Court Opinion

ID: 5124158
Source: CourtListenerOpinion
Date Created: 2021-11-08 17:02:57.371381+00
Date Added: 2024-06-11T08:22:38.828863
License: Public Domain

COURT OF CHANCERY
                                  OF THE
                            STATE OF DELAWARE

                                                                417 S. State Street
JOSEPH R. SLIGHTS III                                         Dover, Delaware 19901
 VICE CHANCELLOR                                            Telephone: (302) 739-4397
                                                            Facsimile: (302) 739-6179
                        Date Submitted: October 18, 2021
                        Date Decided: November 8, 2021

 Daniel K. Astin, Esquire                    Kevin H. Davenport, Esquire
 Ciardi Ciardi & Astin                       Samuel L. Closic, Esquire
 1204 North King Street                      John G. Day, Esquire
 Wilmington, DE 19801                        Elizabeth Wang, Esquire
                                             Prickett, Jones & Elliott, P.A.
 Thaddeus J. Weaver, Esquire                 1310 King Street
 Dilworth Paxson LLP                         Wilmington, DE 19801
 One Customs House
 704 King Street, Suite 500                  David E. Ross, Esquire
 Wilmington, DE 19801                        R. Garrett Rice, Esquire
                                             Ross Aronstam & Moritz LLP
 Nathan A. Cook, Esquire                     100 S. West Street, Suite 400
 Block & Leviton LLP                         Wilmington, DE 19801
 3801 Kennett Pike, Suite C-305
 Wilmington, DE 19807                        Jon E. Abramczyk, Esquire
                                             Alexandra M. Cumings, Esquire
 Kurt M. Heyman, Esquire                     Morris, Nichols, Arsht & Tunnell LLP
 Melissa N. Donimirski, Esquire              1201 North Market Street
 Aaron M. Nelson, Esquire                    Wilmington, DE 19801
 Heyman Enerio Gattuso & Hirzel LLP
 300 Delaware Avenue, Suite 200              Blake A. Bennett, Esquire
 Wilmington, DE 19801                        Cooch and Taylor, P.A.
                                             1000 West Street, 10th Floor
 Peter B. Andrews, Esquire                   Wilmington, DE 19801
 Craig J. Springer, Esquire
 David M. Sborz, Esquire
 Andrews & Springer, LLC
 4001 Kennett Pike, Suite 250
 Wilmington, DE 19807
Robert A. Feuer v. Mark Zuckerberg, et al.
 C.A. No. 2019-0324-JRS
In re Facebook, Inc. Derivative Litigation
 Consolidated C.A. No. 2018-0307-JRS
November 8, 2021
Page 2

      Re:    Robert A. Feuer v. Mark Zuckerberg, et al.
              C.A. No. 2019-0324-JRS
             In re Facebook, Inc. Derivative Litigation
              Consolidated C.A. No. 2018-0307-JRS

Dear Counsel:

      Plaintiff, Robert A. Feuer, has filed a Motion for Reargument or

Reconsideration (the “Motion”) with respect to this Court’s Memorandum Opinion

(the “Opinion”) issued October 5, 2021.1 The Opinion (1) denied Facebook’s

motion to consolidate Feuer’s “demand made” derivative action with related

consolidated “demand futility” actions, and (2) stayed Feuer’s action pending

resolution of anticipated motion(s) to dismiss the operative demand futility

complaint. For the reasons stated below, the Motion is denied.

      The Court will deny a motion for reargument “unless the Court has

overlooked a decision or principle of law that would have a controlling effect or the

Court has misapprehended the law or the facts so that the outcome of the decision

1
  Feuer v. Zuckerberg, 2021 WL 4552160 (Del. Ch. Oct. 5, 2021) (the “Opinion”)
(D.I. 94) (C.A. 2019-0324-JRS).
Robert A. Feuer v. Mark Zuckerberg, et al.
 C.A. No. 2019-0324-JRS
In re Facebook, Inc. Derivative Litigation
 Consolidated C.A. No. 2018-0307-JRS
November 8, 2021
Page 3

would be affected.”2 “Where the motion merely rehashes arguments already made

by the parties and considered by the Court when reaching the decision from which

reargument is sought, the motion must be denied.”3

         Feuer argues the Court erroneously failed to consider the impact of our

Supreme Court’s recent decision in United Food v. Zuckerberg in holding that the

consolidated demand futility action should proceed ahead of his demand made

action.4 He contends that United Food adopted a new unified standard for pleading

