EUGENE F. TOWERS , Derivatively on Behalf of The Walt Disney Company v. Robert A. Iger

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
EUGENE F. TOWERS , Derivatively on
Behalf of The Walt Disney
Company,
Plaintiff-Appellant,
v.
R OBERT A. IGER ; A LAN BERGMAN ;
EDWIN C ATMULL; J AMES A. R ASULO ;
THOMAS O. S TAGGS ; S USAN E.
ARNOLD; J OHN S. C HEN; J ACK
DORSEY; FRED H. LANGHAMMER ;
AYLWIN B. LEWIS ; M ONICA C.
LOZANO ; R OBERT W.
M ATSCHULLAT; S HERYL S ANDBERG ;
ORIN C. S MITH; R ICHARD W. C OOK;
THE W ALT D ISNEY C OMPANY, a
Delaware corporation, Nominal
Defendant,
Defendants-Appellees.
No. 17-15770
D.C. No.
5:15-cv-04609-
BLF
OPINION
Appeal from the United States District Court
for the Northern District of California
Beth Labson Freeman, District Judge, Presiding
Argued and Submitted November 14, 2018
San Francisco, California

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2 TOWERS V. IGER
Filed December 26, 2018
Before: SIDNEY R. THOMAS, Chief Judge, MILAN D.
SMITH, JR., Circuit Judge, and ELAINE E. BUCKLO,*
District Judge.
Opinion by Judge Milan D. Smith, Jr.
SUMMARY**
Shareholder Derivative Action
The panel affirmed the district court’s dismissal of a
shareholder derivative suit on behalf of The Walt Disney
Company because of plaintiff’s failure to satisfy Fed. R. Civ.
P. 23.1’s demand futility requirement.
Plaintiff alleged that Disney’s Board of Directors and
several corporate officers participated in a conspiracy to
enact illegal anticompetitive agreements between Disney
and other animation studios. Plaintiff, admittedly, did not
make a demand on the Board, and therefore, needed to plead
the reasons why such demand would have been futile.
The panel held that plaintiff’s amended complaint did
not constitute particularized facts demonstrating demand
futility. The panel further held that whether the Disney
* The Honorable Elaine E. Bucklo, United States District Judge for
the Northern District of Illinois, sitting by designation.
** This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.

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TOWERS V. IGER 3
Board’s alleged misconduct was characterized as conscious
inaction, or active connivance, plaintiff needed to
demonstrate that a majority of the Director defendants knew
of the conspiracy – and plaintiff failed to do so.
COUNSEL
Steven M. McKany (argued), Gina Stassi, Kevin A. Seely,
and Brian J. Robbins, Robbins Arroyo LLP, San Diego,
California, for Plaintiff-Appellant.
Allen J. Ruby (argued), Richard S. Horvath Jr., and Jack P.
DiCanio, Skadden Arps Slate Meagher & Flom LLP, Palo
Alto, California; Cliff C. Gardner, Skadden Arps Slate
Meagher & Flom LLP, Wilmington, Delaware; for
Defendants-Appellees.
OPINION
M. SMITH, Circuit Judge:
Plaintiff-Appellant Eugene F. Towers (Plaintiff) brought
a shareholder derivative action on behalf of The Walt Disney
Company (Disney), alleging that its board of directors and
several corporate officers participated in a conspiracy to
enact illegal anticompetitive agreements between Disney
and other animation studios. The district court dismissed the
suit, concluding that the action could not be maintained
because Plaintiff failed to satisfy Federal Rule of Civil
Procedure 23.1’s demand requirement. We affirm.

