McElrath v. Kalanick, 224 A.3d 982

In 2016 Uber acquired Ottomotto ("Otto") principally to hire Anthony Levandowski and his team from Google; the deal involved nominal cash and substantial hiring of former Google employees.
Uber retained Stroz Friedberg to investigate whether Otto employees brought or accessed Google confidential information; a preliminary Stroz report raised concerns but (the complaint alleges) was not fully disclosed to the board.
The Uber board approved the Otto acquisition after presentations noting diligence and litigation risk; indemnification provisions in the merger were atypical and limited Uber’s post-closing recovery.
After closing, Google alleged misappropriation based on documents accidentally sent to Google; Uber settled by issuing additional stock to Google valued at $245 million and fired Levandowski.
A stockholder (McElrath) filed a derivative suit alleging the directors ignored theft and failed proper pre-closing diligence; defendants moved to dismiss under Ct. Ch. R. 23.1 for failure to make demand.
The Court of Chancery found only CEO Travis Kalanick was interested, a majority of the board was disinterested and independent, demand was required and not made; the Delaware Supreme Court affirmed dismissal with prejudice.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether demand futility excused under Rales	Demand excused because a majority of directors were interested or beholden to Kalanick	A majority of the board was disinterested and independent; demand required	Demand was required; dismissal affirmed
Whether directors were "interested" (substantial likelihood of liability) given charter exculpation	Directors face likely personal liability for approving/closing a transaction that enabled IP theft	Charter exculpates duty-of-care claims; plaintiff must plead particularized facts of subjective bad faith; he failed to do so except for Kalanick	Only Kalanick was interested; others not subject to substantial likelihood of liability
Whether directors lacked independence from Kalanick	Several directors (e.g., Thain) were beholden to or appointed by Kalanick and thus not independent	Appointment or past association alone is insufficient to plead lack of independence; no particularized facts of domination or beholdenness	Directors were independent; Thain and others were not shown to be beholden
Whether pleaded facts demonstrate bad faith or conscious disregard (to overcome exculpation)	Failure to review Stroz reports, unusual indemnities, Kalanick’s prior conduct establish conscious disregard	Allegations show flawed diligence or poor judgment, not intentional dereliction or knowing misconduct	Allegations insufficient to plead bad faith; at most show negligence or a flawed decision

Rales v. Blasband, 634 A.2d 927 (Del. 1993) (standard for demand futility when current board differs from board that made the challenged decision)
City of Birmingham Ret. & Relief Sys. v. Good, 177 A.3d 47 (Del. 2017) (discusses heightened pleading for demand futility)
Wood v. Baum, 953 A.2d 136 (Del. 2008) (director interest and exculpation principles)
In re Walt Disney Co. Derivative Litig., 906 A.2d 27 (Del. Ch. 2006) (examples of facts supporting pleading of bad faith/conscious disregard)
Brehm v. Eisner, 746 A.2d 244 (Del. 2000) (de novo review of dismissal for failure to plead demand futility)
Aronson v. Lewis, 473 A.2d 805 (Del. 1984) (foundational principles on board management of litigation decisions)
Lyondell Chem. Co. v. Ryan, 970 A.2d 235 (Del. 2009) (distinguishing inadequate oversight from conscious disregard)
Beam ex rel. Martha Stewart Living Omnimedia, Inc. v. Stewart, 845 A.2d 1040 (Del. 2004) (independence and demand futility context)