Joseph R. Eckert III v. Jack Hightower

COURT OF CHANCERY
OF THE
STATE OF DELAWARE
MORGAN T. ZURN LEONARD L. WILLIAMS JUSTICE CENTER
VICE CHANCELLOR 500 N. KING STREET, SUITE 11400
WILMINGTON, DELAWARE 19801-3734

March 24, 2025

Stephen E. Jenkins, Esquire A. Thompson Bayliss, Esquire
Ashby & Geddes, P.A. Abrams & Bayliss LLP
500 Delaware Avenue, 8th Floor 20 Montchanin Road, Suite 200
Wilmington, DE 19801 Wilmington, Delaware 19807

RE: Joseph R. Eckert III v. Jack Hightower, et al.,
Civil Action No. 2024-0569-MTZ
Dear Counsel:

Plaintiff Joseph R. Eckert III (“Plaintiff”) challenges certain executive

compensation packages awarded to the nominal corporate defendant’s CEO, who is

also its controlling stockholder. Plaintiff did not bring a demand on the company’s

board of directors, instead arguing that demand was futile. To reach the quorum

necessary to plead demand futility, Plaintiff argues certain directors face a

substantial likelihood of liability concerning the challenged compensation decisions.

Plaintiff alleges the directors acted with a “controlled mindset” and rubberstamped

the controller’s excessive executive compensation. Because the company has an

exculpation provision in its charter, Plaintiff must plead the directors did so

disloyally or in bad faith. But Plaintiff has not reached that high bar. This action is

dismissed under Court of Chancery Rule 23.1.
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I. BACKGROUND 1

The facts are drawn from the operative complaint, the documents integral to

it, and those incorporated by reference, including documents produced to Plaintiff

in response to his books and records demand. 2

Nominal defendant HighPeak Energy, Inc. (the “Company”) is an oil and

natural gas exploration and production company.3 The Company was formed in

August 2020 through a combination of various entities controlled by defendant Jack

Hightower.4 Hightower is the Company’s CEO, board chairman, and controlling

stockholder. 5 Plaintiff is a Company stockholder as of November 8, 2022. 6

The Company has a Long Term Incentive Plan (the “LTIP”) that governs the

1
Citations in the form “Am. Compl.” refer to Plaintiff’s amended complaint in this action,
available at docket item (“D.I.”) 12. Citations in the form “Thomson Aff.” refer to the
affidavit of G. Mason Thomson, available at D.I. 17. Citations in the form “OB at –” refer
to Defendants’ Opening Brief, available at D.I. 17. Citations in the form “AB at –” refer
to Plaintiff’s Answering Brief, available at D.I. 20. Citations in the form “RB at –” refer
to Defendants’ Reply Brief, available at D.I. 25.
2
See Bricklayers Pension Fund of W. Pa. v. Brinkley, 2024 WL 3384823, at *2, n.3 (Del.
Ch. July 12, 2024) (“That production was made pursuant to an agreement providing that
the documents would be incorporated by reference into any related complaint Plaintiff
filed. Those books and records are incorporated by reference.” (citation omitted)).
3
Am. Compl. ¶ 2.
4
Id. ¶ 8.
5
Id. ¶ 2.
6
Id. ¶ 7.
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award of options, stock awards, cash payments, and other awards “to share in the

value created by the Company’s performance.”7 The LTIP is the Company’s only

equity compensation plan, and it authorized the board to award up to 13% of the

Company’s outstanding shares of stock. 8

On August 24, 2020, the Company’s board met to discuss the LTIP.9 At the

meeting, Hightower discussed management’s recommendation for awarding stock

options to certain employees, including Hightower.10 The board discussed “[t]he

rationale for the number of stock option awards for many of the employees.”11 The