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FACTUAL AND PROCEDURAL BACKGROUND
I. Factual Background
Plaintiff is a stockholder of Disney, a Delaware
corporation headquartered in Burbank, California.
Plaintiff’s amended complaint alleged that Disney and other
leading animation studios and special effects firms engaged
in a long-running, illicit conspiracy to suppress the
compensation of skilled technicians.
A. The Alleged Conspiracy
The conspiracy allegedly began in the mid-1980s, when
George Lucas, then-head of alleged co-conspirator
Lucasfilm Ltd., LLC (Lucasfilm), sold his company’s
computer division to Steve Jobs, former CEO of Apple
Computer, Inc. (Apple).1 Jobs named the new company
“Pixar.” At that time, Pixar and Lucasfilm agreed to refrain
from recruiting each other’s employees. In subsequent
years, Pixar’s president, Defendant-Appellee Edwin
Catmull, and others allegedly expanded the conspiracy to
include Disney, its subsidiary Walt Disney Animation
Studios (Disney Animation Studios), DreamWorks
Animation SKG, Inc. (DreamWorks), Two Pic MC LLC
(formerly known as ImageMovers Digital LLC)
(ImageMovers), Sony Pictures Animation, Inc., Sony
Pictures Imageworks, Inc., and Blue Sky Studios, Inc.
According to Plaintiff’s amended complaint, the
conspiracy primarily involved the establishment and
enforcement of “gentlemen’s agreements” to “artificially
1 Although Plaintiff referred to Jobs’s former employer as “Apple
Inc.” in the amended complaint, Apple did not adopt this abridged name
until 2007. See Drop the Computer, The Economist (Jan. 11, 2007),
http://www.economist.com/business/2007/01/11/drop-the-computer.

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TOWERS V. IGER 5
restrict competition for labor and thus illegally restrain trade
and deflate compensation for employees . . . . The []
Agreements consisted primarily of agreeing to stop the
practice of cold calling into other companies, in exchange
for the same.” Plaintiff explained that “[c]old calling, where
employers call employees working for another company
seeking to recruit or ‘poach’ them, is a vital tool for
acquiring skilled labor, particularly in competitive fields.”
Entering into agreements to prohibit cold calling allowed the
conspirators to “keep costs down and prevent bidding wars.”
B. Disney’s Role
As of the date of the filing of Plaintiff’s amended
complaint, Defendants-Appellees Robert A. Iger, Susan E.
Arnold, John S. Chen, Jack Dorsey, Fred H. Langhammer,
Aylwin B. Lewis, Robert W. Matschullat, Sheryl Sandberg,
and Orin C. Smith (together with Defendant-Appellee
Monica C. Lozano,2 the Director Defendants) served on
Disney’s board of directors (the Board). According to the
complaint, the remaining individual Defendants-Appellees
were current or former officers of Disney or its subsidiaries
and divisions: Catmull was president of Disney Animation
Studios, Alan Bergman was president of The Walt Disney
Studios (Disney Studios), James A. Rasulo was an advisor
to Disney’s CEO and was formerly senior vice president and
CFO, Thomas O. Staggs was formerly COO and an advisor
to the CEO, and Richard W. Cook was formerly chairman of
Disney Studios (collectively, the Officer Defendants, and
together with the Director Defendants, Defendants). In
addition to serving on the Board, Iger was also Disney’s
2 Lozano served on the Disney board from 2000 to 2016, but left
prior to the filing of Plaintiff’s amended complaint.

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6 TOWERS V. IGER
chairman and CEO, and previously served as its president
and COO.
Plaintiff alleged that Disney participated in the
conspiracy since at least 2005, as evidenced by an internal
Pixar email confirming that Pixar would not recruit workers
from Disney. The email noted that “[t]his agreement is
mutual.” In 2006, Disney purchased Pixar and appointed
Catmull—the purported architect of the conspiracy—to run
Disney Animation Studios. As part of the purchase
negotiations, Disney allegedly agreed to abide by the
conspiracy, with the then-chairman of Disney Studios,
Cook, explicitly endorsing the scheme in an email exchange
with Catmull.
C. The DOJ Investigation and Subsequent Litigation
Beginning in 2009, the Department of Justice (DOJ)
conducted an investigation of hiring practices in the high-
tech sector (the DOJ Investigation). On September 24, 2010,
the DOJ filed a complaint against Pixar (by then a wholly
owned subsidiary of Disney), Apple, Adobe Systems Inc.,
Google Inc., Intel Corp., and Intuit Inc.; three months later,
it filed a similar suit against Lucasfilm. In these actions, the
DOJ alleged that the companies employed anti-poaching
agreements that were per se unlawful restraints of trade
under antitrust laws. The companies settled with the DOJ in
2010, and final consent judgments were disclosed when the
actions were publicized. These consent judgments enjoined
the companies from entering into agreements to “refrain
from . . . soliciting, cold calling, recruiting, or otherwise
competing for employees.” However, the consent
judgments permitted such agreements in limited
circumstances (such as when needed for a merger or
acquisition, or for joint projects), and the DOJ imposed no
fines or financial penalties against the co-conspirators.

