[ PUBLISH] 

## In the 

# United States Court of Appeals For the Eleventh Circuit

____________________
No. 20

- 14352

____________________
JERRELL WHITTEN, derivatively o.b.o. FleetCor Technologies, Inc.,
Plaintiff

- Appellant,

versus RONALD F. CLARKE, MICHAEL BUCKMAN, JOSEPH W. FARRELLY, THOMAS M. HAGERTY, MARK A. JOHNSON, et al.,

Defendants

- Appellees. USCA11 Case: 20-14352 Date Filed: 07/27/2022 Page: 1 of 272 Opinion of the Court 20

- 14352

____________________ Appeal from the United States District Court for the Northern District of Geor gia D.C. Docket No. 1:17

- cv

- 02585

- LMM

____________________
Before W ILLIAM P RYOR , Chief Judge, J ORDAN , and A NDERSON , Circuit Judges.

A NDERSON , Circuit Judge : Delaware corporate law requires a shareholder who intends to initiate a derivative action on behalf of a corporation to either make a demand on the board of directors to rectify the alleged
wrongs, or show why demand is excused. Under Delaware law, demand is excused, among other reasons, if a majority of the board of directors faces a substantial likelihood of liability. In July 2017, Whitten , a shareholder and citizen of Illinois, brought this shareholder derivative action alleging breach of fiduciary du ties by FleetCor’s directors and executives without first making a demand

on the board. Whitten argues that demand was excused because a majority of the board face d a substantial likelihood of liability for their breach of fiduciary duties. The district court held that Whitten had failed to adequately plead that demand was excused and dismissed Whitten’s claims. After careful review and with the benefit of oral argument, we affirm.

I. BACKGROUND USCA11 Case: 20-14352 Date Filed: 07/27/2022 Page: 2 of 2720

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Whitten filed his complaint in this shareholder derivative action on July 10, 2017. Following other legal developments, detailed below, Whitten filed an amended complaint

. The complaint names as defendants FleetCor’s CEO, Ronald F. Clarke, FleetCor’s CFO, Eric R. Dey, and all but one member of FleetCor’s Board o f
Directors. 1 Clarke is the only member of the Board who is not an Outside Director. Dey is not a member of the Board. Whitten alleges breaches of fiduciary duties and unjust enrichment by the Defendants. The complaint names FleetCor, incorporated in Delaware and headquartered in Georgia, a nominal defendant. FleetCor provides workforce payment products and derives its revenue primarily from the sale and maintenance of its fuel card programs for businesses. Fuel cards are generally di stributed bybusinesses to their employees, allowing those employees to purchase fuel at gas stations. FleetCor also coordinated with partners, like Chevron/Texaco, to implement branded fuel card programs. In 2007, FleetCor contracted with Chevron to man age Chevron’s card program for ten years. That relationship ended on December 31, 2016.

1 The named defendants that sat on FleetCor’s Board of Directors at the time the first complaint was filed include: Ronald F. Clarke (“Clarke”), Michael Buckman (“Buckman”), Joseph W. Farrelly (“Farrelly”), Thomas M. Hagerty (“Hagerty”), Mark A. Johnson (“J ohnson”), Richard Macchia (“Macchia”), Jeffrey S. Sloan (“Sloan”), and Steven T. Stull (“Stull”). Hala Moddelmog, the other Director at the time the underlying action was commenced , is not a party to this suit. USCA11 Case: 20-14352 Date Filed: 07/27/2022 Page: 3 of 274 Opinion of the Court 20

- 14352
Whitten alleges that FleetCor engaged in a scheme to artificially inflate its stock price between February 2016 and May 2017. Whitten alleges that during this perio d, FleetCor advertised on its website that FleetCor c lients “[p]ay no fees

— no set

- up fees, transaction fees, card fees or annual fees.” Furthermore , Whitten alleges that FleetCor’s sales staff were told to market FleetCor’s fuel cards as having no fees. In contrast to its marketing, Whitten alleges that FleetCor charged a multitude of fees, including late fees, high risk fees, Minimum Program Administration fees, ProgramFees, Account Fees, and Convenience Network and Out of Network Fees. FleetCor allege dly tested its ability to impose such fees in certain customers’ invoices. FleetCor allegedly waited to do so until a few months had passed when most customers would stopmonitoring their invoices. Whitten argued that these allegedly deceptive business p ractices artificially inflated FleetCor’s stock.Whitten also alleges that FleetCor included false or misleading statements in the c ompany ’s 2015 and 2016 10

- K filings. Whitten notes that the Defendant directors all signed those filings

. Whitten furthe r alleges that the Board’s Audit Committee was required to discuss earnings releases and earnings guidance with management and knowingly or recklessly reviewed and approved of the false or misleading statements allegedly contained therein. Whitten specifi cally notes that one Board member, Macchia, reviewed and revised an earnings call script.Whitten further alleges that, during this period, five members of the Board sold stock: Clarke, Farrelly, Hagerty, Johnson, USCA11 Case: 20-14352 Date Filed: 07/27/2022 Page: 4 of 2720

