Opinion ID: 1955244
Heading Depth: 1
Heading Rank: 3

Heading: Standard Of Review Demand Excused/Demand Refused

Text: Since a conscious decision by a board of directors to refrain from acting may be a valid exercise of business judgment, where demand on a board has been made and refused, [courts] apply the business judgment rule in reviewing the board's refusal to act pursuant to a stockholder's demand to file a lawsuit. Id. at 813 (citing Zapata Corp. v. Maldonado, 430 A.2d at 784 & n. 10). The business judgment rule is a presumption that in making a business decision, not involving self-interest, the directors of a corporation acted on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the company. Grobow v. Perot, Del.Supr., 539 A.2d 180, 187 (1988); Aronson v. Lewis, 473 A.2d at 812. [14] The burden is on the party challenging the decision to establish facts rebutting th[is] presumption. Aronson v. Lewis, 473 A.2d at 812. Thus, the business judgment rule operates as a judicial acknowledgement of a board of directors' managerial prerogatives. Id. Spiegel submits that judicial review according to the traditional business judgment rule was inappropriate in his case. Spiegel sets forth two separate arguments in support of his position. First, that the allegations set forth in his complaint support a finding that demand was excused, according to this Court's holding in Aronson, notwithstanding the fact that he made a demand upon the Board. Second, and alternatively, that by appointing a special litigation committee with full authority to respond to his demand, the Board waived its right to challenge his allegation that demand was excused, and thereby invoked the special procedures for judicial review established in Zapata Corp. v. Maldonado, Del.Supr., 430 A.2d 779 (1981). We shall examine each of Spiegel's contentions.