Harrison Metal Capital III, L.P. v. Olof Mathe, C.A. No. 2022-0261-PAF

Harrison Metal Capital III, L.P. (“Plaintiff”) is a major investor in Mixmax, Inc., a Delaware corporation, and at relevant times could appoint one director to the Mixmax board.
Plaintiff brought derivative claims for breach of fiduciary duty against Olof Mathé (CEO, Chairman) and Bradford Vogel (CTO, Director), alleging self-interested conduct including improper executive compensation, risky financial decisions (PPP loan), accounting irregularities, and purportedly self-serving fundraising.
The dispute stems from actions taken during the pandemic, including applying for and having $1.12 million in PPP loans forgiven, layoffs, unsanctioned salary increases, accounting issues, and a $7 million SAFE note financing without notice/approval to major investors.
The original complaint sought to invalidate certain board actions under Section 205 but was amended to assert broader derivative claims for fiduciary breaches.
Defendants moved to dismiss under Chancery Rule 23.1, arguing insufficient allegations of demand futility (i.e., Plaintiff had not shown the board was incapable of impartially deciding whether to pursue these claims itself).

Issue	Plaintiff's Argument	Defendant's Argument	Held
Demand Futility under Rule 23.1	Demand is futile because board members are conflicted or lack independence from Mathé.	Bar-Cohen and Fritjofsson were not conflicted and were independent; Plaintiff waived other arguments.	Demand not futile; Plaintiff failed to adequately allege futility.
Independence of Bar-Cohen	Bar-Cohen not independent due to Mathé's history of removing dissenters and timing of his appointment.	Appointment by alleged controller alone does not rebut independence; no detailed allegations of dependence.	Bar-Cohen presumed independent; no particularized facts to doubt independence.
Independence of Fritjofsson	Fritjofsson not independent due to history of acquiescing to Mathé and risk of retaliation.	Fritjofsson is Creandum's designee; Mathé lacked power to remove him; no personal or financial ties alleged.	Fritjofsson independent; no well-pleaded basis to doubt independence.
Substantial Likelihood of Liability	Fritjofsson faces risk due to participation in challenged acts (e.g., PPP, SAFEs, accounting).	Exculpatory charter provision protects directors; no facts plead bad faith; Plaintiff did not brief.	Not reasonably conceivable that liability risk undermines independence.

Zapata Corp. v. Maldonado, 430 A.2d 779 (Del. 1981) (establishing board authority to decide on corporate litigation and derivative suits)
Aronson v. Lewis, 473 A.2d 805 (Del. 1984) (standards for demand futility and director independence)
Brehm v. Eisner, 746 A.2d 244 (Del. 2000) (requirements for factual particularity in derivative complaints)
Beam ex rel. Martha Stewart Living Omnimedia, Inc. v. Stewart, 845 A.2d 1040 (Del. 2004) (presumption of director independence and requirements to rebut)
Rales v. Blasband, 634 A.2d 927 (Del. 1993) (test for demand futility when a majority of the board was not involved in the challenged transaction)
United Food & Com. Workers Union v. Zuckerberg, 262 A.3d 1034 (Del. 2021) (modern restatement/test for demand futility under Delaware law)
Kaufman v. Belmont, 479 A.2d 282 (Del. Ch. 1984) (acquiescence without more insufficient for breach or to show lack of independence)