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and Macchia (collectively, “Selling Defend ants”) . Whitten argues that those directors traded on adverse, nonpublic information and, therefore, face a substantial likelihood of liability for those insider stock sales. Whitten’s complaint highlights numerous public reports and investigations into FleetCor. The first was published on March 1, 2017 , when Capitol Forum, a consumer

- focused financial journalism publication, published a report raising questions about the legitimacy of FleetCor’s fee

- based income. On March 20, 2017, Capitol Forum published a follow

- up report providing more details on the alle ged scheme. On April 4, 2017, Citron Research, an online stock commentary site, published a similar report detailing FleetCor’s alleged fee scheme. On April 27, 2017, Capitol Forum published a report on FleetCor’s bill payment system. And on that same d ay, Citron published a follow

- up report on FleetCor’s fees. Shortly thereafter, on May 1, 2017, Chevron filed suit against FleetCor alleging that “FleetCor seeks to maximize its profits byharvesting the accounts for fees while failing to service the acc ounts at the contractually required levels.” Chevron’s complaint specifically allege d that FleetCor “allow[ed] the number of salespersonnel to fall below contractual requirements; increas[ed] customer card shipping

- and

- handling fees without approval; and attempt[ed] to cut call

- center hours without approval.” On June 14, 2017, a federal securities law class action was filed against FleetCor. Two and a half years later, on December 20, 2019, the Federal Trade Commission (“FTC”) brought suit against Flee tCor, USCA11 Case: 20-14352 Date Filed: 07/27/2022 Page: 5 of 276 Opinion of the Court 20

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alleging violations of the Federal Trade Commission Act, 15 U.S.C. § 53(b). The FTC complaint alleged FleetCor engaged in deceptive billing and sales practices to collect unwarranted fees. That same day, FleetCor issued a press release stat ing that the FTC’s claim s lacked merit and that FleetCor disagree d with them.In its briefing to the district court, Whitten argued that demand on the Board was futile for two reasons. First, Whitten argued that FleetCor’s press release in response to the FTC c omplaint shows that the Board prejudged the claims here. Second, Whitten argue d that a majority of the Board face d a substantial likelihood of liability on the claims. The district court found that neither of these arguments showed that demand was futile

. On the prejudgment claim, the district court held that director impartiality is determined at the time the plaintiff’s complaintis filed. Therefore, FleetCor’s press release in December 2019, almost two and a half years after the filing of Whitten’s co mplaint,could not show that the Board prejudged the merits and that demand would have been futile in July 2017. The district court alsofound that Whitten failed to allege that the press release was attributable to the Board. Whitten does not appeal thi s holding

.On the substantial likelihood of liability claim, which Whitten does appeal, the district court held that his argument also failed. Although the district court suggested that the Board should have known about FleetCor’s alleged fee scheme, th e district court held that Whitten failed to adequately plead that at least a majority of the Board actually knew about the fee scheme. Because Whitten’s USCA11 Case: 20-14352 Date Filed: 07/27/2022 Page: 6 of 2720

- 14352 Opinion of the Court 7
claims for liability based on insider trading and disseminating false or misleading statements required Board knowledge of the allegedly fraudulent scheme , the district court held that those claims failed. The district court further held that Whitten failed to allege particularized facts showing tha t the Selling Defendants knew adverse, nonpublic information and traded on that information. The district court additionally held that Whitten failed to allege that any Board member besides Clarke and Macchia played any role in the allegedly misleading ea rnings guidance. And the district court noted that signing a 10

- K report is insufficient by itself to sustain a misstatement claim. Accordingly, the district court granted Defendants’ motion to dismiss because Whitten failed to show demand was excused. This appeal followed. II. JURISDICTIONThe district court had jurisdiction over this case through diversity jurisdiction. 28 U.S.C. § 1332. Typically, in a shareholder’s derivative action, “the corporation is properly re aligned as a plaintiff since it i s the real party in interest.” Duffey v. Wheeler , 820 F.2d 1161, 1163 (11th Cir. 1987) (citing Koster v. Lumbermens Mut.
Cas

. Co. , 330 U.S. 518, 522

– 23 , 67 S. Ct. 828, 831 (1947)). If FleetCor were realigned as a plaintiff, complete diversity would be de stroyed because both FleetCor and members of the Board aredomiciled in Georgia. That would remove this case from our jurisdiction. USCA11 Case: 20-14352 Date Filed: 07/27/2022 Page: 7 of 278 Opinion of the Court 20

