November 27, 2017
On November 27, 2017, Vice Chancellor J. Travis Laster of the Delaware Court of Chancery dismissed a stockholder derivative complaint asserting ”Caremark” (duty of care), “Brophy” (common law insider trading), and unjust enrichment claims against Liquidity Services, Inc.’s board of directors.
Piggybacking on claims previously asserted against the company and two of its executives in a federal securities class action, plaintiffs attempted to assert derivative claims in Delaware against Liquidity’s board arising out of the same conduct. In the derivative suit, Weil represented Liquidity and its board and moved to dismiss the action for failure to make demand on the board or show why demand would be futile.
Vice Chancellor Laster granted Weil’s motion to dismiss in its entirety, ruling that the “allegations of the Complaint fail to call into question the ability of any of the Disputed Directors to consider a demand,” and in particular, that the pleadings failed to show either possession or use of any inside information.