Stansell v. Rosensweig

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

BRIAN STANSELL, individually and on )
behalf of all other similarly situated, )
)
Plaintiff, )
)
v. ) C.A. No. 2023-0180-PAF
)
DANIEL ROSENSWEIG, RICHARD )
SARNOFF, RENEE BUDIG, SARAH BOND, )
PAUL LEBLANC, MARNE LEVINE, )
MARCELA MARTIN, TED SCHLEIN, )
MELANIE WHELAN, JOHN E. YORK, and )
DELOITTE & TOUCHE LLP, )
)
Defendants. )

MEMORANDUM OPINION

Date Submitted: February 22, 2024
Date Decided: June 12, 2024

Kurt M. Heyman, Gillian L. Andrews, HEYMAN ENERIO GATTUSO & HIRZEL
LLP, Wilmington, Delaware; Gustavo F. Bruckner, Samuel J. Adams, Ankita
Sangwan, POMERANTZ LLP, New York, New York; Attorneys for Plaintiff Brian
Stansell.

William M. Lafferty, Susan W. Waesco, Emily C. Friedman, MORRIS, NICHOLS,
ARSHT & TUNNELL LLP, Wilmington, Delaware; Dean S. Kristy, Jennifer C.
Bretan, FENWICK & WEST LLP, San Francisco, California; Felix S. Lee,
FENWICK & WEST LLP, Mountain View, California; Attorneys for Defendants
Daniel Rosensweig, Richard Sarnoff, Renee Budig, Sarah Bond, Paul LeBlanc,
Marne Levine, Marcela Martin, Ted Schlein, Melanie Whelan, and John E. York.

Ethan H. Townsend, Daniel T. Menken, MCDERMOTT WILL & EMERY LLP,
Wilmington, Delaware; Timothy E. Hoeffner, MCDERMOTT WILL & EMERY
LLP, New York, New York; Attorneys for Defendant Deloitte & Touche LLP.

FIORAVANTI, Vice Chancellor
A stockholder of Chegg, Inc. (“Chegg” or the “Company”) alleges that the

members of its board of directors breached their fiduciary duties by failing to

disclose the “true nature” of Chegg’s business model in its 2022 proxy statement.

Plaintiff alleges that the Company’s independent auditor aided and abetted in those

breaches.

Plaintiff does not seek compensatory damages for the alleged breach of duty.

Rather, he seeks an order compelling the defendants to hold a new meeting of

stockholders and a revote on the election of directors and ratification of the

appointment of the Company’s auditor. Plaintiff admits that he knew all of the facts

underlying his claims at the time the Company disseminated the proxy statement for

the annual meeting, but made the tactical decision to seek a post-vote mandatory

injunction and nominal damages.

The Defendants have moved to dismiss the Verified Complaint. The court

grants the motions because the Complaint does not allege well-pleaded facts to state

a claim for breach of fiduciary duty or for aiding and abetting as a matter of law.

2
I. BACKGROUND

The following recitation of facts is drawn from the Complaint and the

documents integral thereto.1

Plaintiff Brian Stansell has continuously owned Chegg common stock since

2017.2

Defendants Daniel Rosensweig, Richard Sarnoff, Sarah Bond, Renee Budig,

Paul LeBlanc, Marne Levine, Marcela Martin, Ted Schlein, Melanie Whelan, and

John E. York (collectively the “Director Defendants”) are members of the

Company’s board of directors.3 Rosensweig is also the Company’s Chief Executive

Officer and President.4

Defendant Deloitte & Touche LLP (“Deloitte”) has served as the Company’s

principal independent registered public accounting firm since 2018.5

1
Citations to the docket in this action are in the form of “Dkt. [#].” In citations, the
Complaint in this action, Dkt. 1, will be cited as “Compl.,” and citations to the transcript
of the oral argument, Dkt. 47, will be cited as “Oral Argument.” After being identified
initially, individuals are referenced herein by their surnames without regard to formal titles
such as “Dr.” No disrespect is intended.
2
Compl. ¶ 8.
3
Id. ¶¶ 9–18.
4
Id. ¶ 9.
5
Id. ¶ 21.
3
Chegg is a Delaware corporation with its principal executive offices in Santa

Clara, California.6 Chegg is not a party to this action, and Plaintiff does not purport

to assert claims derivatively on the Company’s behalf.7 Chegg began in 2005 as a

textbook rental company.8 Over the years, its business model evolved, and it now

primarily provides online education resources, which it refers to collectively as

