Opinion ID: 1541285
Heading Depth: 1
Heading Rank: 3

Heading: The Proper Pleading Standard

Text: Plaintiff contends that the trial court erred by imposing an unduly severe pleading requirement, thereby erecting an unwarranted hurdle for plaintiff to overcome. In particular, plaintiff points to language in the trial court's opinion stating that plaintiff has the burden to plead specific facts sufficient to state an actionable disclosure claim and requiring that the plaintiff's complaint contain particularization of the omitted facts. [4] Based on this language, plaintiff argues that the trial court erroneously required plaintiff to plead with particularity the disclosure violations alleged. We agree that this language in the trial court's opinion, if taken literally, was erroneous. At best, it was simply an unfortunate choice of words. At worst, it was harmless error because we have concluded that, even under the proper pleading standard, the complaint fails to state a claim for damages. In asserting direct claims, as distinct from stockholder derivative claims, the complaint need give only general notice of the claim asserted. [5] To state a claim upon which relief may be granted, plaintiff need only provide a well-pleaded short and plain statement of the claim showing that the pleader is entitled to relief. [6] A requirement that the pleader state facts with particularity is reserved for derivative stockholder claims under Chancery Rule 23.1 and for fraud or mistake claims under Rule 9(b). [7] We see no reason to depart from the general pleading rules when alleging duty of disclosure violations. [8] Nevertheless, it is inherent in disclosure cases that the misstated or omitted facts be identified and that the pleading not be merely conclusory. In evaluating ADM's motion to dismiss, therefore, the Court of Chancery was required to assume the truthfulness of all well-pleaded (i.e., nonconclusory) allegations of the complaint for purposes of the motion. [9] The trial court also was required to extend to the complaint the benefit of all reasonable inferences that can be drawn from ... [the] pleading. [10] Moreover, as we held in Solomon, a motion to dismiss, at such a preliminary stage, requires the court to determine with `reasonable certainty' that a plaintiff could prevail on no set of facts that can be inferred from the pleadings. [11] It is well established, however, that conclusions ... [contained in the complaint] will not be accepted as true without specific allegations of fact to support them. [12] This premise is embodied in our 1995 decision in Santa Fe. [13] Plaintiff's argument seems to be that a plaintiff need provide only a conclusory statement of his claims in order to shift to the defendant the burden of proving full disclosure. In advancing this theory, plaintiff mistakenly relied on cases that involved the affirmative defense of ratification. In such a case, the party relying on ratification as a defense has the burden of demonstrating full and fair disclosure. [14] The trial court correctly held that ratification is not implicated in this case. Nevertheless, the trial court's opinion may be read as requiring that plaintiff plead with particularity the facts underlying the allegations in the complaint. The trial court quoted a passage from this Court's Santa Fe opinion that [n]on-disclosure claims must provide some basis for a court to infer that the alleged omissions were material. [15] Santa Fe did not purport to establish a pleading standard for disclosure cases that went beyond the requirements of Chancery Rule 8(a). Our 1996 decision in Solomon makes clear that Rule 8(a) applies to a complaint that is not derivative or does not allege fraud or mistake. [16] There may sometimes be a fine line between the obligation to set forth well-pleaded allegations of ultimate fact under Rule 8(a) and the requirement in derivative or fraud cases to set forth facts with particularity. A claim based on disclosure violations must provide some basis for a court to infer that the alleged violations were material. [17] For example, a pleader must allege that facts are missing from the proxy statement, identify those facts, state why they meet the materiality standard and how the omission caused injury. Here we find independently that, even under a proper pleading standard, the complaint fails to state a claim upon which relief can be granted.