In the recent decision of The Joseph Penar Family Trust v. Adams, C.A. 10441-VCG (Del. Ch. Apr. 28, 2016), Vice Chancellor Glasscock dismissed a derivative complaint for lack of supporting allegations.  Here, plaintiff chose not to use a books and records demand to develop facts to support claims against fiduciaries.  As stated by the Court:

It has perhaps grown clichéd to note that plaintiffs should use Section 220 and its LLC analog to develop facts for litigation by stockholders or members against fiduciaries, or for derivative litigation on behalf of the entity.

Accordingly, when a plaintiff fails to first inspect an entity’s records through a books and records demand, general allegations of wrongdoing or breach of fiduciary duties will not be enough to sustain a complaint under the “reasonably conceivable” standard employed by the Delaware Courts in connection with a Rule 12(b)(6) motion to dismiss.

If you would like to speak to a litigator in Fox Rothschild’s Delaware office, please reach out to Sid Liebesman (302) 622-4237 or Seth Niederman (302) 622-4238.