Court Opinion

ID: 4158262
Source: CourtListenerOpinion
Date Created: 2017-04-05 19:06:17.807873+00
Date Added: 2024-06-11T14:02:51.617598
License: Public Domain

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

IN RE INVESTORS BANCORP, INC.              :     Consolidated
STOCKHOLDER LITIGATION                     :     C.A. No. 12327-VCS

                         MEMORANDUM OPINION

                       Date Submitted: January 5, 2017
                        Date Decided: April 5, 2017

David A. Jenkins, Esquire, Neal C. Belgam, Esquire, and Clarissa R. Chenoweth,
Esquire of Smith Katzenstein & Jenkins LLP, Wilmington, Delaware, and Steven J.
Purcell, Esquire, Douglas E. Julie, Esquire, and Robert H. Lefkowitz, Esquire of
Purcell Julie & Lefkowitz LLP, New York, New York, Attorneys for Plaintiffs.

Kenneth J. Nachbar, Esquire and Zi-Xiang Shen, Esquire of Morris, Nichols, Arsht
& Tunnell LLP, Wilmington, Delaware, Attorneys for Defendants.

SLIGHTS, Vice Chancellor
      A mutual holding company that owned more than half of the stock of a bank

subsidiary completed a mutual-to-stock conversion to become a fully public stock

holding company.     Following the conversion, the directors adopted an equity

compensation plan and submitted it to the stockholders for approval. After receiving

stockholder approval, the directors granted themselves substantial restricted stock

and stock options under the plan. When word of the equity awards became public,

stockholders initiated this derivative action alleging that the compensation awards

were excessive and unfair to the corporation.

      The key issue in this case is whether the stockholder approval of the equity

compensation plan extends to the board of directors’ subsequent decision to

authorize grants of awards under the plan such that the propriety of these awards

should be reviewed under a waste standard. Always recognizing that these are

inherently self-dealing transactions, this court has nonetheless considered challenges

to board-level and executive compensation awards under different standards of

review depending upon the specific details and parameters of the plan previously

submitted for stockholder approval. In some instances, the court has determined that

any purported limit on the total amount of equity compensation allowed under a plan

approved by stockholders was, in fact, no limit at all. In these cases, this court has

refused to deem approval of the overall plan as approval of any awards directors

might give themselves under its terms and has reviewed the awards under the entire

                                          1
fairness standard of review. In other instances, this court has concluded that the

action of the directors fell within limits specifically imposed by the terms of the plan

that had been approved by stockholders. Under these circumstances, this court

deems the stockholder approval of the plan to be ratification of awards made under

the plan and reviews the awards for waste.

         In this case, both non-employee directors and executive directors were granted

equity awards under a stockholder-approved plan. Critically, this plan included

director-specific limits that differed from the limits that applied to awards to other

beneficiaries under the plan. Based on settled guidance in this area, particularly In re

3COM Corp. S’holders Litig. and Calma on Behalf of Citrix Systems, Inc. v.

Templeton (“Citrix”),1 I conclude that the fully informed stockholder vote that

approved the plan extended to the awards themselves, which indisputably fell within

the limits set by the plan. Accordingly, the propriety of these awards will be

reviewed under the business judgment rule which defaults to a waste standard.

Plaintiffs have not pled waste. I also conclude that Plaintiffs have not satisfied the

test for demand futility under Court of Chancery Rule 23.1 with respect to their claim

challenging the grant of awards to the executive directors. Finally, I have determined

that Plaintiffs’ unjust enrichment claim is merely a recast of their breach of fiduciary

1
    1999 WL 1009210 (Del. Ch. Oct. 25, 1999); 114 A.3d 563 (Del. Ch. 2015).
                                            2
duty claim and that they have failed to state a viable claim under either theory of

recovery. Therefore, the motion to dismiss must be granted.

                                 I.     BACKGROUND

       The facts are drawn from allegations in the Complaint, documents integral to

the Complaint and matters of which the Court may take judicial notice.2 As it must

at this stage of the proceedings, the Court assumes as true all well-pled facts in the

Complaint.3

2
  In re Crimson Exploration Inc. S’holder Litig., 2014 WL 5449419, at *8 (Del. Ch.
Oct. 24, 2014) (“‘A judge may consider documents outside of the pleadings only when: (1)
the document is integral to a plaintiff’s claim and incorporated in the complaint or (2) the
document is not being relied upon to prove the truth of its contents.’ Under at least the first
exception, [the court finds] that consideration of the Proxy Statement is appropriate in
resolving this dispute.”) (citation omitted); In re Gardner Denver, Inc., 2014 WL 715705,
at *2 (Del. Ch. Feb. 21, 2014) (on a motion to dismiss, the Court may rely on documents
extraneous to a complaint “when the document, or a portion thereof, is an adjudicative fact
subject to judicial notice.”) (footnotes and internal quotation marks omitted); Narrowstep,
Inc. v. Onstream Media Corp., 2010 WL 5422405, at *5 (Del. Ch. Dec. 22, 2010) (same).
3
  Plaintiffs availed themselves of 8 Del. C. § 220 and secured books and records prior to
filing their complaint. They have incorporated some of the fruits of this endeavor into their
pleading. See Rales v. Blasband, 634 A.2d 927, 934–35 (Del. 1993) (noting the importance
of utilizing the “tools at hand,” including books and records demands, to investigate
derivative complaints in order to overcome the pleading burdens imposed by Court of
Chancery Rule 23.1); King v. VeriFone Hldgs., Inc., 994 A.2d 354, 356 (Del. Ch. 2010),
rev’d on other grounds, 12 A.3d 1140 (Del. 2011) (“For years, our Supreme Court has
made clear that derivative plaintiffs should seek books and records and otherwise conduct
an adequate investigation into demand excusal before rushing off to file a derivative
complaint.”).
                                              3
   A. The Parties

      Plaintiffs, Robert Elburn and Dieter Soehnel, are and have continuously been

stockholders of Investors Bancorp, Inc. (“Investors Bancorp” or the “Company”)

since May 7, 2014. Both stockholders acquired their shares in the Company’s

second-step offering described in detail below.

      Defendants, Robert C. Albanese, Dennis M. Bone, Doreen R. Byrnes,

Robert M. Cashill, William V. Cosgrove, Brian D. Dittenhafer, Brendan J. Dugan,

James J. Garibaldi, Michele N. Siekerka and James H. Ward III are the ten non-

employee directors that sit on the Company’s twelve-member board of directors (the

“Non-Employee Director Defendants”).         Defendants, Kevin Cummings, the

Company’s President and CEO, and Domenick A. Cama, the Company’s COO and

Senior Executive Vice President, are the two executive officers that serve on the

Company’s board (the “Executive Director Defendants”).

