In Re The Trade Desk, Inc. Derivative Litigation

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

)
IN RE THE TRADE DESK, INC. ) Consol. C.A. No. 2022-0461-PAF
DERIVATIVE LITIGATION )

MEMORANDUM OPINION
Date Submitted: April 5, 2024
Date Decided: February 14, 2025
Stephen E. Jenkins, Marie M. Degnan, ASHBY & GEDDES, P.A., Wilmington,
Delaware; Frank R. Schirripa, Daniel B. Rehns, Kurt Hunciker, Kathryn Hettler,
Isaac G. Netzer, HACH ROSE SCHIRRIPA & CHEVERIE LLP, New York, New
York; Co-Lead Counsel and Attorneys for Lead Plaintiff International Union of
Operating Engineers Local 137, 137A, 137B, 137C & 137R Pension & Annuity
Funds.
Stephen E. Jenkins, Marie M. Degnan, ASHBY & GEDDES, P.A., Wilmington,
Delaware; Gregory Mark Nespole, Daniel Tepper, Correy A. Suk, LEVI &
KORSINSKY, LLP, New York, New York; Attorneys for Plaintiff Milton Pfeiffer.
David A. Jenkins, Neal C. Belgam, Jason Z. Miller, SMITH, KATZENSTEIN &
JENKINS LLP, Wilmington, Delaware; Steven J. Purcell, Robert H. Lefkowitz,
Anisha Mirchandani, PURCELL & LEFKOWITZ LLP, New York, New York;
Attorneys for Plaintiff Leroy Huizenga.
Peter J. Walsh, Jr., Jacqueline A. Rogers, POTTER ANDERSON & CORROON
LLP, Wilmington, Delaware; Matthew Rawlinson, LATHAM & WATKINS LLP,
Menlo Park, California; Colleen C. Smith, LATHAM & WATKINS LLP, San
Diego, California; Kristin N. Murphy, LATHAM & WATKINS LLP, Costa Mesa,
California; Attorneys for Defendants Lise J. Buyer, Kathryn E. Falberg, Eric B.
Paley, Gokul Rajaram, and David B. Wells, and Nominal Defendant The Trade
Desk, Inc.
Bradley D. Sorrels, Andrew D. Cordo, Lauren G. DeBona, WILSON SONSINI
GOODRICH & ROSATI, P.C., Wilmington, Delaware; David J. Berger, WILSON
SONSINI GOODRICH & ROSATI, P.C., Palo Alto, California; S. Toni Wormald,
WILSON SONSINI GOODRICH & ROSATI, P.C., San Francisco, California;
Attorneys for Defendant Jeffrey Green.
FIORAVANTI, Vice Chancellor
A corporation’s board of directors granted its chief executive officer a

performance-based equity grant that, if fully realized over ten years, would total 4%

of the company’s outstanding stock. The chief executive officer was also the

corporation’s controlling stockholder. The award was not submitted to a stockholder

vote. Certain stockholders have challenged the award as a breach of fiduciary duty

by the directors that approved it and the controller who received it. Under Delaware

Supreme Court precedent, the claim against the controller is presumptively subject

to review under the entire fairness standard.

Before the stockholder plaintiffs may pursue these claims, however, they must

first establish a right to proceed with the litigation. These claims are assets of the

corporation, and under Delaware’s board-centric model, they fall under the board’s

control. To divest the board of its control over the litigation asset, the plaintiffs must

demonstrate reasonable doubt as to the board’s ability to consider a demand to bring

the suit as of the time at which the plaintiffs filed the original complaint.

The board comprised eight directors at the time the original complaint was

filed. Under Court of Chancery Rule 23.1, the plaintiffs must plead with

particularity facts from which the court may infer that at least four of the eight

directors received a material benefit, lack independence from the controller, or face

a substantial likelihood of liability relating to the challenged conduct. Having

considered the arguments and the particularized allegations in the operative

1
complaint, the court concludes that the plaintiffs have not met their burden.

Accordingly, the defendants’ motions to dismiss for failure to plead demand futility

must be granted in full.

I. BACKGROUND
The facts are drawn from the well-pleaded allegations of the Consolidated

Amended Complaint (the “Complaint”) and the documents integral thereto.1 This

includes documents produced to Plaintiffs in response to a books and records

demand under 8 Del. C. § 220.

A. The Parties
Each of the Plaintiffs has held The Trade Desk, Inc. Class A Common Stock

at all relevant times.2

Nominal Defendant The Trade Desk, Inc. (“Trade Desk” or the “Company”)

is a publicly traded corporation with its principal place of business in Ventura,

California.3 At the time of the filing of the Complaint, Trade Desk was a Delaware

corporation.4 The Company has since converted into a Nevada corporation.5

1
See Dkt. 15 [hereinafter “Compl.”].
2
Id. ¶ 16.
3
Id. ¶¶ 17, 31.
4
Id. ¶ 17.
5
The Company’s conversion into a Nevada corporation is the subject of other litigation in
this court. See Gunderson v. The Trade Desk, Inc., C.A. No. 2024-1029-PAF (Del. Ch.).