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But where “the management is antagonistic to the stockholder,” the corporation is properly a defendant. Smith v. S p

erling
, 354 U.S. 91, 96 , 77 S. Ct. 1112, 1115 (1957). And “if the complaint in a derivative action alleges that the controlling shareholders or dominant official s of the corporation are guilty of fraud or malfeasance, then antagonism is clearly evident and the c orporation remains a defendant.” Liddy v. Urbanek , 707 F.2d 1222, 1224 (11th Cir. 1983). Whitten’s complaint makes such allegations . Therefore, based on Whitten’s allegations, there is the requisite antagonism between Whitten and management. See id

. FleetCor, then,
remains a nominal defendant. Because Whitten is a citizen of Illinois and no defendant is domiciled in that state , there is complete diversity between the parties here, and we have jurisdiction.
III. STANDARD OF REVIEW We have long reviewed a “district court’s dismissal under Federal Rule of Civil Procedure 23.1 for abuse of discretion.” Freedman v. magicJack Vocaltec, Ltd. , 963 F.3d 1125 , 1130

– 31 (11th Cir. 2020) (citing Stepak v. Addison , 20 F.3d 398, 402 (11th
Cir. 1 994) ) ; see also Rothenberg v. Sec. Mgmt. Co. , 667 F.2d 958, 960 (11th Cir. 1982) . The district court abuses its discretion whenit “applies an incorrect legal standard, or applies improper procedures, or relies on clearly erroneous factfinding, or if it r eaches a conclusion that is clearly unreasonable or incorrect.” S c

hiavo ex rel. Schindler v. Schiavo , 403 F.3d 1223, 1226 (11th Cir. 2005) (per curiam). “A district court would necessarily abuse its discretion if it based its ruling on an erroneous view of the law or on a clearly USCA11 Case: 20-14352 Date Filed: 07/27/2022 Page: 8 of 2720

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erroneous assessment of the evidence.” Highmark Inc. v. Allcare Health Mgmt. Sys., Inc. , 572 U.S. 559, 563 n.2 , 134 S. Ct. 1744, 1748
n.2 (2014) (quoting Cooter & Gell v. Hartmarx Corp. , 496 U.S. 384,
405 , 110 S. Ct. 2447 , 2461 (1990)). Whitten argues that our review here should be de novo fortwo reasons. First, Whitten argues that since Delaware law governs the standard for demand excusal and Delaware reviews dismissals for a demand failure de novo , we should do so as well. S econd, Whitten notes that federal courts are trending toward de novo review of dismissals under Rule 23.1. Neither argument require s any change in our standard of review.
First, w hile the substantive requirements for whether demand is excused are defined by Delaware law in this appeal
, Garber v. Lego , 11 F.3d 1197, 1201 (3d Cir. 1993) (citing Kamen v. Kemper Fin. Servs., Inc. , 500 U.S. 90, 108

– 09 , 111 S. Ct. 1711, 1723 (1991))
, the “proper standard of review is a question of federal pr ocedure and is governed by federal law
, ” West v. State Farm Fire & Cas. Co. , 868 F.2d 348, 350 (9th Cir. 1989) (citing Miller v. United States
, 587 F.2d 991, 994 (9th Cir. 1978)); see also In re Abbott Lab’ys Derivative S’holder s Litig. , 325 F.3d 795, 803 (7th Cir. 2003) (“State law does not govern the relation between the trial court and the appellate court in a diversity litigation.” (citing Mayer v. Gary Partners & Co. , 29 F.3d 330 , 335 (7th Cir. 1994)) ) . Th us , while Delaware courts review dismissals fo r failure to make a pre

- suit demand de novo under Delaware’s Rule 23.1, Brehm v. Eisner , 746 A.2d 244, 253 (Del. 2000), that does not control our standard of review. USCA11 Case: 20-14352 Date Filed: 07/27/2022 Page: 9 of 2710 Opinion of the Court 20

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And contrary to Whitten’s argument, because our consistent application of abuse of discre tion review to dismissals under Federal Rule of Civil Procedure 23.1 is not an interpretation of Delaware law, the Delaware Supreme Court’s intervening decision in Brehm does not render our prior holdings “clearly wrong

. ” See Lee v. Frozen Food Express, I nc. , 592 F.2d 271, 272 (5th Cir. 1979) (holding that we follow prior panel decisions “absent a subsequent state court decision or statutory amendment which makes this Court’s decision clearly wrong”). 2
Second, b ecause the standard of review for dismissals under Federal Rule of Civil Procedure 23.1 is a matter of federal law and not influenced by developments in Delaware law , we are bound by prior panel decisions of our Court. Cargill v. Turpin , 120 F.3d 1366, 1386 (11th Cir. 1997). “The law of this circuit is ‘emphatic’ that only the Supreme Court or this court sitting en banc can judicially overrule a prior panel decision.” Id. (citing United States v. Woodard , 938 F.2d 1255, 1258 (11th Cir. 1991)). Thus, even if federal courts are trending t oward de novo review, our prior case s are clear that we review dismissal s under Rule 23.1 for abuse of discretion. Nevertheless, we clarify what our abuse of discretion review entails here. Rule 23.1 contains numerous requirements that a plaintiff must me et to maintain a derivative action. See F ED

. R. C IV

.

