Raul v. Rynd
929 F. Supp. 2d 333
D. Del.2013Background
- Hercules Offshore, Inc. is a Delaware corporation providing shallow-water offshore drilling and marine services.
- Plaintiff Pincus E. Raul files a derivative suit on Hercules’ behalf alleging breaches of fiduciary duty and Section 14(a) violations stemming from the 2010 executive compensation approved by the Board.
- The 2010 compensation plan increased pay 40–190% for several executives, including the CEO and CFO, despite poor 2010 performance.
- A Dodd-Frank say-on-pay vote in 2011 rejected the compensation, but the Board did not rescind the plan, and the plan remained in effect.
- Plaintiff did not make a pre-suit demand on the Board and argues demand should be excused as futile under Aronson and related Delaware law
- The Hercules Offshore Defendants and FWC move to dismiss under Rule 23.1 for failure to plead demand futility and under Rule 12(b)(6) and Rule 9(b) for failure to state claims; the court approves and grants the motions to dismiss.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether demand futility is adequately pleaded | Plaintiff asserts directors are disinterested and the Board faced liability. | Defendants argue no director-by-director analysis showing lack of independence; no substantial likelihood of liability. | Demand not excused; dismissal affirmed. |
| Whether the 14(a) claim is pled with material misstatements | Proxy misrepresented pay-for-performance adherence. | Proxy accurately described compensation policy; no misstatement. | Counts under Section 14(a) fail. |
| Whether the claim against FWC for aiding/abetting and contract breach survives | FWC aided the Board in breach of fiduciary duty. | No primary breach adequately pleaded; professional duty/breach inadequately alleged. | Counts against FWC fail. |
| Whether unjust enrichment and related claims are viable | Executives unjustly enriched by improper pay increases. | Plaintiff’s allegations insufficient to show unjust enrichment. | Unjust enrichment claim dismissed. |
Key Cases Cited
- Aronson v. Lewis, 473 A.2d 805 (Del.1984) (demand futility standard; corporate directors presumed independent)
- In re Intel Corp. Derivative Litig., 621 F.Supp.2d 165 (D. Del.2009) (two-prong test for demand futility; business judgment presumption)
- Beam v. Stewart, 845 A.2d 1040 (Del.2004) (presumption of business judgment; need for particularized missing facts)
- Rales v. Blasband, 634 A.2d 927 (Del.1993) (stockholder litigation standard for demand futility; information sufficiency)