2
As of the date of the original complaint, the Company’s board of directors (the

“Board”) comprised Jeffrey Green, David R. Pickles, Eric B. Paley, Lise J. Buyer,

Kathryn E. Falberg, Gokul Rajaram, David B. Wells, and Andrea Cunningham (the

“Demand Board”).6 All of the members of the Demand Board, except Cunningham

and Pickles, are defendants in this action. This opinion refers to the individual

director defendants, excluding Green, as the “Director Defendants.” Falberg,

Rajaram, and Wells were the members of the Board’s compensation committee (the

“Compensation Committee”), which negotiated and recommended that the Board

approve the compensation package at issue in this action (the “Award”).7

B. Trade Desk’s Founding and Green’s Assumption of Control
Trade Desk is a technology company that provides digital advertising

services.8 Green and Pickles co-founded the Company in 2009.9 Trade Desk is not

Green’s first entrepreneurial venture. In 2004, Green founded AdECN, Inc.

(“AdECN”), the first exchange for online advertising.10 Green led AdECN’s

In the conversion action, the Company and its directors acknowledged that the Company’s
conversion into a Nevada corporation would have no bearing on the claims in this case.
See id. Dkt. 20 at 10 n.6.
6
Compl. ¶ 157.
7
Id. ¶¶ 20, 22–23, 138.
8
Id. ¶ 17.
9
Id. ¶¶ 18, 25.
10
Id. ¶ 160.

3
strategy, product, and business development, and three years after founding the

business, Green sold AdECN to Microsoft Corp. for a rumored $50 to $75 million.11

Seven years after its founding, Trade Desk completed its initial public offering

(the “IPO”) in 2016 at a billion-dollar valuation.12 The Company has experienced

significant growth ever since.13 In the roughly five years between its IPO and the

Award, the Company’s market capitalization grew to approximately $44 billion. 14

Even Plaintiffs concede that Green “was instrumental” in the Company’s success

under his stewardship. 15

The Company has two classes of common stock: Class A Common Stock

(“Class A”) and Class B Common Stock (“Class B”). 16 In almost all respects, these

two classes of stock are identical, but there are two notable differences: (1) the Class

A stock is entitled to one vote per share; the Class B stock is entitled to ten votes per

11
Id.
12
Id. ¶¶ 29, 192.
13
Id. ¶¶ 29, 112, 192; Nasdaq, The Trade Desk, Inc. Class A Common Stock (TTD)
Historical Quotes, https://www.nasdaq.com/market-activity/stocks/ttd/historical (last
visited Feb. 14, 2025). The court may take judicial notice of historic stock price data. Lee
v. Pincus, 2014 WL 6066108, at *4 n.11 (Del. Ch. Nov. 14, 2014) (citing D.R.E.
201(b)(2)).
14
Compl. ¶ 112.
15
Id. ¶¶ 191, 194 (alleging that Founder Collective’s “under $2 million initial investment
[turned] into total profits of hundreds of millions of dollars” and that Green “was
instrumental in making Paley hundreds of millions of dollars in profits”).
16
Id. ¶ 30.

4
share; and (2) the Class A stock is publicly traded; the Class B stock is not.17 If

Class B stock is transferred, other than pursuant to one of a handful of exceptions

specified in the Company’s certificate of incorporation, then it automatically

converts into Class A stock. 18 At the time of the IPO, most of the Company’s

outstanding shares were Class B stock, but as pre-IPO investors sold their Class B

stock over the years, the voting power of the Class B stock became more

concentrated in the remaining Class B holders.19 Following the IPO, Green held on

to a large block of Class B stock. 20 As a result, Green’s voting power increased from

about 27% at the time of the IPO to 53% as of January 31, 2018. 21 Defendants do

not dispute that Green remained the Company’s controlling stockholder when

Plaintiffs initiated this action.22

17
Id. ¶¶ 30–31.
18
Id. ¶ 31.
19
Id. ¶¶ 32–36.
20
Id. ¶ 33.
21
Id. ¶¶ 32, 37. The Company’s dual-class stock structure was originally designed to
expire once the Class B stock made up less than 10% of the Company’s outstanding stock,
at which time all remaining Class B stock would convert into Class A stock. Id. ¶ 47. In
2020, stockholders approved an amendment to the Company’s certificate of incorporation
extending the longevity of Green’s control via this dual-class structure. See generally City
Pension Fund for Firefighters & Police Officers in City of Mia. v. The Trade Desk, Inc.,
2022 WL 3009959 (Del. Ch. July 29, 2022) (dismissing a stockholder complaint
challenging the certificate amendment).
22
Green Opening Br. 6; Trade Desk & Director Defs.’ Opening Br. 4; see also Compl. ¶ 1.