      Nominal Defendant, Investors Bancorp, is a Delaware corporation with its

principal place of business in Short Hills, New Jersey. The Company is a holding

company for Investors Bank, a New Jersey chartered savings bank that has its

corporate headquarters in Short Hills, New Jersey and operates 143 branches located

throughout New Jersey and New York.

                                         4
   B. Investors Bancorp Transitions to a Public Stock Holding Company
      Through a “Second-Step” Conversion

      Before the Company transitioned into its current capital structure, its

predecessor, also called Investors Bancorp, Inc. (“Old Investors Bancorp”),

completed an initial public offering in 2005. Through the initial public offering, Old

Investors Bancorp offered 43.74% of its outstanding common stock for sale to public

investors. After the public offering, Investors Bancorp, MHC, which was the mutual

holding company parent of Old Investors Bancorp, held 54.94% of the outstanding

common stock. The new Investors Bancorp was created in December 2013 in order

for Old Investors Bancorp, Investors Bancorp, MHC and Investors Bank to

undertake a Plan of Conversion and Reorganization (the “Conversion Plan”).

Pursuant to the Conversion Plan, Investors Bancorp, MHC would cease to exist

following the completion of a “second-step” conversion. Investors Bank would then

reorganize from its two-tier mutual holding company structure into a fully public

stock holding company structure (the “Mutual-to-Stock Conversion”) and thereafter

would become a wholly-owned subsidiary of a state-chartered stock corporation,

Investors Bancorp (the “second step” of the conversion).

      As part of the Conversion Plan, the shares of Old Investors Bancorp already

held by the public were converted to shares of common stock of Investors Bancorp

pursuant to an exchange ratio designed to preserve percentage ownership interests.

The shares previously held by Investors Bancorp, MHC were sold to the public at
                                          5
$10.00 per share. Through this second-step offering, the Company sold 219,580,695

shares and raised net proceeds of $2.15 billion. The Conversion Plan was completed

in May 2014.

   C. 2014 Director Compensation

      The Company’s board of directors (the “Board”) sets director compensation

based on recommendations of the Compensation and Benefits Committee (the

“Compensation Committee”).        The Compensation Committee’s membership

includes a majority of the Board with seven out of the ten non-employee directors

serving on the committee. At issue in this case are equity awards approved by the

Board as compensation for both non-employee and executive directors.

      1. Non-employee Directors

      In 2014, non-employee directors were awarded three different strains of

compensation: (i) a monthly cash retainer for board service; (ii) additional cash

rewards for attending board and board committee meetings; and (iii) perquisites and

other personal benefits. The Chairman of each committee received an additional

annual retainer. As the following chart depicts, annual compensation for all non-

employee directors ranged from $97,200 to $207,005, with $133,340 as the average

amount of compensation per director.

                                        6
     Name           Investors    Bank Cash             All Other            Total
                  Bancorp Cash      Fees             Compensation
                       Fees
 Albanese         $56,500      $73,200               $343              $130,043

 Bone             $37,500           $73,200          $264              $110,964

 Byrnes           $59,500           $73,200          $9,898            $142,598

 Cashill          $48,000           $146,400         $12,605           $207,005

 Cosgrove         $24,000           $73,200          $32,970           $130,170

 Dittenhafer      $59,500           $73,200          $13,392           $146,092

 Dugan            $45,000           $73,200          -                 $118,200

 Garibaldi        $24,000           $73,200          -                 $97,200

 Siekerka         $45,000           $73,200          $230              $118,430

 Ward             $59,500           $73,200          -                 $132,700

        2. Executive Directors

        As of 2014, Cummings, the Company’s President and CEO, received the

following compensation: (i) a base salary of $1,000,000; (ii) an Annual Cash

Incentive Award of up to 150% of his base salary contingent on certain performance

goals; and (iii) perquisites and other benefits valued at $278,400. In total, his annual

compensation package was valued at $2,778,700. For Cama, the Company’s COO

and Senior Executive Vice President, annual compensation consisted of: (i) a base

salary of $675,000; (ii) an Annual Cash Incentive Award of up to 120% of his base

                                           7
salary; and (iii) perquisites and other benefits valued at $180,794. In total, his 2014

compensation was valued at $1,665,794.

   D. The Adoption of the Equity Incentive Plan

       The Compensation Committee held a meeting on December 15, 2014,

approximately seven months following the completion of the Conversion Plan, to

review 2014 director compensation and to set compensation for 2015. At the

meeting, a compensation consultant from GK Partners, Inc., Gregory Keshishian,

presented a study analyzing the director compensation within eighteen publicly held

companies that the Compensation Committee had previously identified as peers.

The study revealed that, on average, these companies paid their non-employee

directors $157,350 in total compensation. The Company’s average non-employee

director compensation of $133,340 in 2014 was in line with this figure. Following

the presentation, the Compensation Committee recommended to the Board that the

non-employee director compensation package remain the same for 2015. The only

change was to increase the fees paid for attending committee meetings from $1,500

to $2,500.

      The Compensation Committee discussed the compensation package for

executive officers at the same meeting. After reviewing and discussing GK Partners’

compensation study with respect to average compensation paid to executive officers,

the Compensation Committee unanimously recommended to the Board that

                                          8
Cummings’ annual salary remain at $1,000,000, but that his 2015 Annual Cash

Incentive Award be increased from 150% to 200% of his base salary. The Board

retained Cama’s base salary at its 2014 level, but raised his 2015 Annual Cash

Incentive Award from 120% to 160% of his base salary.

      The only items left to be determined were the precise metrics that would apply

to the incentive awards.    Those metrics were set at the next meeting of the

Compensation Committee on February 23, 2015. The meeting minutes do not reflect

any discussion of additional awards for directors in 2015.

      On March 24, 2015, the Board revisited director compensation and ultimately

adopted the 2015 Equity Incentive Plan at issue in this litigation (the “EIP”) to be

administered by the Compensation Committee. Under the EIP, 30,881,296 shares

of the Company’s common stock are reserved for restricted stock awards, restricted

stock units, incentive stock options, and non-qualified stock options for the

Company’s officers, employees, non-employee directors, and service providers.

