Robert A. Feuer v. Mark Zuckerberg and Facebook, Inc.
C.A. No. 2019-0324-JRS and Consol. CA No. 2018-0307-JRS
| Del. Ch. | Oct 5, 2021Background
- Multiple stockholders brought derivative suits on behalf of Facebook alleging directors/officers failed to protect user data, harming the company.
- Most plaintiffs (the CalSTRS and RI groups) pleaded that pre‑suit demand on Facebook’s board would be futile; Robert Feuer instead made a written demand and alleges the Board wrongfully refused.
- Facebook moved to consolidate Feuer’s demand‑refused action with the demand‑futility actions, or alternatively to stay Feuer’s case while the demand‑futility suits proceed; the demand‑futility plaintiffs opposed consolidation but supported a stay.
- Feuer opposed consolidation and the stay, arguing Rule 23.1 contains no preference between demand‑made and demand‑futility paths.
- The Court found demand‑made and demand‑futility suits implicate different legal standards and practical issues, denied consolidation, and stayed Feuer’s action pending resolution of pleading‑stage motions in the demand‑futility cases.
- The Court rejected a blanket rule favoring demand‑futility complaints but explained why, in many cases (including this one), sequencing the demand‑futility actions first is in the corporation’s interest.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Consolidation of Feuer (demand‑refused) with demand‑futility actions | Feuer: different legal standards preclude consolidation; consolidation would be improper | Facebook: same underlying wrongdoing; consolidation prevents duplicative litigation | Denied — legal standards differ and consolidation would be inefficient and complicated |
| Stay Feuer pending resolution of demand‑futility suits | Feuer: stay prejudices him and effectively creates an improper preference | Facebook & futility plaintiffs: stay avoids duplication; futility claims likely to be litigated first and may resolve or narrow issues | Stay granted — Feuer’s action stayed pending resolution of pleading‑stage motions in the demand‑futility cases |
| Whether Rule 23.1 permits preferring demand‑futility over demand‑made generally | Feuer: Rule 23.1 contains no built‑in preference; a stay would improperly favor futility claims | Futility plaintiffs: practical and doctrinal reasons support sequencing futility first in many cases | No categorical rule; court may, case‑by‑case, sequence futility first; here it is appropriate |
| Rationale for sequencing (relative pleading difficulty / corporate interest) | Feuer: making demand preserves board independence and has procedural advantages | Defendants: demand‑futility claims are likelier to survive pleading, will inform leadership and avoid wasting resources | Court: explained demand‑futility often better tested first because demand‑made concedes board independence and is harder to overcome at pleadings; this counsels staying Feuer here |
Key Cases Cited
- Aronson v. Lewis, 473 A.2d 805 (Del. 1984) (establishing board deference and demand inquiry framework)
- Levine v. Smith, 591 A.2d 194 (Del. 1991) (distinguishing focus of demand‑refusal suits from demand‑futility suits)
- Grimes v. Donald, 673 A.2d 1207 (Del. 1996) (explaining consequences of making demand and allocation of burdens)
- Rales v. Blasband, 634 A.2d 927 (Del. 1993) (demand‑futility test when no board action is implicated)
- Beam ex rel. Martha Stewart Living Omnimedia, Inc. v. Stewart, 845 A.2d 1040 (Del. 2004) (Rule 23.1 demand requirements)
- Wood v. Baum, 953 A.2d 136 (Del. 2008) (pleading standards for derivative suits)
- White v. Panic, 783 A.2d 543 (Del. 2001) (vesting presumptive authority to initiate litigation in board)
- Kallick v. SandRidge Energy, Inc., 68 A.3d 242 (Del. Ch. 2013) (noting the business judgment rule’s limited review at pleading stage)