demand futility that is more difficult to satisfy than the previously prevailing

Aronson/Rales standards, and he also suggests that the Supreme Court has now

2
    Stein v. Orloff, 1985 WL 21136, at *2 (Del. Ch. Sept. 26, 1985).
3
  Wong v. USES Hldg. Corp., 2016 WL 1436594, at *1 (Del. Ch. Apr. 5, 2016) (citing
Lewis v. Aronson, 1985 WL 21141, at *2 (Del. Ch. June 7, 1985)); see also Miles, Inc. v.
Cookson Am., Inc., 677 A.2d 505, 506 (Del. Ch. 1995) (“Where, as here, the motion for
reargument represents a mere rehash of arguments already made at trial and during post-
trial briefing, the motion must be denied.”).
4
 United Food and Com. Workers Union & Participating Food Indus. v. Zuckerberg, —
A.3d —, 2021 WL 4344361 (Del. 2021). The parties refer to this decision as
“United Food,” presumably to avoid confusion with the claims in this litigation also
asserted against Mark Zuckerberg. I will do the same.
Robert A. Feuer v. Mark Zuckerberg, et al.
 C.A. No. 2019-0324-JRS
In re Facebook, Inc. Derivative Litigation
 Consolidated C.A. No. 2018-0307-JRS
November 8, 2021
Page 4

confirmed in United Food that the Facebook board of directors (the “Board”) is not

disabled from considering a stockholder demand to assert claims against

Mr. Zuckerberg.5 Feuer already made both arguments while opposing the motion

to stay his case.6 While he is correct that the Opinion did not overtly address the

arguments, the arguments were, in fact, considered by the Court and rejected.7

Because the Motion simply “rehashes arguments already made” to and rejected by

the Court, it presents no basis for reargument under Chancery Rule 59(f).8 For the

5
 Pl. Robert A. Feuer’s Mot. for Reargument or Recons. (the “Motion”) ¶¶ 2, 6–10, 12–
13, 16, 18 (D.I. 95) (C.A. 2019-0324).
6
   Ltr. to V.C. Slights from Daniel K. Astin, Esq. (D.I. 90) (C.A. 2019-0324);
In re Facebook, Inc. Deriv. Litig., Consol. C.A. No. 2018-0307-JRS, at 10, 30
(Del. Ch. Sept. 30, 2021) (TRANSCRIPT).
7
  Opinion at *5 (recognizing that the pleading standard confronting a demand made
plaintiff remains more onerous than the standard confronting a demand futility plaintiff:
“Of the two potential routes presented by Rule 23.1—pleading demand excusal with
particularity or making a pre-suit demand—the former is a steep road, but the latter is
steeper yet.” (internal quotation marks and citation omitted)).
8
    USES Hldg. Corp., 2016 WL 1436594, at *1.
Robert A. Feuer v. Mark Zuckerberg, et al.
 C.A. No. 2019-0324-JRS
In re Facebook, Inc. Derivative Litigation
 Consolidated C.A. No. 2018-0307-JRS
November 8, 2021
Page 5

sake of completeness, however, I will address Feuer’s argument under United Food

more directly.

       As this court has observed, United Food reframes the inquiry previously

captured by the dual demand futility tests set forth in Aronson and Rales, but the

unified test remains “consistent” with its progeny.9 The Supreme Court said as

much in United Food itself.10 And, while it is true, as Feuer observes, that United

Food now confirms what this court has been holding for years—that duty of care

claims against a fiduciary who is exculpated under a corporation’s charter, standing

alone, cannot support a finding of demand futility—that holding will have

9
 See Genworth Fin., Inc. Consol. Deriv. Litig., 2021 WL 4452338, at *11 (Del. Ch.
Sept. 29, 2021); Patel v. Duncan, 2021 WL 4482157, at *18 (Del. Ch. Sept. 30, 2021).
10
   United Food, 2021 WL 4344361, at *16 (“Blending the Aronson test with the Rales test
is appropriate because both address the same question of whether the board can exercise
its business judgment on the corporation’s behalf in considering demand; and the refined
test does not change the result of demand-futility analysis.”) (cleaned up) (emphasis
added); id. at *16 n.169 (showing how the analysis as applied in one situation is similar
under both Aronson and the new demand futility framework); id. at *17 (observing that
because the new “three-part test is consistent with and enhances Aronson, Rales, and their
progeny, the Court need not overrule Aronson to adopt this refined test, and cases properly
construing Aronson, Rales, and their progeny remain good law”).
Robert A. Feuer v. Mark Zuckerberg, et al.
 C.A. No. 2019-0324-JRS
In re Facebook, Inc. Derivative Litigation
 Consolidated C.A. No. 2018-0307-JRS
November 8, 2021
Page 6

absolutely no bearing on the outcome of the demand futility analysis in this case.11