2 Decisions of the former Fifth Circuit are binding on our Circuit. See Bonner v. City of Pritchard
, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc)

. USCA11 Case: 20-14352 Date Filed: 07/27/2022 Page: 10 of 2720

- 14352 Opinion of the Court 11

P. 23.1. Whitten’s argument on appeal is that the district court erred by concluding that he failed to adequately plead particularized facts showing that demand was excused. A district court “abuse[s] its discretion if it based its ruling on an erroneous view of the law.” Highmark , 572 U.S. at 563 n.2 , 134 S. Ct. at 1748 n.2 (internal quotation marks omitted)

. And whether a complaint meets the requisite pleading standard is a question of law. Cf. id

. at 563 , 134 S. Ct. at 1748 (noting that “[t]raditionally, decisions on ‘questions of law’ are ‘reviewable de novo ’”); Hill v. White
, 321 F.3d 1334, 1335 (11th Cir. 2003) (holding that “[w]e review de novo the district court’s grant of a motion to dismiss under 12(b)(6) for failure to state a claim”)

. Therefore, although a district court mustconstrue the allegations in the complaint “in the light most favorable to the plaintiff,” Hill , 321 F.3d at 1335, and “draw all reasonable inferences in the plaintif f’s favor,” Randall v. Scott , 610 F.3d 701, 705 (11th Cir. 2010), whether the complaint fails “to state a claim upon which relief can be granted” is a question of law, F ED

. R. C IV

. P. 12(b)(6). The same is true even if the complaint is subject to a height ened pleading standard. See Ambrosia Coal & Const r

. Co. v. Pages Morales , 482 F.3d 1309, 1316

– 17 (11th Cir. 2007) (reviewing de novo a complain t subject to Federal Rule of Civil Procedure 9(b)’s heightened pleading standard for fraud). The proper procedu ral vehicle for demand excusal in our Circuit is Rule 23.1. Peller
v. S

. Co. , 911 F.2d 1532, 1536 (11th Cir. 1990). But the inquiry is similar to that with respect to Rule 12(b)(6) and Rule 9(b)
, so whether the complaint adequately pleads demand excusal under Rule 23.1 is a question of law. While we review the district court’s USCA11 Case: 20-14352 Date Filed: 07/27/2022 Page: 11 of 2712 Opinion of the Court 20

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decision for abuse of discretion, a legal error made by the district court, as Whitten argues occurred here, is reviewed de novo and, if error, would warrant reversal.

IV. DISCUSSIONFederal Rule of Civil Procedure 23.1 governs pleading requirements for derivative actions in federal court. F ED

. R. C IV

. P. 23.1. In pertinent part, Rule 23.1 provides: (b) Pleading Requirements . The complaint must be verified and must:

. . . (3) state with particularity: (A) any effort by the plaintiff to obtain the desired action from the directors or comparable authority, and if necessary, from the shareholders or members; and
(B) the reaso ns for not obtaining the action or not making the effort.

F ED

. R. C IV

. P. 23.1(b). Importantly, “Rule 23.1 speaks only to the adequacy of the shareholder representative’s pleadings.” Kamen
, 500 U.S. at 96 , 111 S. Ct. at 1716 . To “determine whether the d emand requirement may be excused,” id., we “must look to the substantive requirements of the exception as it is defined by the state of incorporation,” Garber , 11 F.3d at 1201 (citing Kamen , 500 U.S.
at 108

– 09 , 111 S. Ct. at 1723 ). USCA11 Case: 20-14352 Date Filed: 07/27/2022 Page: 12 of 2720

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Because FleetCor is in corporated in Delaware, Delaware substantive law determines the requirements for demand excusal here. See Garber , 11 F.3d at 1201. But since this action is in federal court, Whitten must “state with particularity” his “reasons for

. . . not making the ef fort” to make a demand on the Board.
F ED

. R. C IV

. P. 23.1 (b), (b)(3). In other words, Whitten’s pleadings must state with particularity why, under Delaware law, demand is excused. And unlike other heightened pleading standards, Rule 23.1 provides no exc eptions to the requirement to “state with particularity.” Specifically, Federal Rule of Civil Procedure 9 providesthat “[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake.” F ED

. R. C IV

. P. 9(b). But Rule 9 allows that “[m]alice, intent, knowledge, and other conditions of a person’s mind may be alleged generally.”
Id. Rule 23.1, however, provides no such exceptions. 3 Therefore, Whitten must state with particularity all factual allegations , including knowledge, which are necessary to show demand excusal under Delaware law.
Delaware law typically requires that a plaintiff make a demand on a board before filing suit. Aronson v. Lewis , 473 A.2d 805,