Chegg Services.9

Chegg Services offers, among other things, “expert Q&As,” “textbook

solutions,” “video walkthroughs,” “practice sets,” “homework answers,” and

“more.”10 Chegg also provides answers to questions uploaded by students.11 Chegg

Services generates a majority of the Company’s annual revenue.12 In the third

quarter of 2022, the Company attributed 97% of its revenue to Chegg Services.13

6
Id. ¶ 20.
7
Oral Argument at 41:23–24. See Agostino v. Hicks, 845 A.2d 1110, 1116 n.15 (Del. Ch.
2004) (“[T]he corporation is an indispensable party to a derivative action.”); Bamford v.
Penfold, L.P., 2020 WL 967942, at *8 n.1 (Del. Ch. Feb. 28, 2020) (noting that “in a
corporate derivative action ‘[t]he corporation is not merely a formal party, but is an
indispensable party to the action’” (alteration in original)) (quoting 12B Carol A. Jones,
Fletcher’s Cyclopedia of the Law of Corporations § 5908, at 490–91 (2009)).
8
Compl. ¶ 22.
9
Id. ¶¶ 2, 23.
10
Id. ¶¶ 26–27.
11
Id. ¶¶ 27, 46–47.
12
Id. ¶ 33.
13
Id.
4
Some of Chegg’s customers use its products to cheat on academic assignments

and exams.14 Rosensweig publicly acknowledged as much in 2020,15 and the

Complaint highlights an eclectic collection of sources—articles in national news

publications,16 an essay in an academic journal,17 stories in school newspapers,18 and

social media posts by professors19 and students20 in 2020,21 2021,22 and early

202223—that mention students using Chegg to cheat. The latest sources upon which

Plaintiff relies are personalized videos published in March 2022 on the social media

platform TikTok.24 The Complaint also makes brief reference to a lawsuit that

14
Id. ¶¶ 35–50.
15
Id. ¶ 50.
16
Id. ¶¶ 38, 40.
17
Id. ¶ 39.
18
Id. ¶¶ 35–37.
19
Id. ¶¶ 47–49.
20
Id. ¶¶ 41–44. The Complaint also references a TikTok video created by the Company,
which Plaintiff asserts discusses “how Chegg is helpful when you have an assignment due
in an hour and you haven’t begun working on it.” Id. ¶ 45. According to the Complaint,
this “undermines the Company’s message that Chegg is a teaching tool and, instead, sells
the idea that Chegg is exactly what its critics suggest it is: a good resource for quick, last-
minute answers.” Id.
21
Id. ¶¶ 37, 43–44, 49.
22
Id. ¶¶ 35–36, 38–39, 48–49.
23
Id. ¶¶ 40, 42, 45.
24
Id. at 16 n.16, 17 n.19.
5
Pearson Education, Inc., a textbook manufacturer, filed against the Company in

2021, which remained pending as of the filing of this action.25

On December 22, 2021, a stockholder plaintiff filed a purported securities

fraud class action against Chegg, Rosensweig, and two of the Company’s other

officers, and two federal derivative actions followed in January and March of 2022.

The federal securities case survived a motion to dismiss after the parties here had

briefed and argued the extant motions.26 The derivative actions have been stayed.27

On April 14, 2022, the Company disseminated a notice of meeting and proxy

statement (the “2022 Proxy”) for its 2022 annual meeting of stockholders (the “2022