board designated Hightower and defendant Michael Hollis as members of the

committee authorized by the LTIP to direct the Company to reserve up to 13% of

the Company’s common stock for future issuance under the LTIP. 12 The board

granted Hightower 5,953,495 stock options.13 Hightower received $190,083 in

7
Thomson Aff., Ex. 7 at -0218; Am. Compl. ¶ 22.
8
Thomson Aff., Ex. 7 at -0219.
9
Am. Compl. ¶¶ 26–34. At this time, the board consisted of Hightower, Hollis, Covington,
Fulgham, Chernosky, Oldham and Michael Gustin. Gustin resigned from the board in
2023. Id. ¶ 14.
10
Thomson Aff., Ex. 7 at -0219.
11
Id.
12
Thomson Aff., Ex. 8 at -0015.
13
Am. Compl. ¶ 58. Hightower’s options immediately vested and had the exercise price
of $10. Thomson Aff., Ex. 8 at -0015; Thomson Aff., Ex. 9 at F-16.
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salary and $3,667 in other compensation.14 The board also granted stock options to

other officers and employees. 15

On April 28, 2021, the compensation committee met to discuss 2021

compensation.16 The compensation committee comprised Hightower, Hollis, and

defendants Keith Covington and Sharon Fulgham (the “Compensation Committee”

or the “Committee”).17 The Committee reviewed and discussed ISS stock ownership

recommendations and stock ownership guidelines of the Company’s peers, and

Hightower discussed proposed salary increases for various employees. 18 After

discussion, the Compensation Committee voted to recommend a salary increase for

multiple employees including Hightower. Hightower’s salary would increase from

$190,083 to $737,500. 19 Later that day, the board met to discuss the Compensation

Committee’s recommendations.20 Hightower left during discussion of his salary,

and after discussion, the board approved the Compensation Committee’s

14
Am. Compl. ¶ 32.
15
Thomson Aff., Ex. 8. The other stock options had an exercise price of $10, and one third
of the options vested immediately. Thomson Aff., Ex. 9 at F-16.
16
Am. Compl. ¶ 35.
17
Id. ¶ 17.
18
Id. ¶ 35; Thomson Aff., Ex. 14.
19
Am. Compl. ¶ 58.
20
Thomson Aff., Ex. 15 at -0216.
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recommendation.21

On November 4, 2021, the Compensation Committee met to discuss granting

stock options, restricted shares, and bonuses to Company employees including

Hightower.22 The Committee discussed management’s recommendations, and

“after discussion” of the information presented to the Committee, they voted to

recommend Hightower receive 164,500 stock options, 1,385,500 restricted shares,

and a $650,000 bonus. 23 The board met and approved the Committee’s

recommendation.24

On April 13, 2022, the Compensation Committee met. “Hightower discussed

level of salaries of the Company’s . . . officers compared with the peer group.”25

And “[b]ased on th[at] analysis,” the Compensation Committee discussed salary

increases for Hightower, Hollis, and other officers, and voted to recommend those

compensation changes to the board.26 The Compensation Committee voted to

recommend granting Hightower 377,500 stock options, and options to other officers.

21
Am. Compl. ¶ 37; Thomson Aff., Ex. 15.
22
Am. Compl. ¶¶ 38–42.
23
Thomson Aff., Ex. 17 at -0240–42.
24
Thomson Aff., Ex. 16 at -0142–45.
25
Thomson Aff., Ex. 20 at -0236; Am. Compl. ¶ 47.
26
Thomson Aff., Ex. 19 at -0236.
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The board met later that day, and Hightower discussed the Compensation

Committee’s recommendations, which the board approved.27

On November 30, the Compensation Committee convened again. “Mr.

