In re Oracle Corporation Derivative Litigation
CA No. 2017-0337-SG(Consol.)
| Del. Ch. | Jun 21, 2021Background
- Oracle acquired NetSuite in a transaction plaintiffs allege was controlled self‑dealing benefiting Lawrence J. Ellison, who had large ownership stakes in both companies.
- A Special Committee was formed to evaluate the deal; the committee’s independence is contested.
- Plaintiffs filed a consolidated derivative action (Fifth Amended Complaint) alleging officer and director breaches of fiduciary duty in connection with the NetSuite acquisition.
- Three defendants moved to dismiss: Paula Hurd (as trustee and successor to co‑CEO Mark Hurd), Jeffrey O. Henley (Executive Vice Chairman), and Renée J. James (Special Committee chair).
- Key factual points: a January 2016 Porcupine Creek board meeting where the board authorized management to explore NetSuite; allegations that Hurd and Henley were involved in management discussions or had special competitive knowledge; James chaired the Special Committee, attended diligence with NetSuite (apparently alone), and is alleged to have taken an active role favoring the deal.
- Procedural disposition: the Court granted dismissal as to Hurd and Henley and denied dismissal as to James.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Hurd can be plausibly alleged to have breached fiduciary duties (officer capacity: gross negligence; or director capacity: disloyalty) | Hurd acted as an officer in directing outreach and attending deal meetings, knew material facts inconsistent with Special Committee materials, and withheld information to benefit Ellison | Hurd was told not to participate, has few specific allegations against him, was at most a passive invitee to meetings, and plaintiffs don’t allege he knew the Special Committee lacked material information | Court: Dismissed Hurd — allegations insufficient to make gross negligence or disloyalty reasonably conceivable |
| Whether Henley (director/officer) acted disloyally under Cornerstone by advancing Ellison’s self‑interest (vote/withholding information) | Henley voted at Porcupine Creek to pursue NetSuite and had special knowledge about NetSuite’s weakness which he withheld from Board/Special Committee | The Porcupine Creek vote merely authorized consideration (not approval) and is too attenuated; plaintiffs don’t allege Henley knew the Committee lacked particular information | Court: Dismissed Henley — vote and alleged omissions do not plausibly show action to advance Ellison’s interest |
| Whether James, as Special Committee chair, lacks independence and acted to advance Ellison’s interest | James was not independent of Ellison, actively participated in deal diligence (including attending alone), and had business ties/ambitions creating conflicts, so her actions plausibly advanced Ellison’s interest | Defendants argued independence and process defenses; relied on exculpatory charter provisions and that process was followed | Court: Denied dismissal as to James — at pleading stage it is reasonably conceivable she lacked independence and acted to advance Ellison’s self‑interest |
| Whether the Fifth Amended Complaint meets Rule 12(b)(6) plausibility standard (reasonable conceivability) | Plaintiffs say factual allegations suffice to infer breaches by certain fiduciaries | Defendants say allegations are conclusory, lack particularized facts of knowledge or conduct, and are legally insufficient | Court: Applied the plausibility standard; sustained dismissal for Hurd and Henley, denied for James |
Key Cases Cited
- In re Cornerstone Therapeutics Inc., 115 A.3d 1173 (Del. 2015) (establishes two‑prong test for director disloyalty: lack of independence plus action to advance an interested party’s self‑interest)
- Arnold v. Soc’y for Sav. Bancorp, Inc., 650 A.2d 1270 (Del. 1994) (distinguishes acts taken in officer capacity from director acts for duty‑of‑care/exculpation analysis)
- Cent. Mortg. Co. v. Morgan Stanley Mortg. Capital Holdings LLC, 27 A.3d 531 (Del. 2011) (pleading standard at motion to dismiss: accept well‑pled allegations and reasonable inferences)