Opinion ID: 3214863
Heading Depth: 2
Heading Rank: 3

Heading: Plaintiffs’ Futility Claim

Text: Plaintiffs allege demand futility on two grounds. First, they allege that the Director Defendants (who constituted half the Board) were interested in the prospective suit because they may have been found personally liable. In arguing futility, Plaintiffs’ opening brief relies on potential liability only on the § 14(a) claim and the fiduciary-duty claim, not on the unjust-enrichment or corporate-waste claims. We will therefore consider futility only as to those two claims. See Lindstrom v. United States, 510 F.3d 1191, 1196 (10th Cir. 2007) (“Arguments not raised in an opening brief are waived.”). Second, Plaintiffs allege that because the Director Defendants were controlled by personal and business relationships among themselves and with former CEO Pedersen, who was also potentially liable, they could not have independently considered a demand to sue. We address interest and then control. D. Exposure of Defendant Directors to Liability (Interest) Nevada follows two landmark decisions of the Supreme Court of Delaware on demand futility: Aronson v. Lewis, 473 A.2d 805 (Del. 1984), and Rales v. Blasband, 634 A.2d 927 (Del. 1993). See Shoen, 137 P.3d at 1184. In particular, Nevada requires that “to show interestedness, a shareholder must allege that . . . the board members would 11 be materially affected, either to their benefit or detriment, by a decision of the board, in a manner not shared by the corporation and the stockholders.” Id. at 1183 (brackets and internal quotation marks omitted). A director may have such a disqualifying interest if the matter before the board is whether to sue the director, but only if the risk of liability is sufficiently great. That is, “interestedness because of potential liability can be shown only in those rare cases where defendants’ actions were so egregious that a substantial likelihood of director liability exists.” Id. at 1184 (brackets, ellipses, and internal quotation marks omitted). The likelihood of liability is greatly reduced in Nevada by an “exculpatory” statute that limits the personal liability of corporate directors. Relevant to Plaintiffs’ claims, it provides: [A] director or officer is not individually liable to the corporation or its stockholders or creditors for any damages as a result of any act or failure to act in his or her capacity as a director or officer unless it is proven that: (a) The director’s or officer’s act or failure to act constituted a breach of his or her fiduciary duties as a director or officer; and (b) The breach of those duties involved intentional misconduct, fraud or a knowing violation of law. Nev. Rev. Stat. § 78.138(7). Most important here, the Director Defendants are not liable unless their actions constituted “intentional misconduct, fraud or a knowing violation of law.” Id.; see In re Amerco Derivative Litig., 252 P.3d 681, 700 (Nev. 2011). Plaintiffs argue that the exculpatory statute is an affirmative defense and they need not plead its negation to claim futility. They rely on Delaware law. In Delaware a statute authorizes a corporation to include in its articles of incorporation a provision limiting the personal liability of directors for breach of fiduciary duty unless the breach involved 12 certain specified conduct, including breach of the duty of loyalty and “acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law.” 8 Del. C. § 102(b)(7). The Delaware Supreme Court appears to have held that the statute creates an affirmative defense on which the directors bear the burden of persuasion. See Emerald Partners v. Berlin, 726 A.2d 1215, 1223–24 (Del. 1999). If Nevada law similarly holds that the state’s exculpatory statute creates an affirmative defense, then Fed. R. Civ. P. 8(c), which requires the defendant to plead affirmative defenses, would support the proposition that the Director Defendants bear the burden of pleading the application of the statute in defending against the shareholder-derivative claims. One could then argue that the same pleading burden applies to the futility allegation. In our view, however, for Plaintiffs to prevail on the futility issue, their complaint had to show that the actions of the Director Defendants were not protected by Nevada’s exculpatory statute. Several considerations lead to that conclusion. As we explain below, (1) in Nevada the plaintiff bears the burden of persuasion to overcome the exculpatory statute on a claim against a director; (2) the burdens of persuasion and pleading on an issue are generally on the same party; (3) the policy reasons for requiring that a matter be pleaded as an affirmative defense do not apply to a director’s reliance on the exculpatory statute; and (4) the federal rule governing pleading in shareholder derivative actions places the burden on the plaintiff to plead the specifics showing futility. To