Hightower discussed the recommended level of salaries and bonuses for all

employees compared with the Company’s peer group. The Committee discussed the

salaries and bonuses for each . . . officer individually as well as the average level of

salaries and bonuses for the collective employee base.”28 Based on that analysis, the

Committee voted to recommend a $995,000 bonus for Hightower, and a 33%

increase in his salary—from $1,500,000 to $2,000,000.29 The board met later that

day and approved the Compensation Committee’s recommendations. At the board

meeting, Hightower “discussed level of salaries and bonuses of the Company’s . . .

officers compared with the peer group as reviewed by the Compensation

Committee,” and after discussion, the board approved the Compensation

Committee’s recommendations. 30

On December 18, 2023, Hightower “discussed the Company’s

27
Am. Compl. ¶ 51; Thomson Aff., Ex. 21 at -0212.
28
Thomson Aff., Ex. 22 at -0244.
29
Am. Compl. ¶ 52.
30
Thomson Aff., Ex. 23 at -0233.
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recommendations to the [Compensation] Committee regarding proposed bonuses for

Company employees.” 31 After discussion, the Compensation Committee voted to

recommend a $1,605,000 bonus for Hightower, and a salary increase to

$2,400,000.32 “After discussion,” the board approved the Compensation

Committee’s recommendation.33

For each of these decisions, the Committee did not retain a compensation

consultant. And in each case, Hightower abstained from voting on his own

compensation. Hightower left the room during the April 2021 vote34 but not during

other votes, despite the compensation committee charter requiring Hightower’s

absence. 35

31
D.I. 25 Ex. 29 at -0186.
32
Id. at -0187; Am. Compl. ¶¶ 55–56.
33
Thomson Aff., Ex. 2 at -0184.
34
Thomson Aff., Ex. 15 at -0216.
35
Am. Compl. ¶ 18–20. The defendants argue the Court should infer Hightower was not
present during voting on his compensation because the minutes are silent as to whether he
left. But on a motion to dismiss, I must accept Plaintiff’s specific allegation that Hightower
was present as true where the minutes do not directly rebut that allegation. See
Amalgamated Bank v. Yahoo! Inc., 132 A.3d 752, 797 (Del. Ch. 2016) (“The incorporation-
by-reference doctrine permits a court to review the actual document to ensure that the
plaintiff has not misrepresented its contents and that any inference the plaintiff seeks to
have drawn is a reasonable one. The doctrine limits the ability of the plaintiff to take
language out of context, because the defendants can point the court to the entire
document.”), abrogated on other grounds by Tiger v. Boast Apparel, Inc., 214 A.3d 933
(Del. 2019); Amalgamated Bank, at 798 (“The court will ‘draw all inferences from those
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Plaintiff initiated this stockholder derivative action on May 29, 2024. 36 The

complaint brings two causes of action: breach of fiduciary duty against all

defendants, and unjust enrichment against Hightower.37 At the time of filing, the

Company’s board of directors consisted of the Compensation Committee and

defendants Jay Chernosky, Jason Edgeworth, and Larry Oldham.38 Plaintiff filed an

amended complaint on September 30, 2024. 39

II. ANALYSIS

The defendants moved to dismiss under Court of Chancery Rule 23.1 and

12(b)(6).40 The motion to dismiss briefing concluded on February 27, and oral

argument was held on March 13.41 The defendants’ Rule 23.1 motion is granted.

A. Plaintiff Must Plead Bad Faith.
“A stockholder may pursue a derivative claim on behalf of a corporation only

if either: ‘(a) she has first demanded that the directors pursue the corporate claim

particularized facts in favor of the plaintiff, and not the defendant.’” (quoting Del. Cty.
Empls. Ret. Fund v. Sanchez, 124 A.3d 1017, 1022 (Del. 2015))).
36
D.I. 1.
37
Am. Compl. ¶¶ 91–101.
38
Id. ¶¶ 9–16, 85.
39
D.I. 12.
40
D.I. 14. Because I find the demand is not excused and dismissal is appropriate, I do not
reach the defendants’ Rule 12(b)(6) arguments.
41
D.I. 25.
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and they have wrongfully refused to do so; or (b) such demand is excused because

the directors are deemed incapable of making an impartial decision regarding the

pursuit of the litigation.’” 42 “Plaintiff did not make a demand and therefore the