The EIP imposes limits on: (i) the number of shares the Company can issue as stock

options (a maximum of 17,646,455) or as restricted stock awards, restricted stock

units or performance shares (a maximum of 13,234,841), and (ii) the number of

shares the Company can award to employees and directors. Specifically, the EIP

imposes the following ceilings on awards to employees and non-employee directors:

                                         9
          A maximum of 4,411,613 shares, in the aggregate (25% of the
           shares available for stock option awards), may be issued or delivered
           to any one employee pursuant to the exercise of stock options;

          A maximum of 3,308,710 shares, in the aggregate (25% of the
           shares available for restricted stock awards and restricted stock
           units), may be issued or delivered to any one employee as a
           restricted stock or restricted stock unit grant; and

          The maximum number of shares that may be issued or delivered to
           all non-employee directors, in the aggregate, pursuant to the
           exercise of stock options or grants of restricted stock or restricted
           stock units shall be 30% of all option or restricted stock shares
           available for awards, “all of which may be granted in any calendar
           year.”4

         According to the Proxy filed on April 30, 2015, the EIP was meant to “provide

additional incentives for [the Company’s] officers, employees and directors to

promote [the Company’s] growth and performance and to further align their interests

with those of [the Company’s] stockholders.”5 The Proxy also disclosed that “[t]he

number, types and terms of awards to be made pursuant to the [EIP] are subject to

the discretion of the [Compensation] Committee and have not been determined at

this time, and will not be determined until subsequent to stockholder approval.”6

The EIP was put to a stockholder vote on June 9, 2015, at the Company’s 2015

4
  Transmittal Aff. of Zi-Xiang Shen in Supp. of Br. in Supp. of Defs.’ Mot. to Dismiss
Ex. 2, DEF 14A Proxy Statement (“Proxy”) at 40; Proxy Appendix A, 2015 Equity
Incentive Plan § 3.3.
5
    Proxy at 40.
6
    Proxy at 46.
                                           10
Annual Meeting. Of the shares voted at the meeting, 96.25% voted to approve the

EIP (representing 79.1% of the total shares outstanding).

   E. 2015 Director Compensation

      Beginning on June 12, 2015, three days after the stockholder vote to approve

the EIP, the Compensation Committee held four meetings that ultimately resulted in

the approval of awards of restricted stock and stock options to all Board members.

The minutes of the first meeting on June 12 state that the objective of the meeting

was to “begin the process of determining the allocation of shares” to be granted

under the EIP. At the next meeting, on June 16, the Board received input from

various experts, including a presentation by outside counsel, Luse Gorman, PC. The

materials for this presentation included a chart of 164 companies that had undergone

a mutual-to-stock conversion in the past twenty years with a list of the number of

stock options and stock awards that each company had distributed to its directors

and executive officers upon completion of the conversion.

      The Compensation Committee met next on June 19. At this meeting, the

Compensation Committee focused on the language in the EIP that authorized up to

30% of the EIP’s capacity to be granted to non-employee directors. At some point

in the meeting, Cama proposed a number of restricted stock and stock options to be

awarded to himself and Cummings. Thereafter, the Compensation Committee

polled each member for a reaction to Cama’s proposal and each “responded in the

                                        11
affirmative.” At the end of the meeting, the Compensation Committee held an

executive session (without Cama and Cummings) during which “[a]ll members of

the Committee reaffirmed their sentiment of where they came out in the open

session” with respect to the awards to be granted to Cama and Cummings. A few

days later, on June 23, the Board approved an award of stock options and restricted

stock for each of the twelve Board members. In total, the grant date fair value of the

awards for all twelve Board members was approximately $51.5 million, broken

down by member as follows:

        Name           Restricted Stock        Stock Options            Total

 Albanese             $1,254,000            $780,000             $2,034,000

 Bone                 $1,254,000            $780,000             $2,034,000

 Byrnes               $1,254,000            $780,000             $2,034,000

 Cashill              $1,881,000            $780,000             $2,661,000

 Cosgrove             $1,254,000            $780,000             $2,034,000

 Dittenhafer          $1,881,000            $780,000             $2,661,000

 Dugan                $1,254,000            $780,000             $2,034,000

 Garibaldi            $1,254,000            $780,000             $2,034,000

 Siekerka             $1,254,000            $780,000             $2,034,000

 Ward                 $1,254,000            $780,000             $2,034,000

                                          12
 Cummings              $12,540,000           $4,159,999            $16,699,999

 Cama                  $10,032,000           $3,327,998            $13,359,998

   F. Procedural History

      Following the Company’s announcement of the equity awards in a

Schedule 14A Proxy Statement issued on April 14, 2016, three separate complaints

were filed in this Court alleging that the directors had breached their fiduciary duties

by awarding themselves grossly excessive compensation. Following the Court’s

entry of an order appointing co-lead Plaintiffs and co-lead counsel, Defendants filed

a motion to dismiss the Verified Stockholder Derivative Complaint (the “Compl.”)

under Court of Chancery Rule 12(b)(6) for failure to state a claim upon which relief

can be granted and under Court of Chancery Rule 23.1 for failure to make a pre-suit

demand with respect to the grants of equity compensation to the executive directors.

                                 II.    ANALYSIS

      As noted, the key issue with respect to Defendants’ Rule 12(b)(6) motion is

whether the stockholder approval of the EIP will be deemed ratification of the

awards made under the plan. If so, then the awards to all directors will be reviewed

for waste. In the alternative, Defendants argue that the Plaintiffs’ failure to make a

demand on the Board with respect to the awards to the Executive Director

Defendants cannot be excused and requires dismissal of the Complaint under

Rule 23.1 with respect to those awards. I first address Defendants’ argument that
                                          13
the Complaint should be dismissed for failure to state a claim against all Defendants

and then turn to whether demand on the Board was excused with respect to the

specific grants of equity compensation to the Executive Director Defendants.

     A. Motion to Dismiss Standard

         “The standards governing a motion to dismiss for failure to state a claim are

well settled: (i) all well-pleaded factual allegations are accepted as true; (ii) even

vague allegations are ‘well-pleaded’ if they give the opposing party notice of

the claim; (iii) the Court must draw all reasonable inferences in favor of the non-

moving party; and (iv) dismissal is inappropriate unless the ‘plaintiff would not be

entitled to recover under any reasonably conceivable set of circumstances

susceptible of proof.’”7

     B. Stockholder Ratification of the EIP Awards

         Every member of the Board, including the seven members of the

Compensation Committee, received awards.                 “[D]irector self-compensation

decisions are conflicted transactions that ‘lie outside the business judgment rule’s

presumptive protection, so that, where properly challenged, the receipt of self-

determined benefits is subject to an affirmative showing that the compensation

7
    Savor, Inc. v. FMR Corp., 812 A.2d 894, 896–97 (Del. 2002) (citations omitted).

                                             14
arrangements are fair to the corporation.’”8 Since the Board approved the grant of

equity awards to themselves, entire fairness is the default standard of review.9 To

avoid entire fairness review, Defendants raise the affirmative defense of stockholder

ratification. If they are correct that this defense is evident in the well-pled allegations

of the Complaint, then the Court must review the awards under the business

judgment rule standard.10

       Plaintiffs contend that ratification cannot apply here for three reasons. First,

the stockholders could not ratify the awards since the EIP approved by stockholders

did not authorize self-executing payments of compensation nor did it contain

“meaningful limits” on the amount of awards the Board members could grant

themselves. Second, even if the plan lacked meaningful limits, the Defendants could