begin with, the burden of persuasion is assigned differently by the Delaware and Nevada exculpatory statutes. In Delaware the statute says nothing about which party 13 bears the burden of persuasion;3 and, as just noted, the state’s highest court has said that the director has the burden of proving the facts that provide exculpation. See id. In contrast, the Nevada statute explicitly states that the director is not liable to the corporation or its stockholders or creditors “unless it is proven that: (a) The director’s or officer’s act or failure to act constituted a breach of his or her fiduciary duties as a director or officer; and (b) The breach of those duties involved intentional misconduct, fraud or a knowing violation of law.” Nev. Rev. Stat. § 78.138(7) (emphasis added). This is a clear allocation of the burden of persuasion to the plaintiff. Because allocation of the burden of persuasion is a matter of substantive law, see Dick v. New York Life Ins. Co., 359 U.S. 437, 446 (1959) (“Under the Erie rule, presumptions (and their effects) and burden of proof are ‘substantive’ . . . .” (footnote omitted)), we apply Nevada’s assignment of the burden in assessing the futility issue here, see Kamen, 500 U.S. at 108. 3 8 Del. C. § 102(b) states that “the 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; (iii) under § 174 of this title; or (iv) for any transaction from which the director derived an improper personal benefit. No such provision shall eliminate or limit the liability of a director for any act or omission occurring prior to the date when such provision becomes effective. All references in this paragraph to a director shall also be deemed to refer to such other person or persons, if any, who, pursuant to a provision of the certificate of incorporation in accordance with § 141(a) of this title, exercise or perform any of the powers or duties otherwise conferred or imposed upon the board of directors by this title. (emphasis added). 14 Thus, Plaintiffs have the burden of showing a substantial likelihood that the Director Defendants will be held liable despite Nevada’s exculpatory statute. Next, in civil cases the “burden of pleading and burden of proof are usually parallel [because] they are both manifestations of the same or similar considerations.” Fleming James, Jr., Burden of Proof, 47 Va. L. Rev. 51, 60 (1961). See Nader v. de Toledano, 408 A.2d 31, 48 (D.C. App. 1979) (“The general rule is that a party asserting or pleading an issue has the burden of proof . . . .”); cf. Schaffer ex rel. Schaffer v. Weast, 546 U.S. 49, 56 (2005) (“‘The burdens of pleading and proof with regard to most facts have been and should be assigned to the plaintiff who generally seeks to change the present state of affairs and who therefore naturally should be expected to bear the risk of failure of proof or persuasion.’” (quoting 2 John W. Strong, McCormick on Evidence § 337, at 412 (5th ed. 1999))). Hence, Plaintiffs could be expected to bear the burden of pleading the absence of exculpation. But see Palmer v. Hoffman, 318 U.S. 109, 116–19 (1943) (in diversity case, Fed. R. Civ. P. 8(c) (which lists contributory negligence as an affirmative defense) requires defendant to plead contributory negligence as an affirmative defense even though state law may place on plaintiff the burden of persuasion to negate contributory negligence). Moreover, we agree with the Third Circuit that in determining whether an issue should be treated as an affirmative defense for purposes of pleading, the critical question (absent a contrary command by statute or rule, such as the list of affirmative defenses in Rule 8(c)) is whether requiring the defendant to plead the matter is necessary “to avoid surprise and undue prejudice by providing the plaintiff with notice and the opportunity to 15 demonstrate why the affirmative defense should not succeed.” In re Sterten, 546 F.3d 278, 285 (3d Cir. 2008) (internal quotation marks omitted). Here, the Nevada exculpatory statute applies to all claims against directors unless the articles of incorporation provide for greater liability. See § 78.138(7). The statute provides ample notice of what the plaintiff will need to prove (and plead) without the necessity of a director’s pleading the statute as an affirmative defense. Further support for requiring Plaintiffs to plead facts establishing the requisites for liability under § 78.138(7) flows from the futility provisions in Fed. R. Civ. P. 23.1 itself. Its pleading requirements, which are designed specifically for derivative actions, mandate that the plaintiff “state with particularity . . . the reasons for . . . not making the effort” to obtain the board of directors’ consent to the suit. Fed. R. Civ. P. 23.1(b)(3)(B). If the reason for not making the request is that the directors would face a substantial risk of liability from the suit, the plaintiffs should set forth fully why the directors