complaint ‘must be dismissed unless it alleges particularized facts showing that

demand would have been futile.’” 43 “[T]he demand requirement is not excused

lightly.”44

Under Court of Chancery Rule 23.1, a derivative complaint “must state with

particularity any effort by the derivative plaintiff to obtain the desired action from

the entity; and the reasons for not obtaining the action or not making the effort; and

allege facts supporting a reasonable inference that the derivative plaintiff has

standing to sue.” 45 In Zuckerberg II, our Supreme Court adopted a three-part

demand futility test. 46 It asks the following on a director-by-director basis:

42
Brinkley, 2024 WL 3384823, at *12 (quoting Beam v. Stewart, 845 A.2d 1040, 1048
(Del. 2004)).
43
Brinkley, 2024 WL 3384823, at *12 (quoting Ryan v. Gursahaney, 2015 WL 1915911,
at *5 (Del. Ch. Apr. 28, 2015), aff’d, 128 A.3d 991 (Del. 2015)).
44
United Food & Com. Workers Union & Participating Food Indus. Empls. Tri-State
Pension Fund v. Zuckerberg (Zuckerberg II), 262 A.3d 1034, 1049 (Del. 2021).
45
Ct. Ch. R. 23.1(a) (formatting altered). Rule 23.1 was amended on June 14, 2024. No
substantive revisions were made to the relevant portion. In re: Amendments to Rules 1–6,
8, 9, 11–15, 23, 23.1, 79, 79.1, 79.2 and 174 of the Court of Chancery Rules, Section I, II,
III, IV, X, and XVI at 59 (Del. Ch. May 31, 2024) (ORDER).
46
Zuckerberg II, at 1059.
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(i) whether the director received a material personal benefit from the
alleged misconduct that is the subject of the litigation demand;

(ii) whether the director faces a substantial likelihood of liability on any
of the claims that would be the subject of the litigation demand; and

(iii) whether the director lacks independence from someone who
received a material personal benefit from the alleged misconduct that
would be the subject of the litigation demand or who would face a
substantial likelihood of liability on any of the claims that are the
subject of the litigation demand.47

“If the answer to any of the questions is ‘yes’ for at least half of the members of the

demand board, then demand is excused as futile.” 48

To plead demand futility for the Company’s seven-member board, Plaintiff

must plead at least four of the directors would not have been able to consider a

demand concerning Hightower’s compensation decisions for one of three reasons

listed in Zuckerberg II. Plaintiff does not challenge Chernosky, Edgeworth, or

Oldham’s impartiality. And the defendants concede Hightower and Hollis cannot

consider a demand. So Plaintiff must plead Covington and Fulgham were incapable

of making an impartial decision regarding the demand. Plaintiff chose Zuckerberg’s

door number two: substantial likelihood of liability in connection with the

underlying compensation decisions. Plaintiff does not attempt to plead demand is

47
Id.
48
Id.
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futile because Covington and Fulgham lack independence from Hightower or

received a material benefit.

“Demand is excused as to any director who ‘faces a substantial likelihood of

liability on any of the claims that would be the subject of the litigation demand.’”49

“[E]ach director is presumed to have acted in conformity with her fiduciary duties,”

and to rebut this assumption, Plaintiff must “make a threshold showing, through the

allegation of particularized facts, that [his] claims [against each director] have some

merit.”50 “[A]s is true in other contexts, the plaintiff[’s] well-pleaded factual

allegations must be taken as true and the complaint has to be read in the light most

favorable to the plaintiff[].”51 “[H]owever, ‘[v]ague or conclusory allegations do

not suffice to challenge the presumption of a director’s capacity to consider

demand,’ and the plaintiff’s allegations must satisfy the ‘stringent requirements of