8
  Calma on Behalf of Citrix Sys., Inc. v. Templeton, 114 A.3d 563, 578 (Del. Ch. 2015)
(“Citrix”) (quoting Telxon Corp. v. Meyerson, 802 A.2d 257, 265 (Del. 2002)).
9
 Defendants sensibly make no argument that demand is not excused with respect to the
grants of equity options the Non-Employee Director Defendants approved for themselves.
This position is well-grounded because “the law is skeptical that an individual can fairly
and impartially consider whether to have the corporation initiate litigation challenging his
or her own compensation, regardless of whether or not that compensation is material on a
personal level.” Citrix, 114 A.3d at 576 (citation omitted).
10
    Cambridge Ret. Sys. v. Bosnjak, 2014 WL 2930869, at *9 (Del. Ch. June 26, 2014)
(“Because plaintiff has failed to undermine the validity of the stockholders approvals on
which the equity awards in question were expressly conditioned, the business judgment
rule applies to the board’s decision to grant those awards in the first instance. [W]here
business judgment presumptions are applicable, the board’s decision will be upheld unless
it cannot be attributed to any rational business purpose.”) (citations and internal quotation
marks omitted).
                                             15
have sought ratification by asking stockholders to approve the specific grants, but

declined to do so. Third, Defendants cannot invoke ratification when they failed to

disclose all material facts regarding the EIP when seeking stockholder approval of

the plan. For the sake of efficiency and clarity, I will consider Plaintiffs’ first two

arguments together before addressing their argument regarding the lack of a fully

informed stockholder vote. If the Board lacked authority to approve the awards or

the limits in the EIP lacked the requisite level of specificity, then ratification is

unavailable regardless of whether the vote was fully informed.

         1. Are the Equity Awards Ratifiable?

         Chancellor Allen addressed the effect of “ratification” by a stockholder vote

on the review of an equity compensation plan in Lewis v. Vogelstein.11 He noted

that the doctrine of ratification is animated by “principles [that are] broader than

those of corporation law”; it derives from the recognition in agency law that a

principal may confer upon the agent authority to act “in circumstances in which the

agent had no authority or arguably had no authority.”12 He then confirmed that the

11
     699 A.2d 327 (Del. Ch. 1997).
12
   Id. at 334. I note, as some other members of the court have observed, that the term
“ratification” does not fit perfectly in this context because “[r]atification in the usual sense,
involves shareholders affirmatively sanctioning earlier board action, the effect of which is
to validate the action” and agree that the term “advance ratification” is somewhat
“oxymoronic.” In re 3COM S’holders Litig., 1999 WL 1009210, at *3 (Del. Ch. Oct. 25,
1999). Nevertheless, “for lack of a better nomenclature and in the interest of simplicity,”
I use the term ratification throughout this opinion to describe the concept of advanced
                                               16
doctrine would apply when stockholders give their informed approval of officer or

director option grants, even though the transactions are inherently self-interested,

and that stockholder ratification will result in “protect[ion] [of] the transaction from

judicial review except on the basis of waste.”13

         Plaintiffs agree that a fiduciary “can avoid entire fairness review of a self-

dealing transaction by demonstrating that the transaction has been ratified by a fully

informed and uncoerced vote of a majority of disinterested stockholders, in which

case business judgement will apply and plaintiff must meet the standard for pleading

a waste claim.”14 They argue, however, that the awards at issue here were not ratified

because the specific parameters of the EIP were such that no award of equity

compensation under the EIP could have been approved by stockholders in advance.

In other words, according to the Plaintiffs, the awards at issue here were not ratifiable

because the Board failed to seek stockholder approval for the specific awards made

under the plan. To support this position, Plaintiffs characterize the EIP as an

“omnibus stock plan” and contend that Defendants are relying upon an argument

that this court repeatedly has rejected; specifically, that director decisions on

stockholder approval of awards made under a previously approved plan. Citrix, 114 A.3d
at 579 n. 63.
13
     Lewis v. Vogelstein, 699 A.2d 327, 336 (Del. Ch. 1997).
14
     Pls.’ Opp’n to Defs.’ Mot. to Dismiss Pls.’ Compl. (“Answering Br.”) 25.

                                             17
compensation are entitled to business judgment rule deference as long as the awards

do not violate a stockholder-approved plan, regardless of its lack of specific limits.

          This court recently performed an exhaustive review of the law of stockholder

ratification with regard to director equity compensation in Citrix. There, Chancellor

Bouchard analyzed in detail “how shareholder approval has been treated for 60

years, both by the Supreme Court and the Chancery Court.”15 Citrix is rich with

helpful guidance in this area of our law, but the most salient, given the facts of this

case, is the effect that “director-specific” limits within a stockholder-approved

equity compensation plan will have on the efficacy and reach of stockholder

approval. The court noted that there is a distinction between stockholder approval

of a plan that features broad parameters and “generic” limits applicable to all plan

beneficiaries on the one hand and, on the other hand, a plan that sets “specific limits

on the compensation of the particular class of beneficiaries in question.”16 Approval

of broader plans will not extend to subsequent grants of awards made pursuant to

that plan; approval of plans with “specific limits,” however, will be deemed as

ratification of awards that are consistent with those limits.17

15
     Citrix, 114 A.3d at 578 (internal citation omitted).
16
     Id. at 587.
17
  Compare Sample v. Morgan, 914 A.2d 647, 663–64 (Del. Ch. 2007) (holding that “the
mere approval by stockholders of a request by directors for the authority to take action
within broad parameters does not insulate all future action by the directors within those
parameters from attack”) with 3COM, 1999 WL 1009210, at *3 n.9 (noting that “the
                                                18
         In Citrix, the court concluded “that the defendants have not established that

Citrix stockholders ratified the RSU Awards because, in obtaining omnibus approval

of a Plan covering multiple and varied classes of beneficiaries, the Company did not

seek or obtain stockholder approval of any action bearing specifically on the

magnitude of compensation to be paid to its non-employee directors.”18 In reaching

this conclusion, the court relied heavily, by way of distinction, upon 3COM. There,

the plaintiffs challenged what they believed to be “excessive” and “lavish” options

granted to the company’s directors under a stockholder-approved plan.19 The court

ultimately concluded that the stockholders had approved the grants at issue because

the stockholders had approved a director stock option plan with director-specific

ceilings. Specifically, the court observed that the “board issued options to directors

in amounts within the specific ceilings set forth in the plan as approved by 3COM

stockholders,” a point which the court in Citrix described as “critical to the Court’s

strictures of this plan include . . . specific ceilings on the awarding of options each year
. . . . [and] it is implicit that the Board may only exercise discretion within these parameters
and is free to award as many options as the Plan permits or as few as zero options,” and
holding that “[o]ne cannot plausibly contend that the directors structured and implemented
a self-interested transaction inconsistent with the interests of the corporation and its
shareholders when the shareholders knowingly set the parameters of the Plan, approved it
in advance, and the directors implemented the Plan according to its terms.”).
18
     Citrix, 114 A.3d at 569 (emphasis in original).
19
     3COM, 1999 WL 1009210, at *1.