25
Id. ¶ 29. After making only passing reference to the Pearson litigation in the Complaint,
Plaintiff sought to rely much more extensively on the facts of that action in his Answering
Brief in opposition to the motions. See Pl.’s Answering Br. 12, 25–26. It is well established
that directors are not required to adopt the characterizations alleged in pending lawsuits.
See Brody v. Zaucha, 697 A.2d 749, 754 (Del. 1997) (“[A] director need not . . . confess[]
to wrongdoing that has not been formally adjudicated by a court of law.”). And, in any
event, Plaintiff’s addition of new facts about that suit in his briefing was improper;
“Delaware law does not permit plaintiffs to amend their complaint through briefing.”
Parseghian as trustee of Gregory J. Parseghian Revocable Tr. v. Frequency Therapeutics,
Inc., 2022 WL 2208899, at *11 n.82 (Del. Ch. June 21, 2022).
26
See Leventhal v. Chegg, Inc., 2024 WL 924484, at *1 (N.D. Cal. Mar. 4, 2024). The
federal action has no bearing on the court’s decision in this action.
27
See Chegg, Inc., Annual Report (Form 10-K) (Feb. 20, 2024), 76–77. “The court may
take judicial notice of facts publicly available in filings with the SEC.” Omnicare, Inc. v.
NCS Healthcare, Inc., 809 A.2d 1163, 1167 n.3 (Del. Ch. 2002) (citing In re Santa Fe
Pacific S’holder Litig., 669 A.2d 59, 69–70 (Del. 1995)). Another derivative action was
filed in this court after the filing of Plaintiff’s complaint in this action. See Stein v.
Rosensweig, C.A. 2023-0244-NAC (Del. Ch.). That action has also been stayed pending
resolution of the Leventhal action. See Stein, C.A. No. 2023-0244-NAC (Del. Ch.), Dkt.
6.
6
Meeting”).28 The 2022 Proxy solicited proxies to reelect Bond, Martin, Whelan, and

York as Class III directors and to ratify the appointment of Deloitte as Chegg’s

independent auditor for the 2022 fiscal year.29 The Complaint alleges that the 2022

Proxy was materially misleading and did not disclose that Chegg’s “primary

business model” helps students to cheat.30 The Complaint also alleges that the 2020

Proxy contained other materially misleading misstatements and omissions,

including:

We put learners first and seek to improve their outcomes in school and
beyond. We strive to improve the overall return on investment in
education by helping students learn more in less time and at a lower
cost. . .

We help students each step of the way to improve the outcome of their
education. To do this, we focus on listening to their needs, elevating
and amplifying their voice, and taking action to provide real life
solutions. . .

28
Compl. ¶ 3; Chegg, Inc., Proxy Statement (Schedule 14A) (Apr. 14, 2022) [hereinafter
“2022 Proxy”]. Chegg issued a revised proxy on April 27, 2022, which revised
“typographical and formatting errors contained in the biographical description of Sarah
Bond in the ‘Nominees to the Board of Directors’ section” but was otherwise identical,
including in all manners pertinent to this opinion. Chegg, Inc., Proxy Statement (Schedule
14A) (Apr. 27, 2022). Though the revised proxy states that it “should be read in place of
the original Proxy Statement, and amends, restates and supersedes the original Proxy
Statement in all respects,” neither party refers to it, and the Director Defendants submitted
the original 2022 Proxy as an exhibit. Id. The court makes this observation in the interests
of accuracy and completeness; it has no bearing on the resolution of this action.
29
2022 Proxy at 1. It also sought an advisory vote on executive compensation, with which
Plaintiff does not take issue. Id.
30
Compl. ¶¶ 3, 50–52, 58, 60, 72.
7
We understand students at a deep level and anticipate their needs at
every step. . .

We hold ourselves to the highest ethical standards and strive for full
compliance with applicable laws and regulations. . .

We are extremely proud to offer an integrated platform for learning that
has helped so many learners on their education journey by providing
them with the type of help they need, when they need it, in the format
they want to receive it. . .

Chegg is a student’s ride-or-die, 24/7, always-answers-when-you-call
partner. [. .]

Supporting students in their learning journey.31

On June 1, 2022, Chegg held the 2022 Meeting, and the Company’s

stockholders re-elected Bond, Martin, Whelan, and York, each of whom was

unopposed, and ratified Deloitte’s appointment.32

On February 14, 2023, Plaintiff filed his two-count complaint as a direct

action, alleging that the Director Defendants breached their fiduciary duties by

disseminating false information in the 2022 Proxy and that Deloitte aided and

abetted in that breach.33 The Complaint seeks a declaration that the Proxy was

“misleading,” an order compelling the Director Defendants to “correct” the Proxy,

and mandatory injunctive relief compelling the Director Defendants to cause Chegg

31
Id. ¶ 57 (quoting 2022 Proxy).
32
Id. ¶ 59.
33
Dkt. 1.
8
to hold a new meeting of stockholders to elect Class III directors and to vote on the

appointment of Deloitte.34 The Complaint also alleges that Plaintiff and the putative

class “sustained significant damages,”35 but at oral argument Plaintiff represented

that the only monetary relief he seeks is nominal damages.36

Plaintiff readily acknowledges that he possessed all of the facts to support his

disclosure claim at the time the Company filed the 2022 Proxy.37 Rather than file a

complaint and motion for preliminary injunction at that time to compel corrective

