Teamsters Union 25 Health Services & Insurance Plan v. Gavin Baiera, 119 A.3d 44

Background

Orbitz entered a five-year "New Agreement" for GDS services with Travelport on Feb. 4, 2014; Travelport previously owned a large stake in Orbitz and sold most of its Orbitz stock after the agreement.
The Audit Committee (Britton, Leslie, Studenmund) approved the New Agreement on Jan. 29, 2014; Studenmund resigned Feb. 7, 2014 and a vacancy remained when suit was filed.
Plaintiff (a stockholder) filed derivative claims alleging Travelport (an alleged controlling stockholder) and Orbitz directors breached fiduciary duties, plus unjust enrichment and aiding-and-abetting; also a class/direct claim challenging proxy disclosures about director independence under NYSE rules.
Defendants moved to dismiss for failure to make a pre-suit demand (Rule 23.1) and for failure to state a claim (Rule 12(b)(6)). Plaintiff did not pursue a Section 220 books-and-records demand.
The Court applied Rales (because approval came from a committee less than half the board) and held plaintiff failed to plead demand futility: plaintiff did not show a majority of directors were interested or lacked independence, nor that the approving directors acted in bad faith.
The Court also dismissed the NYSE-rule claim for lack of standing to enforce exchange rules and for failure to state a fiduciary-duty claim based on the proxy disclosures.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether pre-suit demand was excused for derivative Counts I–IV	Demand excused because Travelport was a controlling stockholder that stood on both sides of a conflicted transaction and many directors were beholden or interested	Demand required because a majority of the Demand Board were independent and could impartially consider demand; only Audit Committee approved the deal	Demand not excused under Rales; plaintiff failed to raise reasonable doubt that a majority could act impartially
Whether approval by Audit Committee converts to full-board decision (Aronson vs. Rales)	Full board likely involved given transaction significance; hence Aronson should apply	Audit Committee charter delegated review/approval to committee; only committee approved so Rales applies	Rales applies; no reasonable inference of full-board approval absent particularized facts or §220 effort
Whether the Audit Committee members face substantial likelihood of liability (bad faith)	Terms (exclusivity, MVG, shortfall fees, five-year term) were so unfair that approving directors acted in bad faith	Complaint omits financial terms and comparators; allegations amount to hindsight second-guessing, not particularized facts of bad faith	No substantial likelihood of liability; plaintiff failed to plead non-exculpated bad-faith claim with particularized facts
Whether plaintiff can sue over alleged violation of NYSE independence rules (Count V)	Proxy misrepresented director independence; shareholders were harmed by misleading votes	NYSE rules are enforced by the exchange; no private right to enforce; no allegation NYSE found a violation; claim fails to state fiduciary breach	Count V dismissed: plaintiff lacks standing to enforce NYSE rules and fails to state a cognizable fiduciary-duty claim

Key Cases Cited

Tooley v. Donaldson, Lufkin & Jenrette, 845 A.2d 1031 (Del. 2004) (distinguishing direct vs. derivative claims)
Aronson v. Lewis, 473 A.2d 805 (Del. 1984) (demand-futility test when board decision is challenged)
Rales v. Blasband, 634 A.2d 927 (Del. 1993) (demand-futility test when decision not made by then-serving board)
Zapata Corp. v. Maldonado, 430 A.2d 779 (Del. 1981) (board controls decision to litigate as managerial power)
Beam v. Stewart, 845 A.2d 1040 (Del. 2004) (majority control alone does not negate director independence)
Guttman v. Huang, 823 A.2d 492 (Del. Ch. 2003) (Rales inquiry focuses on directors' ability to act impartially)
Wood v. Baum, 953 A.2d 136 (Del. 2008) (directors’ exculpation limits when bad-faith claims can proceed)