                                               19
analysis.”20 Indeed, in summarizing 3COM’s holding, Citrix explained that “[t]he

rationale of the Court’s conclusion in 3COM is that it would have made little sense

to have required the 3COM directors to establish the entire fairness of their

compensation when the directors exercised their business judgment to grant options

in amounts within the director-specific ceilings previously approved by

stockholders.”21

           Plaintiffs seek to distinguish 3COM on two grounds. First, they emphasize

that the plan at issue in 3COM applied only to directors and not company executives

or other beneficiaries. Second, they argue that the 3COM plan defined its terms and

limits in such detail that the court there had no difficulty concluding that the

stockholder vote to approve the plan was tantamount to approval in advance of any

grants that were within the parameters of the plan. Essentially, Plaintiffs argue that

the only circumstances in which a stockholder vote can ratify in advance a board of

directors’ decision to approve equity awards to its members is when the “plan [is]

either completely self-executing in that it provide[s] for fixed amounts of pay or []

specifically impose[s] meaningful limits on the directors’ ability to compensate

themselves.”22 According to Plaintiffs, only then will it be clear that there has been

20
     Citrix, 114 A.3d at 582 (emphasis in original).
21
     Id.
22
     Answering Br. 34.

                                               20
“a meeting of the minds” between the board and stockholders as to precisely what

the stockholders have approved.23

      Plaintiffs’ attempt to distinguish 3COM falls short. It is true that the plan at

issue in 3COM singled-out director beneficiaries.24 What Plaintiffs fail to explain,

however, and what I cannot discern, is how, in the ratification context, stockholder

approval of a director-only option plan, that includes specific limits for those

directors, differs in any meaningful respect from a company-wide plan that includes

director-specific limits for all director beneficiaries as a component of the plan. In

either case, the key point is the specific focus on the limit or limits imposed on

awards to various beneficiaries of the plan, particularly, in this case, non-employee

and executive directors. The EIP contained such limits.

      Plaintiffs are also wrong when they argue that the plan in 3COM is

significantly more specific than the EIP. The plan in 3COM did, as Plaintiffs

observe, set annual ceilings that differed based on different types of board service.

This is in contrast to the specific ceilings in the EIP that apply to all non-employee

directors equally as well as the specific ceilings that apply to all executive directors

23
  Answering Br. 40–41 (citing Larkin v. O’Connor, C.A. No. 11338-CB, at 69–71 (Del.
Ch. Mar. 22, 2016) (TRANSCRIPT)).
24
  3COM, 1999 WL 1009210, at *1 (noting that “Plaintiff’s claims flow from 3COM stock
options granted to members of the board under the company’s Director Stock Option
Plan . . .”).

                                          21
equally.   Here again, however, the Plaintiffs point to a distinction without a

difference. Once the plan sets forth a specific limit on the total amount of options

that may be granted under the plan to all directors, whether individually or

collectively, it has specified the “director-specific ceilings” that Citrix found to be

essential when determining whether stockholders also approved in advance the

specific awards that were subsequently made under the plan.25

      Contrary to the characterization of the EIP offered by Plaintiffs, I am satisfied

that the plan set “specific limits on the compensation of” the non-employee and

25
    See Citrix, 114 A.3d at 586 (“There was also valid stockholder approval of the
compensation awarded to directors in 3COM . . . because the awards at issue were within
the director-specific ceilings of 3COM . . .); Criden v. Steinberg, 2000 WL 354390 (Del.
Ch. Mar. 23, 2000) (granting motion to dismiss plaintiff’s challenge to the defendants’
issuance of re-priced employee stock options pursuant to a stockholder-approved stock
option plan upon concluding that “the directors merely implemented a plan presumably
entirely consistent with the interests of the corporation and its shareholders because the
shareholders knowingly endorsed the parameters of the plan.”). Plaintiffs point to Larkin
v. O’Connor, C.A. No. 11338-CB, at 69–71 (Del. Ch. Mar. 22, 2016) (TRANSCRIPT) as
an example of where this court has denied a motion to dismiss because the terms of the
equity plan and the proposal stockholders ultimately approved with respect to director
equity awards were not sufficiently clear to allow the court to draw a pleadings-stage
inference that the stockholders had ratified equity awards that were subsequently made to
the directors. Larkin is also distinguishable. There, the board presented stockholders with
a confusing, inverted proposal and then asked them to approve two separate corporate
actions (the plan and the awards) in one single vote. The court determined, under these
circumstances, that there was some question as to whether a “meeting of the minds” was
reached between the board and stockholders. No such confusion exists here. Investors
Bancorp stockholders were asked to approve a plan with specific director limits baked into
it. In approving the plan, they were necessarily approving the limits as part of the plan.
This is exactly what the stockholders in 3COM did when they voted to approve a plan that
included specific limits.

                                            22
executive members of the Board such that the stockholders’ approval of the EIP

reflects their ratification of all of the specific awards later approved by the Board.26

This is not a situation where, in seeking approval of the EIP, the Board sought “blank

check” authority for subsequent awards.27 The EIP contained meaningful, specific

limits on awards to all director beneficiaries. Stockholders were informed that the

total available number of restricted shares was 13,234,841, representing 6% of the

total number of shares sold pursuant to the Conversion Plan, and that the total

number of stock option shares was 17,646,455, representing 8% of that amount.

26
   Citrix, 114 A.3d at 587. To be sure, awards under the EIP were not self-executing in the
sense that the plan did not identify the specific amounts of the awards or the specific times
at which they would be granted at the time the stockholders approved the plan. If the
awards were self-executing, there would be no room to dispute that subsequent awards
would be subject to business judgment review. Id. at 581 (discussing Steiner v. Meyerson,
1995 WL 441999 (Del. Ch. July 19, 1995) (holding that “stockholder approval of the plan
[with self-executing awards] per force meant stockholder approval of the option awards
for which the directors asserted a ratification defense.”) But this is not the only basis under
our law upon which a defendant may seek to avoid the scrutiny of entire fairness. Plaintiffs
acknowledge this, as they must, given 3COM. 3COM, 1999 WL 1009210, at *3 n.9 (“The
strictures of this plan include (at minimum) specific ceilings on the awarding of options
each year . . . . [and] it is implicit that the Board may only exercise discretion within these
parameters and is free to award as many options as the Plan permits or as few as zero
options.”) As explained in Citrix, if the plan contains “specific limits on the compensation
of the particular class of beneficiaries in question,” Citrix, 114 A.3d at 587, then awards
made after stockholders approve the plan that are within the “specific limits” will likewise
be deemed approved, or ratified, by the stockholders. Id. at 582 (“The rationale of the
Court’s conclusion in 3COM is that it would have made little sense to have required the
3COM directors to establish the fairness of their compensation when the directors
exercised their business judgement to grant options in amounts within the director-specific
ceilings previously approved by stockholders.”).
27
     Citrix, 114 A.3d at 585.