34
Compl. Prayer for Relief.
35
Id. ¶ 74.
36
Oral Argument at 42:16–20. The Complaint also sought an order “[d]irecting the Board
to take all necessary actions to reform and improve its corporate governance and internal
procedures to comply with applicable laws and to protect Chegg and its stockholders from
a repeat of the damaging events described herein.” Compl. Prayer for Relief ¶ E. When
pressed at argument for any instance where this court has ordered that type of relief,
Plaintiff abandoned it. Oral Argument at 42:10–14 (“[Pl.’s Counsel]: [I]f I could go back
and take that out of the complaint, I would. [The Court]: Are you taking it out? [Pl.’s
Counsel]: You can consider it dropped, Your Honor.”). Plaintiff also seeks an award of
attorneys’ fees and expenses. Compl. Prayer for Relief ¶ H.
37
Pl’s Answering Br. 32 (describing the basis for his allegations as “widespread public
information” and asserting that the Director Defendants’ argument that “they had no duty
to disclose information which was already publicly available to stockholders”
“misconstrues Plaintiff’s argument,” which Plaintiff articulated as the Director
Defendants’ having “knowingly disseminated false information (in proxies and elsewhere)
that contradicted the widespread public information”).
9
disclosures, Plaintiff candidly admits that he made a tactical decision to file his

complaint after the meeting and to seek post-meeting relief.38

The Director Defendants and Deloitte filed motions to dismiss or stay this

action.39 Following briefing, the court heard oral argument.40 What follows is the

court’s ruling on those motions.

II. ANALYSIS
On a motion to dismiss for failure to state a claim under Court of Chancery

Rule 12(b)(6):

(i) all well-pleaded factual allegations are accepted as true; (ii) even
vague allegations are well-pleaded if they give the opposing
party notice of the claim; (iii) the Court must draw all reasonable
inferences in favor of the non-moving party; and [(iv)] dismissal
is inappropriate unless the plaintiff would not be entitled to
recover under any reasonably conceivable set of circumstances
susceptible of proof.

Savor, Inc. v. FMR Corp., 812 A.2d 894, 896–97 (Del. 2002) (footnotes and internal

quotation marks omitted); accord Cent. Mortg. Co. v. Morgan Stanley Mortg. Cap.

Hldgs. LLC, 27 A.3d 531, 536 (Del. 2011). “[A] trial court is required to accept only

38
Oral Argument at 40:12–41:9 (“[Pl.’s Counsel]: I just know it’s a lot harder these days
than it used to be to get an injunction based on disclosures than it once was. And that was
part of the calculus in not seeking that kind of relief . . . . And you are correct that we did
not bring this beforehand, and we decided it would be better to bring an action and seek
post-vote relief.”).
39
Dkts. 18–19.
40
Dkts. 18, 20, 34, 40–41, 46.
10
those ‘reasonable inferences that logically flow from the face of the complaint’ and

‘is not required to accept every strained interpretation of the allegations proposed by

the plaintiff.’” In re Gen. Motors (Hughes) S’holder Litig., 897 A.2d 162, 168 (Del.

2006) (quoting Malpiede v. Townson, 780 A.2d 1075, 1083 (Del. 2001)).

“Moreover, a claim may be dismissed if allegations in the complaint or in the

exhibits incorporated into the complaint effectively negate the claim as a matter of

law.” Malpiede, 780 A.2d at 1083.

A. Plaintiff Does Not Present Allegations Supporting a Reasonable
Inference that Defendants Failed to Disclose the Company’s
Business Model.

Plaintiff alleges that the Proxy was materially misleading because it did not

disclose that Chegg’s “primary business model” is to help students to cheat.

Specifically, Plaintiff argues that the Company failed to disclose that the majority of

its business was focused on cheating activities.41

Defendants offer three arguments in support of dismissal of Count I.42 First,

directors are not required to engage in self-flagellation. Second, Plaintiff has not

alleged facts to support its assertion that the Company’s primary business model is

41
Oral Argument at 30:21–24 (“[Pl.’s Counsel]: [W]e’re saying that the focus of their
business at this point, which I would say would have to be 50 percent or more, probably,
would be focused on cheating activities.”).
42
Deloitte joined in the Director Defendants’ arguments with respect to Count I as it
pertained to Count II and presented additional arguments specific to Count II. See
generally Dkts. 18, 41.
11
to facilitate the ability of students to cheat. Third, Plaintiff’s Complaint is based on

information that was publicly available at the time the 2022 Proxy was disseminated.

