The Delaware Supreme Court’s opinion in Espinoza v. Dimon, et al., No. 425, 2015 (Del. Sept. 15, 2015), addressed a certified question of corporate law from the United States Court of Appeals for the Second Circuit. Although the Delaware Supreme Court refused to provide a complete answer to the precise question presented, based on factual issues that it could not determine, the court did provide guidance for Delaware corporate litigators generally on the issue of the applicable standard used by the court to review the response by a board of a stockholder demand in order to determine whether the decision of an independent board committee considering that demand should be set aside.
The Delaware Supreme Court explained that:
Delaware law on whether a board considered a stockholder demand in a grossly negligent fashion is settled, and requires that the decision of an independent committee to refuse a demand should only be set aside if particularized facts are pled supporting an inference that the committee, despite being comprised solely of independent directors, breached its duty of loyalty, or breached its duty of care, in the sense of having committed gross negligence. The burden to plead gross negligence is a difficult one, particularly when, as seems to be undisputed here, the independent committee did a time-consuming investigation with the advice of its own advisors, and prepared a detailed written report of its investigation.
The determination of gross negligence is fact-specific under Delaware law, and because there was no adequate factual record presented, and the Supreme Court could not determine those factual issues, it could not provide a case-specific answer to the precise question presented.