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TOWERS V. IGER 7
Subsequently, some employees of the conspiring
companies filed class action suits against them, and those
actions were consolidated in September 2011 under the
name In re High-Tech Employee Antitrust Litigation, No.
11-CV-02509-LHK (N.D. Cal.). Initially, both the DOJ
Investigation and In re High-Tech implicated only Disney
subsidiaries3 and not Disney itself. However, according to
Plaintiff, “[t]hat began to change in May 2013, when certain
court documents were made public in the DOJ
Investigation,” and again in March 2014, with the disclosure
of additional documents from In re High-Tech that
“contain[ed] evidence of a conspiracy involving numerous
additional companies, including Disney.”
II. Procedural Background
A. Initial Proceedings
In 2015, having been “alerted [] to the fact that Disney
itself faced serious and substantial harm in light of the anti-
competitive practices,” Plaintiff first made an inspection
demand to Disney and, after negotiating with the company,
received and reviewed books and records related to the
alleged conspiracy. He then filed his original complaint on
September 29, 2015, asserting claims for breach of fiduciary
duty and unjust enrichment.
On December 21, 2015, Defendants moved to dismiss
Plaintiff’s complaint under Rule 23.1 (for failure to plead
demand futility) and Rule 12(b)(6) (for failure to state a
claim). The district court granted the motion, concluding
that Plaintiff “failed to plead sufficient facts regarding the
Board’s knowledge of the purported conspiracy.” The
3 In addition to Pixar, Lucasfilm, which Disney acquired in 2012.

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8 TOWERS V. IGER
district court granted leave to amend, emphasizing that, to
satisfy Rule 23.1, Plaintiff would need to plead specific facts
connecting the Director Defendants to the conspiracy.
Following the dismissal, Plaintiff made a second demand
on Disney, secured and reviewed additional documents, and
filed an amended complaint on October 21, 2016.
B. The District Court’s Decision
On March 10, 2017, the district court dismissed
Plaintiff’s amended complaint. The court again concluded
that Plaintiff had only alleged,
at most, that a few high-level employees and
officers knew of and participated in the
alleged conspiracy. Taken as a whole, these
allegations are not sufficient to satisfy
Delaware law with respect to demand futility,
as they do not show that at least six members
of the current board face a substantial
likelihood of personal liability for violating
their fiduciary duties.
The court noted that Plaintiff’s new allegations were drawn
from the minutes of meetings that occurred in late 2005 and
early 2006, during the time the Board considered and
approved the Pixar acquisition. The court determined that
these minutes were “rather unremarkable”; the Board
discussed various facets of the acquisition, such as personnel
issues and strategic aims, but “it would have been
remarkable if the Board had not discussed these topics
before deciding to acquire Pixar . . . . The only inference
that Plaintiff’s allegations plausibly support is that the Board
discussed entirely appropriate and lawful means to retain and
attract creative talent in relation to an acquisition.” The

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TOWERS V. IGER 9
court declined to infer that alleged co-conspirators shared
details of the scheme with the Board when all were present
at these meetings, or that any discussions relating to
employment issues implicated the conspiracy.
Consequently, the district court dismissed Plaintiff’s
amended complaint without leave to amend. This appeal
followed.
STANDARD OF REVIEW AND JURISDICTION
“[W]e review for abuse of discretion the district court’s
ruling dismissing this shareholder derivative suit on the
ground of failure to show demand futility.” Rosenbloom v.
Pyott, 765 F.3d 1137, 1147 (9th Cir. 2014). We have
jurisdiction pursuant to 28 U.S.C. § 1291.
ANALYSIS
I. Rule 23.1
Rule 23.1 “applies when one or more shareholders or
members of a corporation or an unincorporated association
bring a derivative action to enforce a right that the
corporation or association may properly assert but has failed
to enforce.” Fed. R. Civ. P. 23.1(a). The rule imposes
several pleading requirements, including that a complaint
“state with particularity . . . any effort by the plaintiff to
obtain the desired action from the directors or comparable
authority and, if necessary, from the shareholders or
members; and [] the reasons for not obtaining the action or
not making the effort.” Fed. R. Civ. P. 23.1(b)(3). This
“demand requirement implements ‘the basic principle of
corporate governance that the decisions of a corporation—
including the decision to initiate litigation—should be made
by the board of directors or the majority of shareholders.’”