In response, Plaintiff reframed his claim, insisting that he was not arguing that

Defendants needed to use “pejorative [] words such as ‘cheating.’”43 Rather,

Plaintiff argues that Defendants were misrepresenting facts about “the inherent

nature of the services Chegg sells.”44

“Delaware law imposes upon a board of directors the fiduciary duty to

disclose fully and fairly all material facts within its control that would have a

significant effect upon a stockholder vote.” Stroud v. Grace, 606 A.2d 75, 85 (Del.

1992). An omitted fact is material where there is a substantial likelihood that a

reasonable stockholder would consider it important in deciding how to vote. TSC

Indus., Inc. v. Northway, Inc., 426 U.S. 438, 439 (1976). The Delaware Supreme

Court adopted the TSC approach to materiality in Rosenblatt v. Getty Oil Co., 493

A.2d 929 (Del. 1985). To be material, an omitted fact must significantly alter the

“total mix” of information. Id. at 944.

The duty of disclosure “does not exist in a vacuum.” Stroud, 606 A.2d at 85.

“When confronting a disclosure claim, a court therefore must engage in a context[]

43
Pl.’s Answering Br. 29.
44
Id. at 22–23.
12
specific analysis to determine the source of the duty, its requirements, and any

remedies for breach.” In re Wayport, Inc. Litig., 76 A.3d 296, 314 (Del. Ch. 2013).

1. The Director Defendants are not required to engage in self-
flagellation.

It is well settled that in making disclosures a board is not required to engage

in self-flagellation. See Stroud, 606 A.2d at 84 n.1 (“We recognize the long-standing

principle that to comport with its fiduciary duty to disclose all relevant material facts,

a board is not required to engage in ‘self-flagellation’ and draw legal conclusions

implicating itself in a breach of fiduciary duty from surrounding facts and

circumstances prior to a formal adjudication of the matter.”); accord Khanna v.

McMinn, 2006 WL 1388744, at *29 (Del. Ch. May 9, 2006). Under Delaware law,

a board is not required to state a plaintiff’s characterization of the facts. See In re

John Q. Hammons Hotels Inc., S’holder Litig., 2009 WL 3165613, at *15 (Del. Ch.

Oct. 2, 2009) (“Delaware law does not require that the proxy statement include

plaintiffs’ characterization . . . .”); In re MONY Gp., Inc. S’holder Litig., 853 A.2d

661, 682 (Del. Ch. 2004) (“[A]s a general rule, proxy materials are not required to

state . . . plaintiff’s characterization of the facts.”).

The Director Defendants argue that they were not required to characterize

Chegg’s business in pejorative or negative terms or to disparage its student user base

13
as cheaters.45 In response, the Plaintiff pivoted, conceding that the Director

Defendants were not required to use the term “cheating” in describing the

Company’s primary business model.46 Therefore, Plaintiff has abandoned this

argument.

2. The Complaint does not allege facts to support a reasonable
inference that Chegg’s primary business model is to facilitate
student cheating.
Even if Plaintiff has not abandoned its argument that the Director Defendants

were required to disclose that Chegg’s primary business model was to facilitate

student cheating, it fails for lack of factual support. Despite having utilized the tools

at hand to inspect Chegg’s books and records, Plaintiff has not referenced a single

document or a statement by any of the defendants in his Complaint to support the

assertion that Chegg’s “primary business model” is to facilitate cheating by students.

Rather, he draws that conclusion from public information that was available to him

prior to the 2022 Meeting.

Plaintiff presents a two-step argument. First, he argues that some of Chegg’s

customers use Chegg Services to cheat. Second, he argues that Chegg Services

makes up a majority of Chegg’s revenue. The result that he contends logically

45
Director Defs.’ Opening Br. 21.
46
Pl.’s Answering Br. 5, 29.
14
follows is that a majority of Chegg’s revenue comes from cheating. From this,

Plaintiff concludes that Chegg’s “primary business model” is to facilitate cheating.