3 Although Whitten alleges fraud by FleetCor , Whitten does not argue that Rule 9(b) applies to his pleading for demand excusal. W e , thus, consider that argument waived and express no opinion on any application of Rule 9(b) to demand excusal

. See Williams v. Bd. of Regents of Univ. Sys. of Ga. , 477 F.3d 1282, 1303 (11th Cir. 2007) ( explaining that arguments not raised on appeal are waived). USCA11 Case: 20-14352 Date Filed: 07/27/2022 Page: 13 of 2714 Opinion of the Court 20

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809 (Del. 1984)
, overruled with respect to another issue by Brehm
, 746 A.2d at 254 (overruling Aronson ’s discussion of the appropriate standard of review ). This requirement “is a rule of substantive right designed to give a corporation the opportunity to rectify an alleged wrong without litigation, and to control any litigation which does arise.” Id. Delaware law, however, excuses that requirement if “that demand would be futile.” Braddock v. Zimmerman , 906 A.2d 776, 784 (Del. 2006). Delaware law has traditionally provided two tests for when demand would be futile, the test articulated in Aronson and the test articulated in Rales v. Blasband , 634 A.2d 927 (Del. 1993)

. Braddock , 906 A.2d at 784. Under Aronson ’s two

- part test, demand is excused if the complaint pleads “particularized facts creating a reasonable doubt that ‘(1) the directors are disinterested and independent or (2) the challenged transaction was otherwise the product of a valid exercise of business judgment .’” Id. (quoting Rales , 634 A.2d at 933). But Aronson does not apply if “the subject of the derivative suit is not a business decision of the board.” Rales , 634 A.2d
at 934. In that case, Rales applies, and “a court must determine whether or not the pa rticularized factual allegations of a derivative stockholder complaint create a reasonable doubt that, as of the time the complaint is filed, the board of directors could have
proper l y exercised its independent and disinterested business judgment in responding to a demand.” Id.

O ne month after the district court held oral argument in this

case, but before the district court ruled, the Delaware Supreme USCA11 Case: 20-14352 Date Filed: 07/27/2022 Page: 14 of 2720

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Court clarified the requirements for demand excusal and adopted a universal three

- part test. United Food & Com

. Workers Union
& Participating Food Indus

. Emp s. Tri

-State Pension Fund v. Zuckerberg , 262 A.3d 1034, 1058 (Del. 2021). That three

- part test, evaluated “on a director

- by

- direc tor basis,” for determining whether demand is excused is as follows:
(i ) whether the director received a material personalbenefit 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 litig ation demand or who would face a substantial likelihood of liability on any of the claims that are the subject of the litigation demand.

Id. at 1059. The Delaware Supreme Court described this refined test as “[b]lending the Aronson test with the Rales tes t.” Id. Moreover, the Court noted that “cases properly construing Aronson
, Rales , and their progeny remain good law.” Id.

In the portion of the district court’s opinion relevant to this appeal, the district court evaluated demand futility based onwhether “the claims exposed a majority of the Board to a substantial likelihood of personal liability.” This test appears both in the USCA11 Case: 20-14352 Date Filed: 07/27/2022 Page: 15 of 2716 Opinion of the Court 20

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refined three

- part test described in Zuckerberg and in the progeny of Aronson and Rales

. See Conrad v. Blank , 940 A.2d 28, 37 (Del. Ch. 2007). We apply the same test. Whitten argues that a majority of the Board face d a substantial likelihood of lia bility for three reasons. First, Whitten argues that the Board knowingly and/or recklessly allowed the Company to violate the law. Second, Whitten argues that members of the Board engaged in insider trading. Third, Whitten argues that the Board approved false and misleading statements . All three arguments require that the Board or a majority of the Board knew about the allegedly fraudulent scheme. Thus, we first address whether Whitten has alleged with particularity that the Boardknew of the allegedly fraudulent scheme. Then, we address Whitten’s three arguments in turn. We conclude that Whitten failed to adequately plead demand futility.

A. WhetherWhitten alleged with sufficient particularity thatthe Board knew of the allegedly fraudulent scheme.

All three of Whitten’s arguments for why members of the Board face a substantial likelihood of liability depend on those members of the Board having know ledge of the alleged fraudulent scheme. And because Rule 23.1 applies, Whitten must “state with particularity” facts showing that a majority of the Board had knowledge or facts that allow the court to draw the reasonable inference that it did