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Kamen v. Kemper Fin. Servs., Inc., 500 U.S. 90, 101 (1991)
(quoting Daily Income Fund, Inc. v. Fox, 464 U.S. 523, 530
(1984)); see also Aronson v. Lewis, 473 A.2d 805, 811–12
(Del. 1984) (“By its very nature the derivative action
impinges on the managerial freedom of directors. Hence, the
demand requirement . . . exists at the threshold, first to insure
that a stockholder exhausts his intracorporate remedies, and
then to provide a safeguard against strike suits.” (footnote
omitted)).4 Consequently, “the right of a stockholder to
prosecute a derivative suit is limited to situations where the
stockholder has demanded that the directors pursue the
corporate claim and they have wrongfully refused to do so
or where demand is excused because the directors are
incapable of making an impartial decision regarding such
litigation.” Rales v. Blasband, 634 A.2d 927, 932 (Del.
1993).
In his amended complaint, Plaintiff admitted that he did
not make a demand on the Board. Therefore, he must “plead
with particularity the reasons why such demand would have
been futile.” Rosenbloom, 765 F.3d at 1148 (quoting In re
Silicon Graphics Inc. Sec. Litig., 183 F.3d 970, 989 (9th Cir.
1999)). We have emphasized that demand futility “must be
decided by the trial court on a case-by-case basis and not by
any rote and inelastic criteria.” Id. (quoting In re Am. Int’l
Grp., Inc. Derivative Litig., 700 F. Supp. 2d 419, 430
(S.D.N.Y. 2010)). Plaintiff is “entitled to all reasonable
4 “Although Rule 23.1 supplies the pleading standard for assessing
allegations of demand futility, ‘[t]he substantive law which determines
whether demand is, in fact, futile is provided by the state of incorporation
of the entity on whose behalf the plaintiff is seeking relief.’”
Rosenbloom, 765 F.3d at 1148 (alteration in original) (quoting Scalisi v.
Fund Asset Mgmt., L.P., 380 F.3d 133, 138 (2d Cir. 2004)). Because
Disney is incorporated in Delaware, Delaware law controls our demand
futility analysis.

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TOWERS V. IGER 11
factual inferences that logically flow from the particularized
facts alleged,” Brehm v. Eisner, 746 A.2d 244, 255 (Del.
2000), and “[t]he requirement of factual particularity does
not entitle a court to discredit or weigh the persuasiveness of
well-pled allegations.” In re China Agritech, Inc. S’holder
Derivative Litig., No. 7163-VCL, 2013 WL 2181514, at *14
(Del. Ch. May 21, 2013).
Although a “smoking gun of Board knowledge” is not
required—Plaintiff can instead “alleg[e] particular facts that
support an inference of conscious inaction”—demand must
be assessed on a director-by-director basis such that,
“looking to the whole board of directors,” demand is excused
as to a majority of members. Rosenbloom, 765 F.3d at 1151
n.13, 1156; see also Desimone v. Barrows, 924 A.2d 908,
943 (Del. Ch. 2007) (“Delaware law does not permit the
wholesale imputation of one director’s knowledge to every
other for demand excusal purposes. Rather, a derivative
complaint must plead facts specific to each director,
demonstrating that at least half of them could not have
exercised disinterested business judgment in responding to a
demand.” (footnote omitted)). Because Disney’s articles of
incorporation exculpated the Board’s members from
personal monetary liability, Plaintiff must plead bad faith
“by alleging with particularity that a director knowingly
violated a fiduciary duty or failed to act in violation of a
known duty to act, demonstrating a conscious disregard for
her duties.” In re Citigroup Inc. S’holder Derivative Litig.,
964 A.2d 106, 125 (Del. Ch. 2009). Although
“[t]he good faith business decisions of
informed, disinterested, and independent
directors of Delaware corporations are
entitled to deference under the business
judgment standard of review,” . . . . “[i]n rare

