Chancery Dismisses Conclusory Allegations of Gross Negligence and Disloyalty Against Oracle Officers and Directors Related to Alleged Controlled, Self-Dealing NetSuite Acquisition
In re Oracle Corp. Derv. Litig., C.A. No. 2017-0337-SG (Del. Ch. June 21, 2021)
While Delaware maintains a notice pleading standard, this decision reflects that conclusory allegations of breach of fiduciary duty leveled against officers and directors of a Delaware corporation may be found insufficient to state a claim.
Plaintiff-stockholders of Oracle Corporation challenged its acquisition of NetSuite as a controlled, self-interested transaction benefiting both companies’ founder, Larry Ellison. Plaintiffs further alleged that two Oracle officer-directors – Mark Hurd and Jeffrey Henley – were not independent of Ellison and breached their fiduciary duties. Hurd and Henley moved to dismiss.
With respect to Hurd, the Court found that the allegations related to his role as an officer and, thus, the Court evaluated the claim against him as one for breach of the duty of loyalty and for a non-exculpated breach of the duty of care. The Court held the plaintiffs failed to show that Hurd was grossly negligent or disloyal in merely (1) attending a meeting where the board told him to contact NetSuite to see if it would be willing to consider an indication of interest; (2) attending a Special Committee presentation as a passive observer; and (3) making public comments that contradicted information previously provided to the Special Committee by another officer, when there was no allegation that Hurd even was aware of what the Special Committee had been told.
The Court followed a similar analysis with respect to Henley. First, the Court determined that the allegations against Henley were in his role as a director, not least of which because the Complaint did not even identify Henley’s executive position. Accordingly, the Court applied the Cornerstone analysis to determine if Plaintiffs stated a claim for Henley’s breach of the duty of loyalty: (1) whether Henley lacked independence from Ellison; and (2) whether he acted to advance Ellison’s self-interest. While the Court found that Henley lacked independence from Ellison, the Court also found that his only alleged action – i.e., voting along with all other board members merely to direct management to assess the feasibility of acquiring NetSuite – was not disloyal. Similarly, the plaintiffs’ claim that he had unspecified material knowledge about NetSuite that he failed to disclose to the Special Committee was conclusory.
The Court accordingly granted both Hurd’s and Henley’s motions to dismiss.Share