                                              23
They were also advised of the magnitude of the awards Board members could award

to themselves under the EIP. Specifically, the EIP expressly stated that “[t]he

maximum number of shares of Stock that may be covered by Awards granted to all

non-Employee Directors, in the aggregate, is thirty percent (30%) of the shares

authorized under the Plan all of which may be granted during any calendar year.” 28

The EIP also stated that “[t]he maximum number of shares of Stock that may be

subject to stock options to any one Participant who is an employee covered by Code

Section 162(m) during any calendar year . . . shall be 4,411,613 shares” and that

“[t]he maximum number of shares of Stock that may be subject to Restricted Stock

Awards or Restricted Stock Units which are granted to any one Participant who is

an employee covered by Code Section 162(m) during any calendar year . . . shall be

3,308,710 shares, all of which may be granted during any calendar year.” 29 These

limits are unlike the “generic” limit for all beneficiaries under the equity

compensation plan in Citrix, which was 1 million shares with “no sub-limits varied

28
     EIP § 3.3(c).
29
   The Proxy, in several sections, gave stockholders additional information regarding the
precise meaning of an “employee covered by Code Section 162(m).” For example, the
Proxy explained that “Code Section 162(m) generally limits our ability to deduct for tax
purposes compensation in excess of $1 million per year for each of our chief executive
officer and four other executive officers named in our annual proxy statement named in the
summary compensation table (“covered employees”).” Proxy at 45. Therefore,
stockholders were given the information necessary to understand that employees covered
by Code Section 162(m) were the Company’s five executive employees named in the
summary compensation table, including Cama and Cummings.

                                           24
by position with the Company, such as a limit for non-employee directors and a

different limit for officers.”30 This is also distinguishable from Sample v. Morgan,31

where the company’s management stock incentive plan authorized up to 200,000

shares to be issued, but had no internal limits as to how many shares could be issued

to individuals.32 In this case, stockholders approved specific limits and the directors

30
     Citrix, 114 A.3d at 570.
31
     914 A.2d 647 (Del. Ch. 2007).
32
   Id. at 650. In Sample, following the stockholder vote, a compensation committee met
for just 25 minutes to consider a proposal to grant all 200,000 shares (which represented
37.1% of the company’s voting power) to just three employees. The proposal was adopted
ten days later during a twenty-minute meeting. The court in Citrix, addressing Sample,
observed: “[t]he key point I take away from this analysis is that because the stockholders
in Sample merely voted in favor of the broad parameters of the plan—and had not voted in
favor of any specific awards under the plan—the defendants could not show that
stockholders had ratified the decision to grant all of the 200,000 shares authorized under
the plan to just the three employee directors. Thus, the directors’ conduct would be
reviewed under ordinary principles of fiduciary duty and not limited to a waste standard.”
Citrix, 114 A.3d at 584. This explains why the court in Sample concluded that the
stockholder vote in that context was “best understood as a decision by stockholders to give
the directors broad legal authority and to rely upon the policing of equity to ensure that the
authority would be utilized properly.” Sample, 914 A.2d at 664.

                                             25
then approved awards within the bounds of these limits.33 Accordingly, their

decision must be reviewed for waste. And Plaintiffs have not pled waste.34

33
   One cannot help but acknowledge that the awards here were quite large. Indeed,
Plaintiffs make allegations, which appear well-founded, that the Defendants knew that the
compensation they were awarding to themselves was well above the level of compensation
of directors at other corporations in the Company’s self-identified peer group. This fact
alone, however, is not sufficient to subject the awards to entire fairness review. That the
awards were large does not mean that stockholders could not approve the amounts in
advance through a fully informed stockholder vote. As our Supreme Court has explained,
“the long-standing policy of our law has been to avoid the uncertainties and costs of judicial
second-guessing when the disinterested stockholders have had the free and informed
chance to decide on the economic merits of a transaction for themselves.” Corwin v. KKR
Financial Hldgs. LLC, 125 A.3d 304, 312–313 (Del. 2015). Of course, facts could arise in
which the awards to directors are so extraordinary that the court could conclude that it was
reasonably conceivable the plaintiff(s) had stated a claim for waste. As this court has
explained, “the doctrine of waste is a residual protection for stockholders which polices the
outer boundaries of the broad field of discretion afforded directors by the business
judgment rule.” Sample, 914 A.2d at 669. But see, Singh v. Attenborough, 137 A.3d 151,
151–52 (Del. 2016) (“When the business judgment rule standard of review is invoked
because of a vote, dismissal is typically the result. That is because the vestigial waste
exception has long had little real-world relevance, because it has been understood that
stockholders would be unlikely to approve a transaction that is wasteful.”) But, in the
absence of a pled claim for waste, I decline to adopt the Plaintiffs’ proffered “meaningful
limits” test in which the court would assess whether the specific limits within an equity
compensation plan were “meaningful” before determining whether the doctrine of
ratification should apply. This test would propel the court into a position where it was
second-guessing the informed decision of stockholders to approve compensation for the
company’s directors and officers. This is antithetical to settled Delaware law.
34
  I note that the Company’s proxy materials clearly identify the rational business purpose
of the EIP: “to attract, motivate and retain highly qualified officers, employees and
directors by offering a competitive compensation program that is linked to the performance
of our common stock.” Proxy at 40.

                                             26
         2. Was the Stockholder Vote Fully Informed?

         Plaintiffs argue that even if the awards were ratifiable in advance, the

stockholder approval received through the vote on the EIP is insufficient to trigger

ratification for the independent reason that the stockholders were not fully informed

of all material facts before voting.35 Directors have a “fiduciary duty to disclose

fully and fairly all material information within the board’s control when [they] seek[]

shareholder action.”36 Information is material to stockholders when “there is a

substantial likelihood that a reasonable shareholder would consider it important in

deciding how to vote.”37 Plaintiffs emphasize that “in order for directors to access

the safe harbor of ratification, they must meet an affirmative ‘burden of

demonstrating full and fair disclosure.’”38

         According to Plaintiffs, the Board undermined the vote when it “represented

[to stockholders] that it adopted the [EIP] to serve as a compensation vehicle for all

35
  Plaintiffs have not pled a disclosure claim in their Complaint. Their breach of fiduciary
claim is only that “[e]ach Defendant breached his/her fiduciary duty of loyalty by granting
and accepting compensation in amounts that were excessive and unfair to the Company.”
Compl. ¶ 134. Nevertheless, it is appropriate to address the disclosure arguments in the
context of Defendants’ ratification defense.
36
  Arnold v. Soc’y for Sav. Bancorp., Inc., 650 A.2d 1270, 1277 (1994) (internal citation
omitted).
37
  Rosenblatt v. Getty Oil Co., 493 A.2d 929, 944 (Del. 1985) (quoting TSC Indus., Inc. v.
Northway, Inc., 426 U.S. 438, 449 (1976)).
38
     Sample, 914 A.2d at 665.