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cases a transaction may be so egregious on its
face that board approval cannot meet the test
of business judgment.” These rare cases
include those in which a board decides to
undertake illegal activity.
Rosenbloom, 765 F.3d at 1149 (citation omitted) (first
quoting Hamilton Partners, L.P. v. Highland Capital Mgmt.,
L.P., No. 6547-VCN, 2014 WL 1813340, at *15 (Del. Ch.
May 7, 2014); and then quoting Aronson, 473 A.2d at 815).5
II. Plaintiff’s Amended Complaint
Plaintiff contends that
[a] collective analysis of the allegations in the
Amended Complaint, viewed in the light
most favorable to Plaintiff, and with all
reasonable inferences drawn in his favor,
establish at least a reasonable inference that a
majority of the Board at the time the
complaint was filed were aware of the Illegal
Anticompetitive Agreements, if not also
actively participating in them.
He points to three general allegations to support this
inference: that key Disney officers were actively involved in
the conspiracy; that “a majority of the Board was serving
5 Rosenbloom notes that demand futility based on a board’s active
decisions is subject to a somewhat different analysis than demand futility
based on a board’s conscious inaction. 765 F.3d at 1149–51. However,
it ultimately does not matter which theory is applied to Plaintiff’s claims
here because either would require the Board’s knowledge of the
conspiracy, which, we conclude, cannot be inferred from the allegations
in the amended complaint.

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TOWERS V. IGER 13
while defendant Cook, the head of Disney studios, was
actively orchestrating” the conspiracy; and that “several key
architects” of the conspiracy “discussed the Pixar acquisition
with a majority of the Board.” We consider each allegation
in turn.
A. Involvement of Key Disney Officers
The amended complaint alleged that certain high-
ranking Disney officers knew of the conspiracy and
discussed its implications. For example, the complaint
included an email exchange between Catmull and Cook, in
which the former mentioned that “[w]e have avoided wars
up in Norther[n] California because all of the companies up
here—P[i]xar, ILM, Dreamworks, and [a] couple of smaller
places—have conscientiously avoided raiding each
other. . . . I would like the kind of relationship that Pixar has
with Disney in that people cannot be considered to move
back and forth.” Cook responded, “I agree. We will reaffirm
our position again. As for Pixar or Disney, they absolutely
know they are off limits.” In another email exchange
between Catmull, Bergman, and a senior Disney human
resources officer, Catmull reported that a rival recruiter
“approach[ed] some of our people” and that “[w]e called to
complain and the recruiter immediately stopped,” noting that
“[t]his kind of relationship has help[ed] keep the peace in the
Bay Area and it is important that we continue [to] use
restraint.” The email ended with an exhortation: “can we
have [ImageMovers] do their hunting somewhere else other
than our back yard?”
However, even if non-Board corporate officers might
have discussed or even guided the conspiracy, that by itself
is not sufficient to implicate the Director Defendants. To
begin, “Delaware courts routinely reject the conclusory
allegation that because illegal behavior occurred, internal