factual particularity.’” 52

Plaintiff’s target is made smaller by the exculpation provision in the

49
In re Trade Desk, Inc. Deriv. Litig., 2025 WL 503015, at *20 (Del. Ch. Feb. 14, 2025)
(quoting Zuckerberg II, at 1059)).
50
Trade Desk, 2025 WL 503015, at *21 (quoting Rales v. Blasband, 634 A.2d 927, 934
(Del. 1993)).
51
Brehm v. Eisner, 746 A.2d 244, 268 (Del. 2000).
52
Trade Desk, 2025 WL 503015, at *9 (quoting In re INFOUSA, Inc. S’holders Litig., 953
A.2d 963, 985 (Del. Ch. 2007), as revised (Aug. 20, 2007)).
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Company’s charter. Plaintiff must plead with particularity that Covington and

Fulgham breached their duty of loyalty.53 Plaintiff does not attempt to show they

approved Hightower’s compensation out of self-interest; rather, Plaintiff tries to

plead bad faith. To accomplish that task, “Plaintiff[] must plead facts giving rise to

a reasonable inference that each of the [d]irector [d]efendants acted with scienter.”54

“Although bad faith conduct is not precisely defined, it includes ‘conduct motivated

by an actual intent to do harm’ or ‘a conscious disregard for one’s

responsibilities.’” 55 And “‘[w]here (as here) there is no adequate pleading of

conflicted interests or lack of independence on the part of the directors, the scienter

requirement compels that a finding of bad faith should be reserved for situations

where’ it is reasonably conceivable that ‘the nature of the director’s actions can in

no way be understood as in the corporate interest.’”56 Plaintiff’s task is not easy.

B. Plaintiff Has Not Pled A Substantial Likelihood of Liability.
Plaintiff asserts Covington and Fulgham face a substantial likelihood of

liability because they rubberstamped Hightower’s compensation as decided in late

53
In re Cornerstone Therapeutics, Inc. S’holder Litig., 115 A.3d 1173, 1180 (Del. 2015).
54
Trade Desk, 2025 WL 503015, at *22.
55
Id. at *22 (quoting In re Walt Disney Co. Deriv. Litig., 906 A.2d 27, 64, 66 (Del. 2006)).
Trade Desk, 2025 WL 503015, at *22 (quoting In re USG Corp. S’holder Litig., 2020
56

WL 5126671, at *29 (Del. Ch. Aug. 31, 2020)).
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2022 and 2023. 57 Plaintiff alleges Hightower’s compensation was excessive.58 He

seeks to establish a nonexculpated breach of the duty of loyalty by arguing

Covington and Fulgham “operat[ed] under a ‘controlled mindset’ in connection with

approving a transaction benefiting the Company’s controlling stockholder” and by

“overseeing an unfair process.”59

This Court recently grappled with allegations that demand was futile because

directors granted excessive compensation under a “controlled mindset” in In re

Trade Desk, Inc. Derivative Litigation.60 As explained there,

“[C]ontrolled mindset” describes a latent inability to perceive a conflict
that is, at its core, a process failure. Like other mere process failures, it
can, if combined with other well-pleaded allegations, contribute to a
broader constellation of facts that support a finding or reasonable
inference of disloyal conduct. But a stockholder plaintiff cannot merely
slap a “controlled mindset” label onto a process or result with which it
disagrees and expect to wrest control of a claim from a majority
independent and disinterested board of directors.61

57
AB at 16–17. Plaintiff acknowledges he does not have standing to challenge any
compensation decisions before his date of stock ownership: November 8, 2022. While I
may generally consider the earlier decisions to contemplate whether there is a pattern of
conduct, I make no determinations as to whether those decisions themselves reflect a
substantial likelihood of liability.
58
Am. Compl. ¶¶ 58–75.
59
Id. ¶ 94; AB at 22.
60
2025 WL 503015. Trade Desk has been appealed to the Delaware Supreme Court. See
In re The Trade Desk, Inc. Deriv. Litig., No. 114, 2025 (Del.).
61
Trade Desk, 2025 WL 503015, at *24.
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The defendants assert this action must be dismissed because Plaintiff’s

allegations do not plead bad faith by Covington and Fulgham. 62 I agree. The

complaint and minutes incorporated by reference present a streamlined process, but

not bad faith.

