raise a reasonable doubt that Hastings lacked independence 

from Zuckerberg. According to the complaint, Hastings was not independent because:

• “Netflix purchased advertisements from Facebook at relevant times,” and 

maintains “ongoing and potential future business relationships with” Facebook.189

• According to an article published by The New York Times, Facebook gave to 

Netflix and several other technology companies “more intrusive access to users’ 

personal data than it ha[d] disclosed, effectively exempting those partners from 

privacy rules.”190

• “Hastings (as a Netflix founder) is biased in favor of founders maintaining control 

of their companies.”191

185 Beam, 845 A.2d at 1050.

186 Id.

187 M&F Worldwide, 88 A.3d at 649.

188 Because the complaint failed to raise a reasonable doubt that Hastings, Thiel, or Bowles were not 

independent, this Opinion need not address whether Desmond-Hellmann was beholden to 

Zuckerberg. 

189 A60.

190 A61.

191 A60.
46

• “Hastings has . . . publicly supported large philanthropic donations by founders 

during their lifetimes. Indeed, both Hastings and Zuckerberg have been 

significant contributors . . . [to] a well-known foundation known for soliciting and 

obtaining large contributions from company founders and which manages donor 

funds for both Hastings . . . and Zuckerberg . . . .”192

These allegations do not raise a reasonable doubt that Hastings was beholden to 

Zuckerberg. Even if Netflix purchased advertisements from Facebook, the complaint does 

not allege that those purchases were material to Netflix or that Netflix received anything 

other than arm’s length terms under those agreements. Similarly, the complaint does not 

make any particularized allegations explaining how obtaining special access to Facebook 

user data was material to Netflix’s business interests, or that Netflix used its special access to 

user data to obtain any concrete benefits in its own business.

Further, having a bias in favor of founder-control does not mean that Hastings lacks 

independence from Zuckerberg. Hastings might have a good-faith belief that founder 

control maximizes a corporation’s value over the long-haul. If so, that good-faith belief 

would play a valid role in Hasting’s exercise of his impartial business judgment.193

Finally, alleging that Hastings and Zuckerberg have a track record of donating to 

similar causes falls short of showing that Hastings is beholden to Zuckerberg. As the Court

192 Id.

193 See generally Frederick Hsu Living Tr. v. ODN Hldg. Corp., 2017 WL 1437308, at *18 

(Del. Ch. Apr. 14, 2017) (“[T]he fiduciary relationship requires that the directors act prudently, 

loyally, and in good faith to maximize the value of the corporation over the long-term for the benefit 

of the providers of presumptively permanent equity capital, as warranted for an entity with a 

presumptively perpetual life in which the residual claimants have locked in their investment.” 

(citation omitted)).
47

of Chancery noted below, “[t]here is no logical reason to think that a shared interest in 

philanthropy would undercut Hastings’ independence. Nor is it apparent how donating to 

the same charitable fund would result in Hastings feeling obligated to serve Zuckerberg’s 

interests.”194 Accordingly, the Court affirms the Court of Chancery’s holding that the 

complaint does not raise a reasonable doubt about Hastings’s independence.

2. Thiel

The complaint does notraise a reasonable doubt that Thiel lacked independence from 

Zuckerberg. According to the complaint, Thiel was not independent because:

• “Thiel was one of the early investors in Facebook,” is “its longest-tenured board 

member besides Zuckerberg,” and “has . . . been instrumental to Facebook’s 

business strategy and direction over the years.”195

• “Thiel has a personal bias in favor of keeping founders in control of the companies 

they created . . . .”196

• The venture capital firm at which Thiel is a partner, Founders Fund, “gets ‘good 

deal flow’” from its “high-profile association with Facebook.”197

• “According to Facebook’s 2018 Proxy Statement, the Facebook shares owned by 

the Founders Fund (i.e., by Thiel and Andreessen) will be released from escrow 

in connection with” an acquisition.198

• “Thiel is Zuckerberg’s close friend and mentor.”199

• In October 2016, Thiel made a $1 million donation to an “organization that paid 

[a substantial sum to] Cambridge Analytica” and “cofounded the Cambridge 

194 Op. at 896.

195 A57-58.

196 A58.

197 Id.

198 Id.

199 A57.
48

Analytica-linked data firm Palantir.”200 Even though “[t]he Cambridge Analytica 

scandal has exposed Facebook to regulatory investigations”201 and litigation, 

Zuckerberg did not try to remove Thiel from the board.

• Similarly, Thiel’s “acknowledge[ment] that he secretly funded various lawsuits 

aimed at bankrupting [the] news website Gawker Media” lead to “widespread 

calls for Zuckerberg to remove Thiel from Facebook’s Board given Thiel’s 

apparent antagonism toward a free press.”202 Zuckerberg ignored those calls and 

did not seek to remove Thiel from Facebook’s board.