Breach of loyalty claims—the primary claims asserted in the consolidated demand

futility complaint—are not subject to exculpation.12 And, inasmuch as Count I of

the complaint brings duty of care claims against Zuckerberg, Sandberg and

11
   Id. at *12 (“[T]his Court affirms the Court of Chancery’s holding that exculpated care
claims do not satisfy Aronson’s second prong . . . When Aronson was decided, raising a
reasonable doubt that directors breached their duty of care exposed them to a substantial
likelihood of liability and protracted litigation, raising doubt as to their ability to
impartially consider demand. The ground has since shifted, and exculpated breach of care
claims no longer pose a threat that neutralizes director discretion.”); id. at *10
(“[T]he weight of Delaware authority since the enactment of Section 102(b)(7) supports
holding that exculpated care violations do not excuse demand under Aronson’s second
prong.”).
12
   See, e.g., Malpiede v. Townson, 780 A.2d 1075, 1094 (Del. 2001) (“A plaintiff must
allege well-pleaded facts stating a claim on which relief may be granted. Had a plaintiff
alleged such well-pleaded facts supporting a breach of loyalty or bad faith claim, the
Section 102(b)(7) charter provision would have been unavailing as to such claims . . . .”);
Second Am. and Consol. Verified S’holder Deriv. Compl. (“Compl.”) ¶¶ 665–76
(D.I. 242) (C.A. 2018-0307).
Robert A. Feuer v. Mark Zuckerberg, et al.
 C.A. No. 2019-0324-JRS
In re Facebook, Inc. Derivative Litigation
 Consolidated C.A. No. 2018-0307-JRS
November 8, 2021
Page 7

Papamiltiadis as officers, those claims, by statute, are also not subject to

exculpation.13

      Although unclear, it appears Feuer would have the Court conclude that the

finding in United Food that demand was not excused in that case will somehow be

binding on this Court as it considers demand futility with respect to the claims

asserted in this case.14 The Opinion did not address that argument because it was

(and is) patently unpersuasive. To be clear, the claims addressed in United Food

have absolutely no relationship to the claims asserted here. And Feuer has offered

no credible reason to conclude, or even suspect, that this Court will be bound by the

demand futility determination made in an entirely separate case, involving different

13
  See Compl. ¶¶ 665–69; 8 Del. C. § 102(b)(7); Firefighters’ Pension Sys. of Kan. City,
Mo. Tr. v. Presidio, Inc., 251 A.3d 212, 286 (Del. Ch. 2021) (“Section 102(b)(7) only
applies to directors.”).
14
  Motion ¶ 10 (“United Food has particular significance here because, in that opinion, the
Supreme Court analyzed and rejected demand futility as to the Board of Directors of
Facebook. As such, the decision is highly material with respect to the ability of the
demand-futile plaintiffs here to overcome a Rule 23.1 motion to dismiss.”).

.
Robert A. Feuer v. Mark Zuckerberg, et al.
 C.A. No. 2019-0324-JRS
In re Facebook, Inc. Derivative Litigation
 Consolidated C.A. No. 2018-0307-JRS
November 8, 2021
Page 8

claims, different plaintiffs, different defendants and entirely different bases to

argue, on both sides, how the three questions posed in United Food should be

answered.15

          After carefully considering the parties’ arguments on consolidation and

sequencing, the Court concluded that consolidation of the demand futility case and

Feuer’s demand made case was unwarranted because “demand-made-and-refused

and demand-futile cases are subject to a different legal analysis,” a proposition and

result with which Feuer agreed.16 Then, in determining which case should proceed

first, the Court declined to adopt a rule that would always place demand futility

claims ahead of demand made claims when both arise from the same facts,

concluding that any such per se rule would “blunt the optionality of Rule 23.1.”17

15
   While there is overlap, there are defendants named in the consolidated complaint
brought here who were not named in United Food.
16
  Opinion at *4 (citing Robert A. Feuer’s Opp’n to the Facebook Defs.’ Mot. to Consol.
¶ 6 (D.I. 81) (C.A. No. 2019-0324)).
17
     Id. at *5.
Robert A. Feuer v. Mark Zuckerberg, et al.
 C.A. No. 2019-0324-JRS
In re Facebook, Inc. Derivative Litigation
 Consolidated C.A. No. 2018-0307-JRS
November 8, 2021
Page 9

Instead, the Court held that “when a complaint that makes a bona fide attempt to

plead demand futility is presented alongside a complaint that implicitly

acknowledges the independence of the board, it makes sense to allow the demand

futility allegations to be tested before addressing the demand-refused complaint”

because “[i]f the demand futility allegations survive the challenge, that finding

alone will likely inform the court’s determination of which plaintiff’s team has

made the better strategic decisions.”18 After carefully assessing Feuer’s bid for

reargument, for the reasons already stated, I remain satisfied that, as a matter of case

management, the Opinion correctly sequenced the presentation of the claims in the