face liability. That would include why the directors are not protected by Nev. Rev. Stat. § 78.138(7). We note that Delaware, which has a rule of procedure similar to Rule 23.1(b)(3), appears to require as much when plaintiffs in a shareholder-derivative suit claim futility. See Wood v. Baum, 953 A.2d 136, 141 (Del. 2008) (“Where directors are contractually or otherwise exculpated from liability for certain conduct, then a serious threat of liability may only be found to exist if the plaintiff pleads a non-exculpated claim against the directors based on particularized facts.” (internal quotation marks omitted)); id. at 139 n.2 (quoting the Delaware rule); Teamsters Union 25 Health Servs. & Ins. Plan v. Baiera, 119 A.3d 44, 62–63 (Del. Ch. 2015); In re Lear Corp. S’holder Litig., 967 A.2d 640, 16 647–48 (Del. Ch. 2008) (“To plead demand futility . . . , because the Lear charter contains an exculpatory provision . . . , the plaintiffs cannot sustain their complaint even by pleading facts supporting an inference of gross negligence; they must plead a nonexculpated claim.”). In short, we hold that the allegations of Plaintiffs’ complaint must establish whether, in light of the Nevada exculpatory statute, the Director Defendants faced a substantial risk of liability in this derivative action. Thus, we now turn to whether Plaintiffs alleged with particularity facts showing a substantial likelihood that Defendants engaged in “intentional misconduct, fraud or a knowing violation of law.” Nev. Rev. Stat. § 78.138(7)(b). We can rule out fraud because Plaintiffs disclaim any allegations of fraud. As for the terms knowing violation and intentional misconduct, we believe that both require knowledge that the conduct was wrongful. We recognize that in some contexts courts interpret knowingly in a limited way, requiring only “factual knowledge as distinguished from knowledge of the law.” Bryan v. United States, 524 U.S. 184, 192 (1998) (internal quotation marks omitted); see id. (“[T]he term ‘knowingly’ does not necessarily have any reference to a culpable state of mind or to knowledge of the law.”). The interpretation of intentional may be similarly limited, requiring only that the action be deliberate, regardless of whether the actor appreciated that it was misconduct. See Wright v. Municipality of Anchorage, 590 P.2d 425, 426 (Alaska 1979) (affirming jury instruction stating that “[t]o constitute criminal intent it is not necessary that there should exist an intent to violate the law. Where a person intentionally does that which the law declares to be a crime, he is acting with 17 criminal intent, even though he may not know that his act or conduct is unlawful.”); People v. Hill, 166 Cal. Rptr. 824, 825 (Cal. App. Dep’t Super. Ct. 1980) (defendant guilty for an intentional act even if he “did not know his actions were unlawful, or even if he did not intend to violate the law”); cf. United States v. Manatau, 647 F.3d 1048, 1050 (10th Cir. 2011) (“[A] person acts intentionally if he acts purposely or had as a conscious object to cause a particular result.” (internal quotation marks omitted)). But courts have also interpreted knowingly and intentionally more expansively, to require knowledge of wrongfulness. See, e.g., Liparota v. United States, 471 U.S. 419, 420, 434 (1985) (to be guilty of knowingly acquiring or possessing food stamps in a manner not authorized by the governing statute or regulations, defendant must know that the conduct was unauthorized); Mee Indus. v. Dow Chem. Co., 608 F.3d 1202, 1220 (11th Cir. 2010) (“In order to demonstrate intentional misconduct [to establish liability for punitive damages], the plaintiff must show the defendant had actual knowledge of the wrongfulness of the conduct . . . .” (internal quotation marks omitted)); Cohen v. United States, 378 F.2d 751, 754 n.1, 757 (9th Cir. 1967) (statute stating that “[w]hoever being engaged in the business of betting or wagering knowingly uses a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers” is not violated unless defendant knew of the statutory prohibition); State v. Peters, 253 P. 842, 846 (Idaho 1927) (“The word ‘intentional,’ as used in penal laws, is held to import evil intent and unlawful purpose.”); S.S. LLC v. Review Bd. of Indiana Dept. of Workforce Dev., 953 N.E.2d 597, 602 (Ind. Ct. App. 2011) (unemployment claim: “To have knowingly violated an employer’s rule, the employee must know of the rule and must 18 know that his conduct violated the rule.”); Still v. Comm’r of Employment & Training, 672 N.E.2d 105, 112 (Mass. 1996) (unemployment claim: “‘knowing violation’ requires an intent to violate the law, and not merely an intent to commit the act that is a violation.”). The latter meaning is the one that makes the most sense here. The purpose of the exculpatory statute is to limit the liability of corporate directors. Under the narrower interpretations of intentional