Rule 23.1 of the Delaware Court of Chancery Rules requires a plaintiff asserting a shareholder derivative action to plead “with particularity the efforts, if any, made by the plaintiff to obtain the action the plaintiff desires from the directors or comparable authority and the reasons for the plaintiff’s failure to obtain the action or for not making the effort” (emphasis added).  In Elburn v. Albanese, 2020 Del. Ch. LEXIS 156 (Del. Ch. Apr. 21, 2020), the Delaware Court of Chancery (Slights, V.C.), addressed the “fundamental,” but rarely asked, “question of what is required to plead a fact ‘with particularity’ under Rule 23.1.”  In addressing this question, the Court applied authority interpreting the particularity requirement set forth in Rule 9(b) of the Court of Chancery Rules holding that the standard is met so long as the plaintiff pleads particularized facts sufficient to apprise the defendants of the basis for the claim.  The Court declined to require the pleading of “so-called ‘newspaper facts’—who, what, when, where and how” —in all cases under Rule 23.1, holding that even under Rule 9(b) such details are not required in all cases.  The Court’s analysis in Elburn recognizes that a shareholder plaintiff’s burden to plead specific facts varies depending on the plaintiff’s reasonable access to the facts underlying his or her theory of demand futility.
Continue Reading Delaware Court of Chancery Addresses Pleading ‘With Particularity’ Under Rule 23.1