5
C. Green’s Historic Compensation Packages
The Compensation Committee must annually review the chief executive

officer’s (“CEO”) compensation. 23 Every year since the Company’s IPO, the

Compensation Committee has awarded Green a compensation package consisting of

a base salary, equity awards, and performance-based cash bonuses, valued at

$6,122,218 in 2017, $10,782,252 in 2018, $12,135,473 in 2019, $15,927,482 in

2020, and $16,042,476 in 2021 (excluding the Award). 24 The Company explained

that these packages were designed to reward Green’s performance and structured to

match the 75th percentile relative to the Company’s compensation peer group.25

D. The Award
The Compensation Committee first formally discussed the possibility of a

large equity award for Green on December 4, 2020.26 At that time, the

Compensation Committee’s legal adviser was Latham & Watkins LLP (“Latham”),

and its compensation consultant was Compensia, Inc. (“Compensia”). 27 Prior to the

23
Dkt. 22 Ex. 8 Art. IV § 1.
24
Compl. ¶¶ 55–56, 58–59, 61.
25
Id. ¶¶ 57–58, 60, 62.
26
Id. ¶ 89; Dkt. 22 Ex. 16.
27
Dkt. 22 Ex. 16.

6
meeting, Compensia circulated a slide presentation to the Compensation Committee

(the “Compensia Presentation”). 28 The slide presentation stated that:

The Compensation Committee at The Trade Desk asked Compensia to
assist in evaluating CEO compensation alternatives, with the following
objectives:
[(1)] Support CEO retention, engagement and commitment for
the next 7 years
[(2)] Motivate significant long-term shareholder value creation
[and]
[(3)] Recognize unique value associated with J. Green’s
continued engagement as TradeDesk’s CEO[.]29

According to the minutes of the meeting, Erik Beucler of Compensia reviewed

the Compensia Presentation, which “set[] forth considerations in connection with

large equity grants for CEOs and model[ed] certain potential terms and scenarios for

the Committee’s consideration.”30 The Compensia Presentation included two other

compensation structures—the Company’s historic approach to Green’s

compensation and a “Large Cap” compensation approach—in slides that compared

them to what Compensia labeled a “mega grant.” 31 The Compensia Presentation

included a “Straw Model: Stock Price Targets only” and accompanying

28
Id. at TTD_Huizenga000469.
29
Id. Ex. 27 at TTD_Huizenga000760 [hereinafter “Compensia Presentation”].
30
Id. Ex. 16 at TTD_Huizenga000469.
31
Compensia Presentation at TTD_Huizenga000762; see id. at TTD_Huizenga000762–
65.

7
considerations for a so-called mega grant, but not for other structures.32 The “Straw

Model” presented an award for up to 2% of the Company’s outstanding stock

conditioned upon an increase in the Company’s market capitalization by roughly

130%. 33 The award under the Straw Model would fall between the 60th and 75th

percentile of comparable CEO mega grants.34 Other features of the Straw Model

specified that award tranches would only be achievable after four years and would

be contingent on Green remaining as CEO. 35 Latham advised the Compensation

Committee about “the disclosure obligations, legal considerations and litigation

risks associated with a potential large CEO equity grant.”36

The Compensation Committee next met on January 6, 2021.37 Green attended

the meeting along with Jay Grant, the Company’s chief legal officer, Blake Grayson,

the Company’s chief financial officer, and Vina Leite, the Company’s chief people

officer.38 The meeting began with discussion of the Company’s executive

compensation and equity plans in general.39 Grant, Grayson, and Leite then left the

32
Id. at TTD_Huizenga000763.
33
Id.
34
Id.
35
Id.
36
Dkt. 22 Ex. 16 at TTD_Huizenga000469.
37
Dkt. 22 Ex. 17 at TTD_Huizenga000470.
38
Id.
39
Id. at TTD_Huizenga000471.

8
meeting, after which Green and the Compensation Committee met in closed session

to “Review CEO Grant Analysis.”40 According to the minutes: “Mr. Green

discussed his views of executive and CEO compensation. Questions were asked and

discussion ensued, and the Committee determined to consider a large CEO equity

grant further.”41 Green then left the meeting, and the Compensation Committee

“discussed various matters” and approved the Company’s executives’ 2021 cash

compensation in closed session before adjourning.42

On January 13, 2021, the Compensation Committee met again, this time

joined by Buyer and Green’s counsel, who had been invited “to participate and

facilitate the Committee’s discussions around a potential significant equity grant to

the Company’s CEO and potentially another member of the management team.”43

“It was discussed that Wilson Sonsini Goodrich & Rosati would represent Mr.