and knowing that do not require knowledge of wrongfulness, a director would not be protected so long as the director knew what his or her actions were—such as signing a document with knowledge of its contents. But that state of mind would be present for virtually any conduct that could lead to the director’s liability to the corporation or its stockholders or creditors. The exculpatory statute would be an empty gesture. To give the statute a realistic function, it must protect more than just directors (if any) who did not know what their actions were; it should protect directors who knew what they did but not that it was wrong. In any event, we need not pursue whether something less than actual knowledge of the wrongful nature of the conduct may suffice in some circumstances because Plaintiffs do not press the point. The Director Defendants’ appellate brief asserted that they are liable only if they knew their conduct to violate the law, and Plaintiffs did not contest the point in their reply brief. We now consider whether Plaintiffs sufficiently pleaded that the Director Defendants knew their conduct to be wrongful. We find no error in the district court’s holding that they did not. Plaintiffs alleged that the Director Defendants faced a substantial likelihood of liability under Exchange Act § 14(a) and the common law 19 governing fiduciaries by failing to disclose Pedersen’s pledges and the alleged succession plan. We first address the pledges, then the alleged succession plan.
SEC regulations require a company’s proxy statements to “indicate, by footnote or otherwise, the amount of shares that are pledged as security” by its officers and directors. 17 C.F.R. § 229.403(b); see id. § 229.10(a)(2). And it is a violation of Exchange Act § 14(a) to solicit a proxy in violation of SEC regulations, including § 229.403(b). See 15 U.S.C. § 78n(a)(1). ZAGG’s April 27 proxy statement did not report Pedersen’s margined stock, and Plaintiffs assert that this violation of § 14(a) exposed the Director Defendants to a substantial likelihood of liability. We can assume without deciding that Plaintiffs adequately pleaded that the Director Defendants knew of Pedersen’s margin pledges. What is missing, however, is an adequate basis in the complaint for an inference that the violation was knowing or intentional—that is, that the Director Defendants knew that such pledges had to be disclosed. Plaintiffs urge that such knowledge is reasonably inferred from the pleaded facts that all three Director Defendants “reviewed, approved, and signed [ZAGG’s] filings with the SEC,” Aplt. App., Vol. 1 at 61 ¶ 154, and that Larabee and Ekstrom, as members of the audit committee, were “responsible for overseeing the integrity of ZAGG’s financial statements,” id. at 59 ¶ 149. The district court properly refused to infer knowledge from these allegations. We doubt that board members are expected to know the minutiae of SEC regulations. We think it significant that the Delaware courts, whose experience and expertise in such matters is widely recognized, see Delaware Coal. for 20 Open Gov’t, Inc. v. Strine, 733 F.3d 510, 524 (3d Cir. 2013); Swope v. Siegel-Robert, Inc., 243 F.3d 486, 496 (8th Cir. 2001), do not think they are. Delaware cases do not infer knowledge of detail (factual or legal) merely from committee membership or execution of SEC filings, but require specific allegations from which one can infer knowledge. For example, in Guttman v. Huang, 823 A.2d 492 (Del. Ch. 2003), the plaintiffs alleged that the board knew of the company’s improper accounting practices. See id. at 496–97. The court refused to infer such knowledge because the complaint did not contain “well-pled, particularized allegations of fact detailing the precise roles that these directors played at the company, the information that would have come to their attention in those roles, and any indication as to why they would have perceived the accounting irregularities.” Id. at 503. In Wood, 953 A.2d at 139, plaintiffs alleged that defendant board members breached their fiduciary duty to value certain assets properly, in violation of the company’s internal policies, accounting standards, and federal law. To support the claim that the defendants knew their actions to have been wrongful, the plaintiffs alleged that the defendants had executed the company’s financial reports and served on its audit committee. See id. at 142. The court, however, ruled that the complaint did “not plead with particularity the specific conduct in which each defendant ‘knowingly’ engaged, or that the defendants knew that such conduct was illegal.” Id. It said that “Delaware law on this point is clear: board approval of a transaction, even one that later proves to be improper, without more, is an insufficient basis to infer culpable knowledge or bad faith on the part of individual directors.” Id. It could not infer knowledge from the plaintiffs’ allegations because “[t]he Board’s execution of [the 21 company’s] financial reports, without more, is insufficient to create an inference that the directors had actual or constructive notice of any illegality.” Id. In particular, it held that to infer knowledge from membership on an audit committee would run “contrary to wellsettled Delaware law.” Id. In short, “[a]s numerous Delaware decisions make clear, an allegation that the underlying cause of a corporate trauma falls within the delegated authority of a board committee does not support an inference that the directors on that committee knew of and consciously disregarded the problem.” South v. Baker, 62 A.3d 1, 17 (Del. Ch. 2012). Plaintiffs quote the ZAGG audit committee charter, but fail to explain how it compels a conclusion of knowledge. To be sure, one quoted provision states that “[t]he Audit Committee shall comply with the relevant rules and regulations of the SEC.” Complaint, Aplt. App., Vol. 1 at 35 ¶ 51. But it would be too much of a stretch to read this as requiring the committee members to have detailed knowledge of all SEC regulations. Corporations have lawyers and accountants for that purpose. Who would take on that responsibility as a board member? As was true in Wood, 953 A.2d at 142, “the Complaint alleges . . . violations of federal securities . . . laws but does not plead with particularity the specific conduct in which each defendant ‘knowingly’ engaged, or that the defendants knew that such conduct was illegal.” 4 4 Plaintiffs argued to the district court that the secret succession plan was itself evidence that the Director Defendants knew of the “illicit nature” of Pedersen’s pledges. They have dropped this argument on appeal, which is just as well, as the allegation of a secret succession plan is implausible. 22 Plaintiffs’ pleadings likewise fail to show that the Director Defendants knew that nondisclosure of the pledges violated a common-law fiduciary duty. Indeed, that may have been an impossible task, given the apparent lack of support for the existence of any such duty. The only case in point that we have found states the contrary. See Burekovitch v. Hertz, No. 01-cv-1277 (ILG), 2001 WL 984942, at  (E.D.N.Y. July 24, 2001) (“While a controlling shareholder’s decision to commit large quantities of his stock as security in margin trading undoubtedly has the potential to affect the price of that stock, plaintiff has not and cannot allege an affirmative duty imposed by common law to keep the public appraised of such a decision.”).
Plaintiffs allege that the Defendant Directors failed to disclose their secret plan to replace Pedersen by Hales as CEO. But there is nothing wrongful about failing to disclose the nonexistent, and Plaintiffs did not adequately allege the existence of such a plan. According to Plaintiffs’ opening brief, the Director Defendants decided in December 2011 to remove Pedersen as CEO and Chairman and make Hales the CEO but they deliberately concealed this information because ZAGG had repeatedly informed investors that its success depended on Pedersen’s skill and experience. They allege that “the hiring of Hales was a direct response to Pedersen’s margin call situation, marking the initial step of the secret succession plan,” Aplt. Br. at 36, and that the plan was concealed in a press release of December 12, 2011, and a Form 8-K filed on December 16 which misleadingly stated that Hales would serve only as President and COO and that 23 Pedersen would continue as CEO and Chairman of the Board. In support of their secretplan theory, Plaintiffs point to the “temporal proximity” between the first margin call and Hales’s being named President and COO, Aplt. Br. at 36, and to Hales’s statement in August 2012 that from the outset he had worked with Pedersen to “identify and establish corporate objectives” and Pederson had “handed [over] much of the responsibilities for the day-to-day operations,” id. at 38 (internal quotation marks omitted). This theory is far-fetched. The complaint alleges no facts indicating that the Board knew of Pedersen’s margined stock before the first margin call, and that came nine days after ZAGG’s announcement that Hales would become president and COO, which certainly came only after serious discussions with Hales about assuming the positions. Plaintiffs’ temporal-proximity argument makes no sense if the alleged cause (knowledge of the margined stock) occurred after the effect (bringing in Hales to take over ZAGG). We also see nothing remarkable about Hales’s disclosure in August 2012 of the nature of his work when he took office at ZAGG in December 2011. No one should be surprised if the president/COO discusses corporate objectives with the CEO and Board chairman or if the president/COO takes over day-to-day responsibilities. And even if the Board knew of the margined stock before hiring Hales, Plaintiffs’ theory would ascribe