The gap in Plaintiff’s logic is evident from his failure to present any allegations or

argument about the extent to which Chegg’s entire customer base uses Chegg

Services to cheat.

Anecdotal evidence that some customers use Chegg Services to cheat is not,

by itself, sufficient to establish a reasonable inference that cheating is the Company’s

“primary business model.” Take, for example, an automobile manufacturer. One

would not be hard pressed to find anecdotal evidence that some of the manufacturer’s

automobiles are used for illegal drag racing, transporting contraband, as getaway

vehicles, or driven at speeds in excess of posted speed limits. And automobile

manufacturers draw the majority of their revenue from selling automobiles. But that

does not mean that an automobile manufacturer’s “primary business model” is

facilitating illegal activity. So too, here.

Plaintiff fails to present any allegations or argument as to how many of

Chegg’s customers use Chegg Services to cheat. In his briefing, Plaintiff argued that

he was not required to quantify the exact number of students who used Chegg

Services to cheat to state a claim.47 But as Plaintiff’s counsel conceded at oral

47
Id. at 30.
15
argument, to survive dismissal, he must allege facts supporting a reasonable

inference that “50 percent or more, probably, would be focused on cheating

activities.”48 Plaintiff has not alleged facts giving rise to a reasonable inference that

a majority of the Company’s revenue comes from students using its products to cheat

in school, or that a majority of its customers use its products to cheat.

Plaintiff also argues that the Director Defendants should have more clearly

disclosed that the Company’s products could have been used for cheating.

Specifically, Plaintiff argues that the Director Defendants could have and should

have “describe[d] Chegg’s business model accurately – supplying exam, homework,

and textbook answers – without using any pejorative (even if accurate) terms like

‘cheating.’”49 That argument also fails. The Company’s 2021 filing on Form 10-K,

incorporated by reference into the 2022 Proxy and the Complaint, provides a clear

description of what the Company sells. It is also obvious that these products could

be used to cheat.

For example, on the fourth page of the 10-K, which is the first page of its

substantive material, the Company discloses that its services include its “Expert

Questions and Answers service [which allows] students to ask questions on our

48
Oral Argument at 30:23–24.
49
Pl.’s Answering Br. 5.
16
website and receive detailed explanations” and “Textbook Solutions, which are step-

by-step explanations to help students learn how to solve the questions at the end of

each chapter in their textbooks.”50 The 10-K also highlights Chegg’s services as

offering “a step-by-step math problem solver and calculator” and emphasizes twice

that Chegg provides plagiarism detection services for students.51 Therefore, the 10-

K provides what Plaintiff himself identifies as his desired accurate description of

Plaintiff’s business model—supplying an “Answers service,” “Textbook Solutions,”

a “problem solver,” and tools that help students not get caught cheating. The

Company sold products that it accurately described, which can be used for cheating.

A step-by-step problem-solving tutorial can be used to learn new material, and it can

be used to quickly pull answers for a homework assignment without doing the work.

The 2022 Proxy was not materially misleading and did not omit information about

the Company’s products that was material to stockholders in casting votes for the

Class III directors or to ratify the Company’s auditor at the 2022 Meeting. See

MONY, 853 A.2d at 683 (“Proxy statements need not disclose facts known or

reasonably available to the stockholders.” (internal quotation marks omitted)).

50
Chegg, Inc., Annual Report (Form 10-K) (Feb. 22, 2022), 4.
51
Id.
17
Plaintiff also complains that the 2022 Proxy contained vague statements that

“misled investors to believe that Chegg values academic integrity, which is not the

case.”52 But these statements, such as: “‘Chegg is a student’s ride-or-die, 24/7,

always-answers-when-you-call partner,’” “‘We hold ourselves to the highest ethical

standards and strive for full compliance with applicable laws and regulations,’” and

“‘We understand students at a deep level and anticipate their needs at every step’”53

are not actionable.