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controls must have been deficient, and the board must have
known so.” Desimone, 924 A.2d at 940; see also Stone ex
rel. AmSouth Bancorporation v. Ritter, 911 A.2d 362, 373
(Del. 2006) (declining to “equate a bad outcome with bad
faith” because “directors’ good faith exercise of oversight
responsibility may not invariably prevent employees from
violating criminal laws”). Furthermore, “Delaware law does
not permit the wholesale imputation of one director’s
knowledge to every other for demand excusal purposes.”
Desimone, 924 A.2d at 943. Thus, we cannot assume that
members of the Board had knowledge of the conspiracy
simply because other individuals at Disney—even other
Board members—knew. Instead, Plaintiff would need to
demonstrate a clear line of communication and knowledge
between the implicated officers and the Board. See, e.g.,
Wal-Mart Stores, Inc. v. Ind. Elec. Workers Pension Tr.
Fund IBEW, 95 A.3d 1264, 1273 (Del. 2014) (“Plaintiff may
establish director knowledge . . . by establishing that certain
[] officers were in a ‘reporting relationship’ to [] directors,
that those officers did in fact report to specific directors, and
that those officers received key information.”). Here,
Plaintiff did allege that Cook and Catmull communicated
with the Board, particularly during discussions of the Pixar
acquisition, but he did not allege with particularity that
information regarding the conspiracy was ever transmitted
to the Board by these or other officers.
In short, the district court did not abuse its discretion
when it determined that it could not impute knowledge to the
Director Defendants solely because some of the Officer
Defendants engaged in the conspiracy and discussed it
amongst themselves.

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TOWERS V. IGER 15
B. Cook and the Board
Plaintiff notes that “seven of the Company’s eleven
directors (at the time of filing) have served on the Board
since 2006, ‘when the Company’s participation in the
conspiracy was in full effect.’” He argues that “it is a
reasonable inference that defendant Cook, who was freely
discussing [the conspiracy] with the heads of other
companies, including and especially defendant Catmull, was
also sharing that information with the members of Disney’s
Board.” The main support for this inference, in addition to
Cook’s emails with Catmull, is language from Disney’s
2015 Form 10-K, in which it discussed, in Plaintiff’s words,
“the significant adverse effects that employment costs can
have on the Company and the [] Defendants’ ‘active’ efforts
to ‘control increases’ in those costs.”
Under Delaware law, we cannot infer that Cook shared
his knowledge with other members of the Board simply
because he discussed the conspiracy with Catmull. Plaintiff
claims that the 10-K provides a link between the Board and
Cook’s misconduct, but while that document’s allegedly
incriminating language did discuss employment costs, it was
not in the context of competitors’ pilfering of Disney
employees or the Board’s efforts to prevent it. Instead, the
10-K focused on the “costs of pension benefits and current
and postretirement medical benefits,” as well as “[l]abor
disputes” stemming from “collective bargaining
agreements.” Accordingly, Plaintiff cannot tie this 10-K to
the alleged conspiracy such that we can infer Board
knowledge.
C. Board Meeting Discussions of Pixar’s Acquisition
Lastly, Plaintiff’s amended complaint relied heavily on
the minutes of meetings that the Board conducted around the

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16 TOWERS V. IGER
time of the Pixar acquisition, during which the directors
discussed various issues relating to the merger. Plaintiff
alleged that the Board addressed employment issues and the
overall competition for talent, and that Jobs, allegedly a
primary player in the conspiracy, spoke to the Board
regarding the acquisition. However, discussion of these
employment-related topics does not permit us to infer that
the Board knew of the conspiracy. Just as Delaware law
prevents us from imputing knowledge or bad faith to the
Board simply because other officers knew of and engaged in
misconduct, it also suggests that knowledge of misconduct
cannot be imputed to the Director Defendants simply
because the Board oversaw an acquisition that touched on
related issues. See Ash v. McCall, No. Civ.A. 17132, 2000
WL 1370341, at *8–9 (Del. Ch. Sept. 15, 2000) (determining
that “[t]he notion that [directors overseeing a merger] had
actual knowledge of” red flags could not be maintained
where allegations did not plead this knowledge and
“plaintiffs’ claims sound[ed] in negligence, at most”).
Plaintiff argues that the district court improperly drew
inferences against him as to the board meeting allegations,
but this is not accurate. The amended complaint does not
contain specific allegations that can be inferred in favor of
Plaintiff, because we cannot establish an inference of Board
knowledge merely through proximity to the conspiracy or
the alleged misconduct of Disney officers. As the Delaware
Court of Chancery has explained,
Plaintiffs’ invitation to play inferential
hopscotch does not comport with Rule 23.1’s
“stringent requirements of factual
particularity.” While the Court must “draw
all reasonable inferences in the plaintiff’s
favor,” our Supreme Court has made clear