. F ED

. R. C I V

. P. 23.1. USCA11 Case: 20-14352 Date Filed: 07/27/2022 Page: 16 of 2720

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Whitten does not attempt to plead that each director knew on an individual basis. However, allegations against the directors as a group do not appear to be impermissible under Delaware law.
See In re A m. I nt’l G rp. , Inc. , 965 A.2d 763, 797 (Del. Ch. 2009) (noting that “these group accusations are used sparingly” but concluding that “the Complaint pleads details about the fraudulent schemes that, when taken with the pled facts regarding Matthews’ and Tizzio’s roles at AIG, support the inferen ce that they knew of and approved much of the wrongdoing”). After careful consideration
, we conclude that Whitten’s allegations fail to show that the Board as a group or individually knew of the alleged fraudulent scheme here. In briefing to the district court, Whitten argued that the following seven facts , along with the allegation that fraudulent fees accounted for 76 percent of FleetCor’s revenues, showed Board knowledge:(i) FleetCor’s illicit fees and revenues derived therefrom were closely tracked, b oth at the Board and employee levels; (ii) employees were directed to test fees on vulnerable customers; (iii) customers routinely complained, both to FleetCor and the Better Business Bureau, regarding the illicit fees, and even sued FleetCor for the same; (iv) Capitol Forum and Citronpublished several publicly available investigative reports detailing the fee scheme; (v) the Company’s former largest customer, Chevron, sued FleetCor on May 1, 2017 for “harvesting [customer] accounts for USCA11 Case: 20-14352 Date Filed: 07/27/2022 Page: 17 of 2718 Opinion of the Court 20

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fees”; (vi) shareho lders filed the Securities Class Action for the same misconduct; and (vii) federal regulators were actively investigating FleetCor.

But these facts , when considered together, fail to show Board knowledge. For all the above facts, Whitten failed to plead t hat the Board was actually aware of any of them at the relevant time for Whitten’s demand on the Board. The relevant time of course is the period of time before Whitten filed suit on July 10, 2017. That is when Whitten would have had to make his demand on the Board to act. And to prove that a majori ty of the Board had a substantial likelihood of liability at that time (such that the Board could not consider his demand impartially), Whitten would have to show a majority of the Board had knowledge of the allegedly fraudulent scheme and had either acted in a manner to create personal liability (e.g., insider trading) or dela y ed acting long enough to be liable for knowingly or recklessly allowing fraud to continue

. Despite claiming in his briefs that the Board tracked revenues derived from fees, the com plaint actually only alleges that FleetCor tracked related information and provides no evidence that information indicating a fraudulent fee scheme reached the Board at the relevant time

. Cf. Rosenbloom v. Pyott , 765 F.3d 1137, 1152 (9th Cir. 2014) ( concl uding Board knew or should have known about off

- label marketing where complaint provided that “Board continued to closely and regularly monitor off

- label Botox sales”). The same is true for FleetCor’s alleged testing of fees ; there USCA11 Case: 20-14352 Date Filed: 07/27/2022 Page: 18 of 2720

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are no particularized a llegation s that the Board knew of the practice. Similarly, there are no allegation s that customer complaints reached the Board . As the district court noted, the one customer lawsuit cited by Whitten was for a $1,000 fee

— a lawsuit that would be unlikely t o come to the Board ’s attention. Cf. McCall v. Scott
, 239 F.3d 808, 822 (6th Cir. 2001) ( concluding that statement in 10

- K confirming existence of qui tam action was sufficient to show “Board was aware of the lawsuit”). Whitten argues that the Capitol
Fo rum and Citron reports show the Board should have known about issues contained in those reports before publication

— on the theory that if outsiders knew, the Board should have . But Whitten’s complaint fails to provide allegations, and certainly provides

no particularized allegations
, s howing that the Board had knowledge of those issues until the publication of the reports , beginning March 1, 2017 , shortly before Whitten filed suit. March 1, 2017 is after the occurrence of the alleged misconduct that Whitten identifies as providing the basis for a substantial likelihood of liability

. The latest alleged misstatement in Whitten’s complaint was made February 8, 2017
, a nd as described below, the relevant alleged insider sales occurred before March 1 , 2017. Thus, Whitten’s allegations fail to identify any actions taken by a majority of the Board members such as to subject them to a substantial likelihood of liability. Similarly, t he federal securities class action was filed less than a month before Whitten filed suit on July 10, 2017. T he FTC ’s lawsuit , moreover, was brought well after Whitten filed his complaint . And of course, Whitten was obligated to have made his demand before he filed suit. USCA11 Case: 20-14352 Date Filed: 07/27/2022 Page: 19 of 2720 Opinion of the Court 20

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The allegations regarding the Chevron lawsuit also f ail to show Board knowledge. Nothing in Whitten’s complaint shows that the Board was aware of the allegations in Chevron’s complaint prior to May 1, 2017. Nor did Whitten plead particularized facts that the Board knew about Chevron ending its relationshi p with FleetCor prior to the termination that occurred on December 31, 2016. And even if the Board was informed about the specifics of the Chevron lawsuit prior to its filing or earlier , Chevron’s complaint would not alert the Board to FleetCor ’s alleged fraud. The Chevron lawsuit complains that FleetCor sought “to maxi mi ze its profits by harvesting accounts for fees” while providing “poor service” and “failing to service the accounts at the contractually required levels.” Chevron’s complaint, then, does not indicate fraud but rather indicates breach of contract and highlights that Chevron was looking to avoid fees. Whitten’s allegations surrounding FleetCor’s Board meetings similarly fall short. Those allegations fail to show the Board was on notice of any alleged fraud or deception