                                            27
of the Company’s nearly 1,800 employees, officers, and non-employee directors for

the purpose of giving Investors Bancorp the flexibility [it] need[s] to continue to

attract, motivate and retain highly qualified officers, employees and directors by

offering a competitive compensation program that is linked to the performance of

[the Company’s] common stock.”39 This representation was deceiving, according

to Plaintiffs, because the Proxy concealed that the Board “had timed the

implementation of the [EIP] to avoid restrictions imposed by [Federal Reserve Board

(“FRB” )] rules, and that they were planning to use over 25% of the [EIP]’s capacity

immediately after stockholder approval to make an ‘allocation’ of shares to

themselves as a reward for a transaction that occurred more than a year earlier.”40

The Proxy’s disclosure “that awards have not been determined at this time, and will

not be determined until subsequent to stockholder approval,” served only to

exacerbate the deception.41

39
     Answering Br. 42 (internal citation omitted).
40
     Id.
41
  Id. The parties disagree over whether the Court can consider the contents of a Prospectus
that was issued in 2014, more than a year before stockholders were asked to approve the
EIP. Defendants argue that the Prospectus expressly told stockholders of the Company’s
plans to issue restricted stock and stock options in the future once an equity incentive plan
had been adopted and approved. I do not resolve this dispute, however, because I do not
need to look beyond the four corners of the Proxy to determine that the stockholder vote
here was fully informed.
                                              28
      Plaintiffs’ characterization of the Proxy finds no support in the document itself

or in Delaware law. They have either pointed to omissions that are not material as

a matter of law or have selectively referred to portions of the Proxy without

providing full context. In either event, they have failed to identify any bases upon

which the Court could reasonably infer that the stockholders’ approval of the EIP

was uninformed.

      First, with respect to Plaintiffs’ contention that the Board withheld

information about the timing of the implementation of the EIP in order to avoid FRB

rules that limit how many shares can be allocated to the plan, this information is not

material. The percentage of the Company’s total shares that were set aside for the

EIP was at the limit imposed by the FRB rules, not above it. Accordingly, the timing

of the adoption of the EIP in relation to the FRB rules cannot be material. Moreover,

the EIP was approved at the first meeting of stockholders to occur after the plan was

adopted.     Plaintiffs’ argument that the timing was somehow manipulated

conveniently ignores this fact. Under these circumstances, any disclosures regarding

the FRB rules or the timing of the EIP would have been immaterial and probably

confusing.

      Second, it is not reasonably conceivable from the facts pled in the Complaint

that the Board concealed from stockholders a preconceived plan to grant themselves

equity awards under the EIP as soon as it was implemented. Specifically, the

                                          29
Complaint acknowledges the lengthy process initiated by the Board after stockholder

approval of the EIP but before the Board determined the specific awards that would

be made to individual directors, including four formal meetings of the Compensation

Committee where the Board received input regarding the awards from expert

advisors.42 Plaintiffs have not alleged specific facts that the Board had agreed to

make any specific awards prior to stockholder approval of the EIP or prior to

undertaking the formal process of determining what awards should be made. The

fact that the Board met on the heels of the stockholders’ approval of the EIP does

not alone support a reasonable inference that the disclosures regarding the plan were

a sham or that the Board was hiding its true intentions to stockholders all along. The

stockholders were apprised of the parameters of the EIP and knew that once it was

implemented the Board could immediately begin discussing implementation within

those parameters.

         Plaintiffs point to ODS Technologies, L.P. v. Marshall43 and argue that, like

the board in that case, the Board here “g[ave] the impression that [the proposals] are

42
  Plaintiffs point out that all of the Compensation Committee meetings were attended by
Board members who did not sit on the committee. Specifically, at the June 12 meeting,
Cummings and Cama were both in attendance. At the June 16 meeting, the full Board,
with the exception of Siekerka and Ward, attended. On June 19, Cummings and Cama
again joined the Compensation Committee meeting. At the final meeting on June 23, the
full Board was present.
43
     832 A.2d 1254 (Del. Ch. 2003).

                                           30
merely routine measures adopted on a clear day.”44 The only “day” metaphor that

is apt here is “night and day”—that is what ODS is to this case. In ODS, the board

attempted to thwart a would-be majority stockholder from gaining control by

proposing bylaw amendments that would classify the board. The disclosures in the

proxy included some general information about classified boards but omitted the fact

that the proposal was intended to fend off a specific threat. For that reason, the court

determined that stockholders had been misled about the true motivations for the

proposal.45 Here, the EIP was approved by the Board in due course following the

completion of the Conversion Plan and then submitted to stockholders for approval

at the next scheduled annual meeting. Based on the disclosures in the Proxy, the

stockholders knew that once the EIP was approved, the Board could immediately

choose to make awards, including to directors. Given this background, ODS simply

does not fit here.

                                         *************

         Because the EIP (with director-specific limits) was approved by a fully

informed stockholder vote and Plaintiffs have not pled a claim for waste, Plaintiffs

44
     Answering Br. 43 (quoting Id. at 1260).
45
   ODS Technologies, 832 A.2d at 1260 (“The Proxy Statement, however, fails to
accurately depict the purposes or effects of the Amendments—purposes and effects the
Board itself found relevant in its deliberations.”).