Feuer and consolidated demand futility cases. Thus, I cannot agree that “the Court

has overlooked a decision or principle of law that would have a controlling effect

or [that] the Court has misapprehended the law or the facts so that the outcome of

the decision would be affected.”19

18
     Id. at *6.
19
     Stein, 1985 WL 21136, at *2.
Robert A. Feuer v. Mark Zuckerberg, et al.
 C.A. No. 2019-0324-JRS
In re Facebook, Inc. Derivative Litigation
 Consolidated C.A. No. 2018-0307-JRS
November 8, 2021
Page 10

         Feuer also contends that the Court erred when it determined no prejudice

would result from a stay of his case. But Feuer did not (and does not) articulate

why the stay would prejudice him or Facebook, the company he seeks to represent.

A general statement that unidentified witnesses may leave, die or have their

memories fade while the other case proceeds—made for the first time in the

Motion—does not suffice.20 The Opinion set forth the reasons why a stay was not

only justified in this case but good policy for future cases.21

         Finally, I am not persuaded that the particular circumstances of Facebook’s

alleged rejection of Feuer’s demand by silence change any of the foregoing

analysis.22     Feuer’s demand on the Facebook Board “tacitly concede[d] the

20
   Motion ¶ 17; see inTEAM Assocs., LLC v. Heartland Payment Sys., Inc., 2016
WL 6819734, at *2 (Del. Ch. Nov. 18, 2016) (“A party may not present a new argument
for the first time in a motion for reargument.”).
21
     Opinion at *5–6.
22
  Feuer appears to argue that because the Board allegedly ignored his demand, his
complaint should be viewed differently than a typical demand-refused complaint.
Motion ¶¶ 14–15; see id. ¶ 14 n.4 (“Mr. Feuer’s Complaint alleges that the Facebook
Board’s failure to respond to the pre-suit written demands in any way is prima facie and
per se a wrongful refusal.”). But “[w]here the board fails to accede to the plaintiff’s
Robert A. Feuer v. Mark Zuckerberg, et al.
 C.A. No. 2019-0324-JRS
In re Facebook, Inc. Derivative Litigation
 Consolidated C.A. No. 2018-0307-JRS
November 8, 2021
Page 11

disinterest and independence of the board to respond.”23 For their part, the demand

futility plaintiffs have endeavored to challenge the disinterestedness or

independence of a majority of the Board, both in connection with their demand

futility allegations and in their allegations that the defendants breached their duty

of loyalty.24 I remain convinced that these allegations should be vetted at the

demand to take corrective action or does not respond to such demand, Rule 23.1 requires
the plaintiff to plead with particularity why that failure to accede or respond is wrongful.”
3 Robert S. Saunders et al., Folk on the Delaware General Corporation Law,
§ 327.04[C][1], 13-203 (7th ed. 2021) (emphasis added). “[A] board has no obligation to
take any specific type of action to comply with a demand under Rule 23.1. The board
may, for example, ignore the demand . . . if, in the exercise of its good faith judgment . . .
the corporation’s interests would be served thereby.” Schick Inc. v. Amalgamated
Clothing & Textile Workers Union, 533 A.2d 1235, 1240 (Del. Ch. 1987). Whether the
demand was refused or ignored, Feuer must make “particularized allegations which would
raise a reasonable doubt that the Board’s decision to reject the demand was the product of
a valid business judgment.” Grimes v. Donald, 673 A.2d 1207, 1220 (Del. 1996),
overruled in part on other grounds by Brehm v. Eisner, 746 A.2d 244 (Del. 2000). Thus,
although the fact that the Board failed to respond to a demand might be relevant in an
argument that the Board’s decision was not the product of a valid business judgment,
contrary to Feuer’s argument, it is not our law that ignoring a demand is per se a wrongful
refusal.
23
     Opinion at *5 (citation omitted).
24
     Compl. ¶¶ 562–662.
Robert A. Feuer v. Mark Zuckerberg, et al.
 C.A. No. 2019-0324-JRS
In re Facebook, Inc. Derivative Litigation
 Consolidated C.A. No. 2018-0307-JRS
November 8, 2021
Page 12

pleading stage before determining whether Feuer’s demand made claims should

proceed.25

          Based on the foregoing, the Motion must be DENIED.

          IT IS SO ORDERED.

                                       Very truly yours,

                                       /s/ Joseph R. Slights III

25
     Id. at *6.