For the late-2022 decision, the Compensation Committee, “discussed the

recommended level of salaries and bonuses for all employees compared with the

Company’s peer group” and voted to recommend Hightower’s bonus “[b]ased on

that analysis.” 63 That same day, the full board discussed the same salaries and

bonuses, considered peer group data, and approved Hightower’s bonus. 64

For the 2023 compensation decisions, the Compensation Committee

“discussed the Company’s recommendations to the Committee regarding proposed”

bonuses and 2024 salaries, and “[a]fter discussion,” Covington, Fulgham, and Hollis

voted to recommend Hightower’s bonus and salary increase to the board.65 “After

discussion,” the board approved the Compensation Committee’s

recommendations. 66 Hightower abstained from all votes on his compensation.

62
See generally AB at 26–42; RB at 5–15.
63
Thomson Aff., Ex. 22 at -0244.
64
Thomson Aff., Ex. 23.
65
D.I. 25 Ex. 29 at -0186–87.
66
Thomson Aff., Ex. 2.
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Plaintiff says Covington and Fulgham “did nothing” and “completely

deferred” to Hightower. 67 He alleges no negotiation occurred and that “[t]he minutes

do not disclose what metrics (if any) were used by the Compensation Committee to

determine Hightower’s compensation.”68 Plaintiff says Hightower dominated the

board by leading discussions and being present during votes on his compensation,

and that the management reports were “inherently flawed” because Hightower

“controlled” management. 69

Plaintiff relies on many of same cases relied upon by the Trade Desk

plaintiff70: In re CBS S’holder Class Action & Derivative Litigation,71 In re Viacom

67
AB at 25, 30. Plaintiff cites case law saying that “[w]hile there may be instances in
which a board may act with deference to corporate officers’ judgments, executive
compensation is not one of those instances” to argue that Covington and Fulgham
improperly deferred to management’s analyses. See AB 30–31 (quoting Off. Comm. of
Unsec. Creds. of Integrated Health Servs., Inc. v. Elkins, 2004 WL 1949290, at *12 (Del.
Ch. Aug. 24, 2004)). But Elkins does not say directors can never consider management
recommendations or reports on executive compensation. It explains that “the board must
exercise its own business judgment in approving an executive compensation transaction.”
Elkins, 2004 WL 1949290, at *12. Plaintiff has not sufficiently pled this board failed to
do that.
68
AB at 26.
69
Id. at 27. Any argument that Hightower’s compensation awards originated with him are
conclusory. Plaintiff pleads no allegations showing Hightower had control over
management, other than pointing to Hightower’s status as controller and CEO. E.g., Am.
Compl. ¶ 3 (“Hightower exercises control and influence over the Company’s management
. . . .”); Am. Compl. ¶¶ 34, 78.
70
Plaintiff’s counsel here represented the plaintiff in Trade Desk.
71
2021 WL 268779 (Del. Ch. Jan. 27, 2021).
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Inc. S’holders Litigation,72 and Berteau v. Glazek. 73 But as in Trade Desk, “[a] brief

review of those cases shows much more controller interference and resulting

influence than what can be reasonably inferred here.”74 Trade Desk explained that

Berteau narrated particularized and extreme facts of disloyalty, while CBS and

Viacom painted a detailed picture of a retributive controller involved in a subservient

board’s plainly flawed process. 75

As in Trade Desk, Plaintiff’s allegations here do not approximate the fact

patterns in CBS, Viacom, or Berteau.76 Plaintiff pleads no threats or retributive

behavior by Hightower, or any other conduct that would cause Fulgham and

Covington to act disloyally. The process as documented appears thin; but Plaintiff