The Company disclosed the nature of its products, and Chegg’s products are

a tool. Foreseeable misuse thereof was obvious, and Plaintiff himself asserts that

actual misuse was public knowledge. See Seibert v. Harper & Row, Publ’rs, Inc.,

1984 WL 21874, at *6 (Del. Ch. Dec. 5, 1984) (“[A] proxy statement need not

disclose facts known or reasonably available to the stockholders.”). Although the

Company’s products have been misused by some customers, the Company’s

aspirational representations promoting the utility of its services for customers who

actually want to use them to study is not a material misrepresentation. For example,

the “disclosure” that “‘We hold ourselves to the highest ethical standards and strive

for full compliance with applicable laws and regulations’”54 is, like statements that

52
Compl. ¶ 55.
53
Id. ¶ 57 (quoting 2022 Proxy).
54
Id. (quoting 2022 Proxy).
18
a company provides “an ‘ideal work environment’ and had ‘unique resources,’” “at

best enthusiastic puffery that no rational prospective investor” would find material.

Lazard Debt Recovery GP, LLC. v. Weinstock, 864 A.2d 955, 971 (Del. Ch. 2004).

Nor is “‘We help students each step of the way to improve the outcome of their

education [and] we focus on listening to their needs, elevating and amplifying their

voice, and taking action to provide real life solutions’”55 any more actionable than

“classically vague statements” like bragging about “‘very strong brand name,’

‘established market presence,’ and ‘unprecedented levels of customer loyalty.’”

Airborne Health, Inc. v. Squid Soap, LP, 2010 WL 2836391, at *8 (Del. Ch. July 20,

2010).

In sum, the Complaint does not state a claim that the Director Defendants

breached their fiduciary duties by failing to expressly state that Chegg’s “primary

business model . . . facilitates cheating.”56 Plaintiff failed to present non-conclusory

allegations that cheating was the Company’s primary business model. Therefore, he

has not stated a claim that the Director Defendants breached their fiduciary duties

by failing to disclose that it was. The Complaint also lacks well-pleaded facts to

support a claim that, in a request for stockholder action concerning the election of

55
Id. (quoting 2022 Proxy).
56
Id. ¶ 52.
19
directors and ratification of the appointment of auditors, the Director Defendants

made materially misleading disclosures or omitted material information about the

Company’s products or their use. Plaintiff has, therefore, failed to state a claim for

breach of fiduciary duty against the Director Defendants, and Count I must be

dismissed.57

B. Having Failed to State a Claim for Breach of Fiduciary Duty,
Plaintiff’s Aiding and Abetting Claim Also Fails.
To state a claim for aiding and abetting a breach of fiduciary duty, a plaintiff

must allege: “(i) the existence of a fiduciary relationship, (ii) a breach of the

fiduciary’s duty, (iii) knowing participation in that breach by the defendants, and

(iv) damages proximately caused by the breach.” RBC Cap. Mkts., LLC v. Jervis,

129 A.3d 816, 861 (Del. 2015).

57
The court need not address the question of whether the Plaintiff, who made the tactical
decision not to file a pre-vote complaint and application for preliminary injunctive relief,
would have been entitled to an order compelling a new annual meeting for the election of
directors and ratification of the appointment of auditors. See Loudon v. Archer-Daniels-
Midland Co., 700 A.2d 135, 141 (Del. 1997) (“There may be circumstances under which a
proxy statement soliciting votes for the election of directors is actionable under Delaware
law for material misstatements or omissions. Injunctive relief in the form of corrective
disclosures and resolicitation may be appropriate if the matter is addressed in time by a
court of equity.”). Doing so would require equitable considerations. Mandatory injunctive
relief “may be granted only if Plaintiff demonstrates: (1) entitlement to judgment as a
matter of law on the merits of her claim; (2) that the failure to issue the injunction will
result in immediate and irreparable injury; and (3) that the balance of hardships weighs in
Plaintiff’s favor.” DeMarco v. Christiana Care Health Servs., Inc., 263 A.3d 423, 433
(Del. Ch. 2021); see Loudon, 700 A.2d at 147 (“In every case, a plaintiff stating a claim
against directors for violation of the duty of disclosure must set forth in a well-pleaded
complaint allegations sufficient to warrant the remedy sought.” (emphasis added)).
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For the reasons already discussed, Plaintiff’s allegations do not give rise to a

reasonable inference that the Director Defendants breached their fiduciary duties.

Therefore, “without an underlying breach, the aiding and abetting claim fails.”

Wayport, 76 A.3d at 323. Upon Count I’s failure, Count II must also be dismissed.

III. CONCLUSION

For the foregoing reasons, the Complaint fails to state a claim upon which

relief can be granted. The Defendants’ motions to dismiss are granted in full, and

the Complaint is dismissed with prejudice. See Ct. Ch. R. 15(aaa).

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