These allegations do not raise a reasonable doubt that Thiel is beholden to 

Zuckerberg. The complaint does not explain why Thiel’s status as a long-serving board 

member, early investor, or his contributions to Facebook’s business strategy make him 

beholden to Zuckerberg. And for the same reasons provided above, a director’s good faith 

belief that founder controller maximizes value does not raise a reasonable doubt that the 

director lacks independence from a corporation’s founder.

While the complaint alleges that Founders Fund “gets ‘good deal flow’” from Thiel’s 

“high-profile association with Facebook,”203 the complaint does not identify a single deal 

that flowed to—or is expected to flow to—Founders Fund through this association, let alone 

any deals that would be material to Thiel’s interests. The complaint also fails to draw any 

connection between Thiel’s continued status as a director and the vesting of Facebook stock 

200 A59.

201

 Id.

202 Id.

203 A58.
49

related to the acquisition. And alleging that Thiel is a personal friend of Zuckerberg is 

insufficient to establish a lack of independence.204

The final pair of allegations suggest that because “Zuckerberg stood by Thiel” in the 

face of public scandals, “Thiel feels a sense of obligation to Zuckerberg.”205 These 

allegations can only raise a reasonable doubt about Thiel’s independence if remaining a 

Facebook director was financially or personally material to Thiel. As the Court of Chancery 

noted below, given Thiel’s wealth and stature, “[t]he complaint does not support an inference 

that Thiel’s service on the Board is financially material to him. Nor does the complaint

sufficiently allege that serving as a Facebook director confers such cachet that Thiel’s 

independence is compromised.”206 Accordingly, this Court affirms the Court of Chancery’s 

holding that the complaint does not raise a reasonable doubt about Thiel’sindependence.

3. Bowles

The complaint does not raise a reasonable doubt that Bowles lacked independence 

from Zuckerberg. According to the complaint, Thiel was not independent because:

• “Bowles is beholden to the entire board” because it granted “a waiver of the 

mandatory retirement age for directors set forth in Facebook’s Corporate 

Governance Guidelines,” allowing “Bowles to stand for reelection despite having 

reached 70 years old before” the May 2018 annual meeting.207

204 See, e.g., Beam, 845 A.2d at 1050.

205 Op. at 898.

206 Id. at 898-99.

207 A56-57.
50

• “Morgan Stanley—a company for which [Bowles] . . .served as a longstanding 

board member at the time (2005-2017)—directly benefited by receiving over 

$2 million in fees for its work . . . in connection with the Reclassification . . . .”208

• Bowles “ensured that Evercore and his close friend Altman financially benefitted 

from the Special Committee’s engagement” without properly vetting Evercore’s 

competency or considering alternatives.209

These allegations do not raise a reasonable doubt that Bowles is beholden to 

Zuckerberg or the other members of the Demand Board. The complaint does not make any 

particularized allegation explaining why the board’s decision to grant Bowles a waiver from 

the mandatory retirement age would compromise his ability to impartially consider a 

litigation demand or engender a sense of debt to the other directors. For example, the 

complaint does not allege that Bowles was expected to do anything in exchange for the 

waiver, or that remaining a director was financially or personally material to Bowles.

The complaint’s allegations regarding Bowles’s links to financial advisors are 

similarly ill-supported. None of these allegations suggest that Bowles received a personal 

benefit from the Reclassification, or that Bowles’s ties to these advisors made him beholden 

to Zuckerberg as a condition of sending business to Morgan Stanley, Evercore, or his “close 

friend Altman.”210 Accordingly, this Court affirms the Court of Chancery’s holding that the 

complaint does not raise a reasonable doubt about Bowles’s independence.211

208 A57.

209 Id.

210 Id.

211 The factual section of the complaint also alleges that “Bowles privately told Zuckerberg” that 

Bowles was “proud to be a small part of [Zuckerberg’s] life” after learning about Zuckerberg’s plan 
51

IV. CONCLUSION

For the reasons provided above, the Court of Chancery’s judgment is affirmed.

to make accelerated donations to fulfill his pledge. See A33. Tri-State did not repeat this allegation 

in the portion of the complaint addressing demand futility. See A56-57. It is therefore unclear 

whether the complaint relies on this assertion to establish that Bowles lacks independence. 

Nonetheless, Tri-State has argued below and on appeal that Bowles’s expression of gratitude is 

“hardly a sign of director independence” and is “a harbinger of [his] flawed tenure on the Special 

Committee.” Opening Br. 43. To the extent Tri-State intended to rely on this allegation to help 

establish that demand is futile, this Court agrees entirely with the Court of Chancery’s analysis. 

“These allegations suggest that Zuckerberg and Bowles had a collegial relationship, which is not 

sufficient to compromise Bowles’s independence.” 250 A.3d at 899; see also Beam, 

845 A.2d at 1050 (noting that the existence of a “personal friendship” is insufficient to establish that 

a director is not independent).