72
2020 WL 7711128 (Del. Ch. Dec. 29, 2020).
73
2021 WL 2711678 (Del. Ch. Jun. 30, 2021).
74
Trade Desk, 2025 WL 503015, at *24.
75
Id. at *25–26.
76
Other cases Plaintiff cites as support also do not disturb my findings. See, e.g., In re S.
Peru Copper Corp. S’holder Deriv. Litig., 52 A.3d 761, 797 (Del. Ch. 2011) (“Although I
conclude that the Special Committee did in fact go further and engage in negotiations, its
approach to negotiations was stilted and influenced by its uncertainty about whether it was
actually empowered to negotiate. The testimony on the Special Committee members’
understanding of their mandate, for example, evidenced their lack of certainty about
whether the Special Committee could do more than just evaluate the Merger.”); In re Loral
Space & Commc’ns Inc., 2008 WL 4293781, at *26 (Del. Ch. Sept. 19, 2008) (explaining
in post-trial entire fairness opinion there was a “sheer accumulation of examples of
timorousness and inactivity that contribute[d] to [the] conclusion that th[e] Special
Committee did not fulfill its intended function”).
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has not pled a controlled mindset tantamount to bad faith. At bottom, Plaintiff

disagrees with the challenged compensation, and believes the directors should have

done more, pushed back more, or asked more questions. Even making the necessary

inferences in Plaintiff’s favor, the allegations and related minutes “pale[] in

comparison to the controllers’ conduct in CBS, Viacom, . . . and even Berteau.”77

The minutes reflect that Fulgham and Covington—disinterested and independent

fiduciaries—discussed compensation for Hightower and other employees in view of

management’s recommendations and peer data. Hightower’s mere presence, even

at the vote in violation of the Compensation Committee charter, does not establish

that he controlled Covington and Fulgham’s votes, especially considering Plaintiff

does not challenge their independence.78 His presence and position in management

do not establish that Covington and Fulgham acted with a “controlled mindset” such

that they breached their duties of loyalty in approving the challenged compensation.

Plaintiff’s conclusory allegation that they acted with a “controlled mindset” fails to

dislodge the presumption that they acted independently and in good faith.

And to the extent Plaintiff alleges an oversight failure by “overseeing an unfair

77
Trade Desk, 2025 WL 503015, at *27.
78
See id. at *26 (explaining that in CBS, Viacom, Berteau and other cases, “this court
focused on directors’ responses to interfering actions, not merely the presence of a
controlling stockholder, as the pertinent objective indicia”).
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process and then approving an unfair compensation package for Hightower,” that

also fails to establish a substantial likelihood of liability.79 Oversight claims are

“possibly the most difficult theory in corporation law upon which a plaintiff might

hope to win a judgment.”80 Plaintiff must allege that “(a) the directors utterly failed

to implement any reporting or information system or controls; or (b) having

implemented such a system or controls, consciously failed to monitor or oversee its

operations thus disabling themselves from being informed of risks or problems

requiring their attention.”81 “In either case, imposition of liability requires a showing

that the directors knew that they were not discharging their fiduciary obligations.”82

Plaintiff has not alleged a failure to implement reporting systems, nor has he pled a

conscious failure to oversee its operations.

Plaintiff has not met his burden.

III. CONCLUSION

Plaintiff failed to plead demand futility. This matter is dismissed pursuant to

Rule 23.1.

79
Am. Compl. ¶ 94; AB at 1 (“Allowing Hightower to effectively set his own pay, the
Board abdicated its duty of oversight . . . .”).
80
In re Caremark Int’l Inc. Deriv. Litig., 698 A.2d 959, 967 (Del. Ch. 1996).
81
Stone v. Ritter, 911 A.2d 362, 370 (Del. 2006).
82
Id.
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Sincerely,

/s/ Morgan T. Zurn

Vice Chancellor

MTZ/ms

cc: All Counsel of Record, via File & ServeXpress