. While Whitten argues that 76% of FleetCor’s revenue came from fees and that all the fees were fraudulent, Whitten’s complaint fails to plead particularized facts showing that Board members other than Clarke knew of the fraud or knew of FleetCor’s allegedly deceptive marketing by its salespeople. And, as the district court noted, any inference of knowledge of the allegedly fraudulent scheme based on the percentage of revenue FleetCor received from fees does not ex tend to Outside Directors. While it USCA11 Case: 20-14352 Date Filed: 07/27/2022 Page: 20 of 2720

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is reasonable to assume managers are privy to the daily operations of a company, the same is not true for Outside Directors. Cf. Pfeiffer v. Toll , 989 A.2d 683, 693 (Del. Ch. 2010) (affording such an inference of knowl edge under very different circumstances and under Rule 12(b)(6) but expressly distinguishing cases under Rule 23.1), abrogated on other grounds by Kahn v. Kolberg Kravis Roberts & Co. , 23 A.3d 831 (Del. 2011)

. Because Whitten failed to adequately plead Bo ard knowledge of the allegedly fraudulent scheme , all three of his claims that purportedly show that a majority of the Board face d a substantial likelihood of liability fail. Nevertheless, we discuss the three claims below in more detail.

B. Whether the Boar d is liable for knowingly or recklessly allowing the alleged fraud to continue.
Defendants argue that Whitten failed to preserve any claim that the Board knew and failed to act because he disavowed any
Caremark 4 claim before the district court. Whitten responds that his claim is not a Caremark claim, which would allege an unconsidered failure of the Board, Caremark , 698 A.2d at 967, because healleges conscious disregard. Whitten argues that this conscious disr egard claim is along the lines of In re Abbott and In re Pfizer

. 5 We

4 In re Caremark Int’l, Inc. Deriv ative Litig. , 698 A.2d 959 (Del. Ch. 1996).

5 In re Pfizer Inc. S’holder Derivative Litig. , 722 F. Supp. 2d. 453 (S.D.N.Y. 2010)

. USCA11 Case: 20-14352 Date Filed: 07/27/2022 Page: 21 of 2722 Opinion of the Court 20

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need not decide whether Whitten waived this claim be low because he has failed to adequately plead liability on this claim

.While Whitten argues that the district court erred by ignoring his theory of liability that the Board knowingly and/ or recklessly allowed FleetCor to violate the law, this theory is not connected to an underlying claim of liability in the complaint. As Zuckerberg makes clear, to determine demand excusal, we ask “whe ther the director faces a substantial likelihood of liability onany of the claims that would be the subject of the litigation demand.” 262 A.2d 1034, 1059. In his complaint, Whitten brought four counts against the Defendants: (1) breach of fiduciary dut ies for disseminating false and misleading information to shareholders;(2) breach of fiduciary duties for insider trading and misappropriation of company information; (3) unjust enrichment; and (4) contribution. Whitten’s theory that the Defendants allow ed FleetCor to violate the law , then, is not connected to the underlying claims in his lawsuit and cannot establish demand excusal on his claims

. In other words , even if Whitten could show the Defendants knowingly or recklessly allowed FleetCor to violate the law , Whitten could not show that the Defendants faced a “substantial likelihood of liability on any of the claims” that he brought in his complaint. Id. Therefore, Whitten’s argument that demand is excused because the Board face d liability for knowingly and/or recklessly allowing FleetCor to violate the law fails. USCA11 Case: 20-14352 Date Filed: 07/27/2022 Page: 22 of 2720

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C. Whether a majority of the Board faces liability for i nsider t rading.
Whitten argues that the Selling Defendants face a substantial likelihood of liability for their stoc k sales. To succeed, Whitten must show that each of the Selling Defendants knew and traded on “material, non

- public information” about FleetCor. Guttman v. Huang , 823 A.2d 492, 502 (Del. Ch. 2003). Because t here were nine
Directors when Whitten filed hi s complaint, to succeed, Whitten must show that five directors were interested (tainted) because they faced a substantial likelihood of liability. Even assuming arguendo that Whitten might be able to show that Clarke and Macchia are interested based on ap proving misstatements (see discussion below), in order to show that a majority of the Board faced a substantial likelihood of liability, Whitten needs to show a likelihood of liability for each of the three other Selling Defendants who are on the Board

— Hag erty, Johnson, and Farrelly. Because Whitten cannot show that either Johnson or Farrelly face liability, Whitten failed to plead demand excusal on this basis. 6

6 By focusing on Johnson and Far relly, we do not imply that Hagerty or Macchia face liability. Whitten simply must show that a majority of the Board faces liability to establish demand excusal

