The Raj and Sonal Abhyanker Family Trust v. Mason Blake and UpCounsel
2020-0521-KSJM
Del. Ch.Jun 17, 2021Background
- UpCounsel entered a 2019 licensing/transition agreement with LinkedIn that required UpCounsel to cease operations, wind down within 120 days, and use commercially reasonable efforts to have certain employees (including directors/CEOs) commence employment at LinkedIn; the transaction was approved by written consents from >85% of voting shares.
- The Raj and Sonal Abhyanker Family Trust (via trustee Raj Abhyanker) refused to consent, sought books and records under DGCL §220 (denied due to a waiver), and alleged the transaction would eliminate recoverable value for common stockholders.
- Abhyanker sent January 25 and January 27, 2020 pre‑suit communications demanding that the board stop redirecting traffic to LinkedIn, recuse/remove Blake and Faustman, and initiate litigation against them and LinkedIn.
- Plaintiff sued derivatively in Delaware alleging breach of fiduciary duty, unjust enrichment, and a violation of DGCL §275 (dissolution). Defendants moved to dismiss under Court of Chancery Rules 23.1 and 12(b)(6).
- The Court dismissed claims against interim CEO Rudin for lack of particularized allegations (impermissible group pleading), held the January demands were valid pre‑suit demands (invoking the tacit‑concession doctrine) and dismissed fiduciary and unjust enrichment claims under Rule 23.1, and converted the §275 Rule 12(b)(6) challenge into a Rule 56 summary‑judgment posture because defendants relied on extrinsic documents.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Sufficiency of allegations against Rudin (group pleading) | Complaint names Rudin among Defendants; he should remain a defendant | No particularized facts about Rudin’s week as interim CEO; grouping alleges against all defendants is impermissible | Dismissed Rudin: group pleading inadequate; no reasonably conceivable breach by Rudin |
| Whether Jan 25/27 communications were pre‑suit demands under Rule 23.1 | Communications aren’t in the complaint and thus can’t be considered; even if considered, they weren’t demands | Communications identify wrongdoers, alleged wrongdoing, and specific board action — they are demands | Court considered the letters and held they satisfied the Yaw factors; they were pre‑suit demands |
| Effect of making demands (tacit‑concession / demand futility) | Even after making demands, plaintiff may plead demand futility | Making demands concedes board independence; plaintiff is limited to wrongful‑refusal claim and cannot plead futility | Tacit‑concession applies; plaintiff cannot plead demand futility after making demands; Counts I & II dismissed under Rule 23.1 |
| Unjust enrichment claim scope | Unjust enrichment is a distinct remedy and should survive | Claim arises from same transaction and facts as the demands and is thus encompassed by the demand subject matter | Dismissed under Rule 23.1 as arising from the subject matter of the pre‑suit demands |
| DGCL §275 (alleged dissolution without shareholder approval) — Rule 12(b)(6) sufficiency | Blake’s communications indicated winding down/dissolution without stockholder vote; pleadings suffice | Record (extrinsic) shows no proposed dissolution plan; 12(b)(6) dismissal appropriate | Court will not consider extrinsic exhibits on 12(b)(6); converted the motion to Rule 56 and allowed briefing on summary‑judgment record |
Key Cases Cited
- Spiegel v. Buntrock, 571 A.2d 767 (Del. 1990) (establishes tacit‑concession doctrine: making a demand concedes board independence and limits plaintiff to wrongful‑refusal claims)
- Rales v. Blasband, 634 A.2d 927 (Del. 1993) (discusses demand futility standard and derivative procedure)
- Aronson v. Lewis, 473 A.2d 805 (Del. 1984) (board business‑judgment and derivative suit principles)
- Grimes v. Donald, 673 A.2d 1207 (Del. 1996) (scope of demand and that a demand letter encompasses all legal theories arising from the same facts)
- Levine v. Smith, 591 A.2d 194 (Del. 1991) (by making demand, plaintiff concedes board’s independence)
- Scattered Corp. v. Chicago Stock Exchange, Inc., 701 A.2d 70 (Del. 1997) (demand consequences and board authority over litigation decisions)
- Espinoza v. Dimon, 124 A.3d 33 (Del. 2015) (standards for independent committee refusal of demand and review under the business‑judgment rule)
- Savor, Inc. v. FMR Corp., 812 A.2d 894 (Del. 2002) (pleading standard and treating well‑pleaded allegations on a motion to dismiss)
- Central Mortgage Co. v. Morgan Stanley Mortgage Capital Holdings, 27 A.3d 531 (Del. 2011) (Rule 12(b)(6) standard; accepting well‑pleaded facts but rejecting conclusory allegations)
- Gotham Partners, L.P. v. Hallwood Realty Partners, L.P., 817 A.2d 160 (Del. 2002) (aiding‑and‑abetting liability requires the defendant be a non‑fiduciary)