very peculiar thinking to the Board members. Why would the Board decide to deal with Pedersen’s margined stock by looking for a successor rather than working on a plan for an orderly sale of that stock to avoid the bad publicity of a margin call? And after the publicity from the first margin call had damaged Pedersen’s favorable image, what would be the public-relations advantage of keeping him on as 24 CEO or the downside of disclosing the succession plan? Why court a further reputational blast from future margin calls, particularly if the Board was not going to make it a condition of Pedersen’s remaining as CEO that he eliminate his margin debt? Why wait until four months after Pedersen’s resignation to appoint Hales as permanent CEO if that had already been decided a year earlier? Someone might be able to conceive of answers to these questions, but Plaintiffs’ secret-plan theory is too speculative to support their futility claim. E. Lack of Independence Finally, Plaintiffs claim that they did not need to demand action by the Board before filing suit because there was not a Board majority independent of influence from interested persons. See Shoen, 137 P.3d at 1183 (“[D]irectors’ discretion must be free from the influence of other interested persons.”). The independence inquiry asks whether a board member was “incapable, due to . . . domination and control, of objectively evaluating a demand.” Brehm v. Eisner, 746 A.2d 244, 257 (Del. 2000). Plaintiffs contend that three ZAGG directors were not independent of each other or of Pedersen. Because Plaintiffs do not challenge the independence of the other three of the six board members, our inquiry is complete if their allegations against any of the three challenged directors are inadequate. See Beam, 845 A.2d at 1046 n.8 (Del. 2004) (demand is excused if there is not a majority of independent directors). In this case we need go no further than Defendant Larabee. Plaintiffs’ allegation of Larabee’s lack of independence fails on two grounds. First, were Larabee controlled by another, such control would compromise her ability to 25 consider a demand only if the person controlling her had an interest in the suit. See Brehm, 746 A.2d at 258 (because CEO was disinterested, it is irrelevant which directors were independent of him). But we have already ruled that none of the Director Defendants were interested in the suit because none faced a substantial likelihood of liability. That leaves Pedersen as the only potentially interested Defendant. Plaintiffs did not, however, allege that Pedersen controlled Larabee; as to Larabee, Plaintiffs argue only lack of independence from Hales.5 Second, the sole ground alleged for Larabee’s lack of independence from Hales is that they served on another company’s board together. This is hardly sufficient to establish the requisite control. Personal or business relationships may compromise objectivity but only if they are “of a bias-producing nature. Allegations of mere personal friendship or a mere outside business relationship, standing alone, are insufficient.” Beam, 845 A.2d at 1050. Although the Delaware Supreme Court has acknowledged “the structural bias common to corporate boards throughout America, as well as the other unseen socialization processes cutting against independent discussion and decision making in the boardroom,” Aronson, 473 A.2d at 815 n. 8, it nonetheless requires allegations of “specific facts pointing to bias on a particular board” to demonstrate demand futility. Id. For example, allegations that board members “moved in the same 5 The Complaint alleged that Larabee lacked independence because she received substantial compensation in her role as a board director and would not want that jeopardized. But because Plaintiffs do not pursue this allegation on appeal, we do not consider it. See Adler v. Wal-Mart, 144 F.3d 664, 679 (10th Cir. 1998). We also do not consider Plaintiffs’ assertion, raised for the first time in their reply brief and without any record support, that Hales and Larabee shared a longstanding friendship. See id. 26 social circles, attended the same weddings, developed business relationships before joining the board, and described each other as ‘friends’” are insufficient to excuse demand. Beam, 845 A.2d at 1051. Plaintiffs’ lesser allegation here—merely that Larabee served on a separate board with Hales—must also fall short. See also Orman v. Cullman, 794 A.2d 5, 27 (Del. Ch. 2002) (“The naked assertion of a previous business relationship is not enough to overcome the presumption of a director’s independence.”); Highland Legacy Ltd. v. Singer, No. Civ.A. 1566-N, 2006 WL 741939, at  (Del. Ch. Mar. 17, 2006) (rejecting allegation of lack of independence that was “based solely on the alleged facts that [defendant directors served together] on the boards of other companies”). Plaintiffs have failed to plausibly allege lack of independence.