. In other words, Whitten must show that there are five interested (tainted) Directors. He su cceeds with respect to Clarke. We have assumed arguendo that he could also include Macchia. Thus, to succeed, Whitten has to show that three more Directors faced a substantial likelihood of liability. Thus, Whitten needs all three of the other Selling D irectors

— Hagerty, Johnson, and Farrelly. If Whitten fails with USCA11 Case: 20-14352 Date Filed: 07/27/2022 Page: 23 of 2724 Opinion of the Court 20

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As discussed above, Whitten has failed to show that the Board had knowledge of the alleged fra udulent scheme and that dooms Whitten’s insider trading claims. However, even assuming arguendo that Whitten successfully pleaded that the Board had knowledge that Chevron would be terminating its contract with FleetCor as early as the October 2016 Board meeting, neither Johnson nor Farrelly could face any substantial risk of liability based ontheir sales because their alleged insider sales occurred before October 2016. 7 Their sales also occurred well before the publication of the Capitol Forum and Citron reports. 8 Whitten’s allegations failto show Johnson and Farrelly face a substantial likelihood of liability based on Whitten’s insider trading claims. Therefore, de mand was not excused.

respect to even one of the three, his claim fails. We focus on Johnson and Farrelly only because Whitten’s failure with respect to them is most obvious.

7 Moreover, as noted above, Chevron’s dissatisfaction with FleetCor suggested only dissatisfaction with contractually agreed

- upon services and excessive fees

— not fraud.

8 It is not clear that any sales after the publication of those reports would be suspicious since those reports are public information. USCA11 Case: 20-14352 Date Filed: 07/27/2022 Page: 24 of 2720

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D. Whether a majority of the Board faces liability for knowing or reckless misstatements.
Whitten argues that the Board is liable for purported misstatements made in earnings call s and earnings guidance. 9 This misstatement theory is wi thout merit for two separate and independent reasons. First, as discussed above, Whitten failed to plead particularized facts showing that a majority of the Board knew ofthe alleged fraudulent scheme. Thus, a majority of the Board cannot be liable for a ny alleged knowing or reckless misstatements in earnings calls and earnings call guidance. Second, Whitten must show that at least five members of the Board are liable for the alleged misstatements. And Whitten failed to allege that any members of the B oard besides Clarke and possibly Macchia even participated in any misstatements. Even assuming that any misstatement in the earnings calls could be attributed to Macchia based on the limited role he played, Whitten cannot show that the rest of the Board is subject to a substantial likelihood of liability on the misstatement claim s

. Thus, even if we

9 Whitten does not appeal the district court’s holding that board members’ routine approval of FleetCor’s 10

- K filings is insufficient under Delaware law to sustain a misstatement claim. Nor would an appeal on that issue likely prevail

. See In re Citigroup Inc. S’holder Derivative Litig. , 964 A.2d 106, 134 (Del. Ch. 2009) ( concluding that allegations that directors reviewe d routine disclosures was insufficient to conclude that they faced a substantial likelihood of liability). USCA11 Case: 20-14352 Date Filed: 07/27/2022 Page: 25 of 2726 Opinion of the Court 20

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assume (contrary to fact) that the Board ha d knowledge, Whitten’s misstatement claim would fail to show demand excusal.Whitten argues that the district court should have reasonably inferred participation by the rest of the Board based o n two considerations: (1) an email from Macchia showing he had reviewed and revised an earnings call script and (2) FleetCor’s corporate governance policy that provides that the Audit Committee should discuss earnings press releases with management . But neither of those warrant any such inference. Conduct by one Bo ardmember does not imply identical conduct by other Board members, especially where Whitten is required to plead particularized facts for why demand was excused and the Defendants are not similarly situated

. Cf. In re The Home Depot, Inc. S’holder Deriva tive Litig. , 223 F. Supp. 3 d 1317, 1325 (N.D. Ga. 2016) ( concluding “group pleading may be enough” where “ defendants are ‘similarly situated’”). Macchia
, a s a member of the Audit Committee, has certain duties related to earnings calls. Specifically, Flee tCor’s governance requires the Audit Committee to “discuss with management earnings press releases

. . . and any earnings guidance.” But those discussions “ may be done generally. ” Thus, no reasonable inference can be drawn from FleetCor’s corporate gover nance documents or Macchia’s actions that any other member of the Audit
Committee

— or the Board for that matter

—played any role in specific purported misstatements in earnings calls . Whitten’s argument that a majority of the Board faces a substantial likelihood of USCA11 Case: 20-14352 Date Filed: 07/27/2022 Page: 26 of 2720

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liability for knowing or reckless misstatement s , then, fails to excuse demand

. V. CONCLUSION For the foregoing reasons, Whitten failed to plead particularized facts showing demand was excused. Therefore, we affirm the district co urt’s dismissal of Whitten’s complaint under Rule
23.1

. AFFIRMED. USCA11 Case: 20-14352 Date Filed: 07/27/2022 Page: 27 of 27