                                               31
have failed to plead a claim of breach of fiduciary duty against Defendants relating

to subsequent awards issued under the EIP.46 Therefore, Count I and Count II (unjust

enrichment) of the Complaint must be dismissed.47

46
   The parties disagree over whether the claims against all Defendants can be dismissed on
the Rule 12(b)(6) motion or whether dismissal of the claim for breach of fiduciary duty as
it relates specifically to the grant of equity awards to the Executive Director Defendants
requires an analysis of demand futility under Rule 23.1. See Br. in Supp. of Defs.’ Mot. to
Dismiss 19 (“The Court need not look beyond the Complaint’s failure to state a claim for
breach of fiduciary duty and unjust enrichment under Rule 12(b)(6).”); Answering Br. 49
n.18 (“On the other hand, while Defendants appear to contend that the awards to Cummings
and Cama have also somehow been ‘ratified’ such that a Rule 12(b)(6) dismissal should
result, they have not offered any explanation for that conclusion.”). In my view, Plaintiffs’
failure to state a claim for breach of fiduciary duty warrants dismissal of the Complaint as
to all Defendants. I reach this conclusion based on the emphasis in both 3COM and Citrix
of the importance of “director-specific limits” and the implementation of a plan within
those limits as predicates to finding ratification. In this case, Plaintiffs have challenged the
awards to all of the director defendants (both the non-employee directors and the directors
that also serve as executive officers). The EIP, however, included specific limits for both
categories of directors based on their position within the Company. Stockholders,
therefore, ratified not just a limit that applied only to one subset of directors, but specific
limits broken down by each type of director serving on the Board. Therefore, I conclude
that all awards to the director Defendants were ratified based on the “director-specific”
limits applicable to each category. Even if I had not reached this conclusion, however, as
discussed in detail below, Rule 23.1 provides an alternative basis upon which to dismiss
the claims relating to Cama and Cummings.
47
  Citrix, 114 A.3d at 591 (“At the pleadings stage, an unjust enrichment claim that is
entirely duplicative of a breach of fiduciary duty claim—i.e., where both claims are
premised on the same purported breach of fiduciary duty—is frequently treated in the same
manner when resolving a motion to dismiss.”) (citations and internal quotation marks
omitted).

                                              32
      C. Demand on the Board Is Not Excused For the Awards to Executive
         Officers

         Defendants contend that Plaintiffs have not satisfied the test for demand

futility with respect to the awards granted to the Executive Director Defendants.

Accordingly, they argue that the claim against these defendants must be dismissed

under Court of Chancery Rule 23.1. Plaintiffs counter that they have pled demand

futility because “the awards received by Cummings and Cama were part of a

premeditated unitary transaction with a single purpose: to allocate shares to

executive and non-executive members of the Board, i.e., a quid pro quo.”48 In

making this argument, Plaintiffs attempt to invoke a line of this court’s cases which

have held that, under certain circumstances, multiple transactions or proposals may

be considered as a “single interrelated set of transactions, authorized as a quid pro

quo” for purposes of determining demand futility.49

         Under the test articulated in Aronson v Lewis,50 the court determines demand

futility by deciding whether, based on the particularized facts alleged in the

complaint, “a reasonable doubt is created that: (1) the directors are disinterested and

48
     Answering Br. 49.
49
  Needham v. Cruver, 1993 WL 179336 (Del. Ch. May 12, 1993); Noerr v. Greenwood,
1997 WL 419633 (Del. Ch. July 16, 1997); In re Nat’l Auto Credit, Inc. S’holders Litig.,
2003 WL 139768, at *9 (Del. Ch. Jan. 10, 2003).
50
     473 A.2d 805 (Del. 1984).

                                          33
independent and (2) the challenged transaction was otherwise the product of a valid

exercise of business judgment.”51           Here, Plaintiffs argue that each director’s

disinterestedness and independence must be analyzed in light of the fact that the

decision to approve the grant of awards to the non-employee directors was part of

the same single, self-interested scheme to grant awards to the executive officers.

Defendants disagree and point to the fact that the votes of the executive officers were

not necessary for the approval of the grant of awards to the non-employee directors

and, therefore, there could be no quid pro quo.

         After carefully reviewing the Complaint, I am satisfied that Plaintiffs cannot

invoke the quid pro quo theory on these facts. Even if the Plaintiffs did not have to

demonstrate that the non-employee directors needed the votes of the executive

officers for the approval of their own awards, they would still need to plead facts

that allow a reasonable inference that the non-employee directors received

something in return for their approval of the grants to the Executive Director

Defendants before the Court could deem the two transactions as one self-interested

scheme for purposes of demand futility.52

51
     Id. at 814. Because the entire board approved the awards, the Aronson test applies.
52
   This court has previously referred to the necessary showing as a “quid pro quo trade.”
Freedman v. Adams, 2012 WL 1345638, at *8 (Del. Ch. Mar. 30, 2012) (“[T]he Plaintiff
has not approached pleading sufficient particularized facts to allow the Court to infer that
a quid pro quo trade took place.”). In other words, the Plaintiffs were required to plead
                                              34
         The Non-Employee Director Defendants received nothing in exchange for

their approval of the executive awards. The grants of equity awards to all directors

were approved based on the parameters of a stockholder-approved plan. Under the

same plan, the independent directors then made a decision to grant awards to

executive officers, again within the terms of the stockholder-approved plan. There

was no “quid pro quo trade” here; the Board was simply implementing an equity

incentive plan that had already been approved by stockholders within the specific

parameters of that plan. In this situation, when making awards to Cummings and

Cama, the directors “could disinterestedly asses the challenge to the individual Plan

under which they did not benefit.”53

         Moreover, it cannot be ignored that the votes of Cummings and Cama were

not required to approve the awards to the non-employee directors. And Plaintiffs

have failed to plead any facts that would allow a reasonable inference that Cummings

or Cama would not have supported the awards to the non-employee directors had

their own awards not been approved. The quid pro quo theory does not hold together

under these circumstances.

sufficient particularized facts to allow the Court to infer some type of “causal connection”
between the two acts. Id.
53
     Noerr, 1997 WL 419633, at *10.

                                            35
      Because Plaintiffs have not pled any particularized facts that would support a

reasonable inference that the Board engaged in a unitary transaction such that a

reasonable doubt has been raised regarding the independence or disinterestedness of

a majority of the Board,54 the claim against the Executive Director Defendants must

be dismissed for failure to make a demand on the Board or to plead demand futility.55

                                III.   CONCLUSION

      For the foregoing reasons, the motion to dismiss is GRANTED. The claim

for breach of fiduciary duty against all Defendants in Count I of the Complaint is

dismissed under Court of Chancery Rule 12(b)(6). The claim against the Executive

Director Defendants in Count I is dismissed on the separate and alternative basis of

Court of Chancery Rule 23.1. The unjust enrichment claim in Count II against all

Defendants is dismissed as duplicative of the breach of fiduciary duty claim.

      IT IS SO ORDERED.

54
  Plaintiffs make a point to stress that Cummings and Cama were at the meetings at which
their compensation was discussed and that Cama even proposed the number of restricted
stock and stock options to be awarded to himself and Cummings. Plaintiffs have not
explained, however, how this fact alone is sufficient to justify a holding that all of the
awards constituted a unified scheme. Furthermore, the Complaint acknowledges that the
awards to the executive officers were ultimately approved during an executive session of
the Compensation Committee at which Cama and Cummings were not present.
55
  Beam ex rel. Martha Stewart Living Omnimedia, Inc. v. Stewart, 854 A.2d 1040, 1044
(Del. 2004).
                                           36