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TOWERS V. IGER 17
that “conclusory allegations are not
considered as expressly pleaded facts or
factual inferences.” Even reasonable
inferences “must logically flow from
particularized facts alleged by the plaintiff.”
Horman v. Abney, No. 12290-VCS, 2017 WL 242571, at *12
(Del. Ch. Jan. 19, 2017) (footnotes omitted) (first quoting
Brehm, 746 A.2d at 254; and then quoting Wood v. Baum,
953 A.2d 136, 140 (Del. 2008)).
Accordingly, the district court did not abuse its
discretion when it declined to infer knowledge of the
conspiracy based on the fact that the Board discussed
employment issues at these meetings. As the court noted,
“The only inference that Plaintiff’s allegations plausibly
support is that the Board discussed entirely appropriate and
lawful means to retain and attract creative talent in relation
to an acquisition.” The district court concluded that
“Plaintiff alleges no particularized facts demonstrating that
Jobs or anyone else revealed any recruiting practices, let
alone any unlawful conspiracy, to the members of the
Board.” This conclusion is reasonable and entirely
consistent with both the allegations in the amended
complaint and controlling law.
* * *
Ultimately, the allegations in Plaintiff’s amended
complaint do not constitute particularized facts
demonstrating demand futility. Whether the Board’s alleged
misconduct is characterized as conscious inaction or active
connivance, Plaintiff needed to demonstrate that a majority
of the Director Defendants knew of the conspiracy, and he
failed to do so.

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18 TOWERS V. IGER
Plaintiff is correct that he does not need to show evidence
of a smoking gun, and relies on Rosenbloom to this effect.
However, in that case, the plaintiffs “offer[ed] a battery of
particularized factual allegations that strongly support[ed]
an inference . . . that the Board knew of and did nothing
about illegal activity.” Rosenbloom, 765 F.3d at 1152. Such
allegations included that the board “closely and regularly
monitored” potentially illicit activities; “received data” that
“qualifie[d] as a ‘red flag’” of illegality; and “received
repeated FDA warnings about illegal” activities. Id. at
1152–54. Here, by contrast, it is not even clear that the
Board was aware of a conspiracy, let alone either
consciously disregarded or actively encouraged it such that
the Director Defendants acted in bad faith.6 A smoking gun
may not be needed, but something more than speculative,
conclusory allegations is required. All Plaintiff alleged is
that the Board was in close proximity to officers who were
involved with the conspiracy, and that its members discussed
related issues at meetings. These allegations would likely be
insufficient even under de novo review; consequently, under
the more deferential standard that we must apply, the district
6 Consequently, this case is more similar to those in which courts
distinguished their operative allegations from those in Rosenbloom. See,
e.g., In re First Solar Derivative Litig., No. CV-12-00769-PHX-DGC,
2016 WL 3548758, at *13 (D. Ariz. June 30, 2016) (determining that
“[t]his case differs from Rosenbloom” because “Plaintiffs have not
alleged that there was enduring and pervasive misconduct” and
“Plaintiffs have not alleged that the board was informed of the critical
facts by anyone”); In re Impax Labs., Inc. S’holder Derivative Litig., No.
14-cv-04266-HSG, 2015 WL 5168777, at *6 (N.D. Cal. Sept. 3, 2015)
(noting that Rosenbloom “address[ed] circumstances far more extreme
than those presented here,” where “there are no particularized allegations
that the Impax Board affirmatively adopted plans to perpetuate any
illegal conduct or made a conscious decision not to take any action in
response to” red flags of illegality).

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TOWERS V. IGER 19
court did not abuse its discretion when it concluded that
Plaintiff failed to plead demand futility.7
CONCLUSION
Plaintiff failed to plead particularized facts relating to
demand futility, as required by Rule 23.1. Accordingly, we
AFFIRM the district court’s order granting Defendants’
motion to dismiss.
7 The district court also concluded that Plaintiff’s claims were time-
barred by the applicable three-year statute of limitations. However,
because Plaintiff’s failure to plead demand futility constitutes a sufficient
basis for dismissal, we need not consider whether the district court
correctly calculated the statute of limitations.

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