Opinion ID: 1890645
Heading Depth: 1
Heading Rank: 4

Heading: Independence Is a Contextual Inquiry

Text: Independence is a fact-specific determination made in the context of a particular case. The court must make that determination by answering the inquiries: independent from whom and independent for what purpose? To excuse presuit demand in this case, the plaintiff has the burden to plead particularized facts that create a reasonable doubt sufficient to rebut the presumption that either Moore, Seligman or Martinez was independent of defendant Stewart. In order to show lack of independence, the complaint of a stockholder-plaintiff must create a reasonable doubt that a director is not so beholden to an interested director (in this case Stewart) that his or her discretion would be sterilized. [24] Our jurisprudence explicating the demand requirement is designed to create a balanced environment which will: (1) on the one hand, deter costly, baseless suits by creating a screening mechanism to eliminate claims where there is only a suspicion expressed solely in conclusory terms; and (2) on the other hand, permit suit by a stockholder who is able to articulate particularized facts showing that there is a reasonable doubt either that (a) a majority of the board is independent for purposes of responding to the demand, or (b) the underlying transaction is protected by the business judgment rule. [25] The reasonable doubt standard is sufficiently flexible and workable to provide the stockholder with `the keys to the courthouse' in an appropriate case where the claim is not based on mere suspicions or stated solely in conclusory terms. [26]