Green; and it was determined that Latham & Watkins will represent the Company

and the Committee on legal matters related to this topic and Compensia will continue

to advise the Committee as compensation consultant to the Committee.” 44 The

40
Id.
41
Id.
42
Id. at TTD_Huizenga000471–72.
43
Id. Ex. 18 at TTD_Huizenga000474. It is not apparent from the record who this
additional member of the management team was, and no such award was ultimately
granted.
44
Id.

9
Compensation Committee reviewed the key terms of the proposed awards with its

advisors and “determined to seek input from Mr. Green . . . on his thoughts around

how a significant equity grant might be structured in order to properly incentivize

key management team members and to be well received by the Company’s

stockholders.”45 The Compensation Committee asked Green’s counsel to “discuss

the matter with Mr. Green and then revert with input for the Committee’s

consideration.”46

At the Compensation Committee’s next meeting on January 22, 2021, Green’s

counsel relayed Green’s views about the contemplated grant.47 The minutes do not

specify what Green’s counsel relayed. 48 The Compensation Committee “discussed

certain of the key terms.”49 Falberg requested that Green’s counsel confer with

Green and revert with additional input for the Compensation Committee. 50

On February 3, 2021, the Compensation Committee met again, and its

business was not limited to the proposed CEO grant. Green, Grant, Grayson, and

45
Id. at TTD_Huizenga000475.
46
Id.
47
Id. Ex. 19 at TTD_Huizenga000476.
48
The Compensation Committee’s minutes are not detailed. Generally speaking, they
document the occurrence of a meeting, those in attendance, and a general summary of what
transpired.
49
Id.
50
Id. at TTD_Huizenga000476–77.

10
Leite attended the meeting. 51 While management was present, the Compensation

Committee proceeded through general business, including bonus and equity plans,

and the upcoming transition of the Company’s chief strategy officer (“CSO”).52

After the Compensation Committee completed its general business, Green, Grant,

Grayson, and Leite left the meeting.53 Buyer and Paley then joined at the invitation

of the Compensation Committee “to provide input to the [Compensation] Committee

on the size and framework for the grant.”54 During the meeting, the Compensation

Committee reviewed and acknowledged the independence of its advisers. 55

The next day, at a regular meeting of the full Board, the Compensation

Committee reported on the previous day’s meeting.56 The Board minutes identify

several topics from Falberg’s presentation to the Board, but the contemplated mega

grant is not among them. 57

51
Id. Ex. 20 at TTD_Huizenga000478.
52
Id. at TTD_Huizenga000479.
53
Id.
54
Id.
55
Id.
56
Id. Ex. 14 at TTD_Huizenga000454–56.
57
Id. at TTD_Huizenga000456. Pickles was elected to the Board at the end of this meeting
to fill the gap left by the departing CSO, and the Board appointed Buyer as lead
independent director. Id. at TTD_Huizenga000457.

11
On February 18, 2021, the Board held a special meeting without Green or

Pickles.58 The directors were joined by the Compensation Committee’s counsel,

Green’s counsel, and Beucler from Compensia.59 Falberg reported on “recent

discussions related to a potential significant performance equity grant for Mr. Green

and potentially another executive team member,” and Green’s counsel discussed the

potential framework for such an award and examples from similar awards.60 The

Board discussed the framework and considerations for such an award, and “decided

to continue to consider such a performance equity grant for Mr. Green.”61 Green’s

counsel left the meeting, and the Board continued its discussion in a closed session

before adjourning.62

The Compensation Committee met again on April 26, 2021.63 Latham was

present, but Compensia did not attend. 64 The minutes are sparse. The substantive

description is reduced to one sentence: “The Committee members met and discussed

58
Id. Ex. 15 at TTD_Huizenga000458.
59
Id.
60
Id.
61
Id. at TTD_Huizenga000458–59.
62
Id. at TTD_Huizenga000459.
63
Id. Ex. 21.
64
Id. at TTD_Huizenga000481.

12
various matters in connection with the framework for a potential CEO equity grant

and recent discussions therewith.”65

The Compensation Committee met again the next day. 66 Green and three

other senior managers (Grant, Grayson, and Leite) were in attendance.67 Consistent

with prior meetings where management was in attendance, the Compensation

Committee first discussed general business, then excused management (other than

Green), after which it discussed the mega grant.68 After management was excused

from this meeting, the Compensation Committee discussed a framework for the

award with Green and then excused him from the meeting to allow the committee

members to deliberate with their advisers.69

The Compensation Committee’s next meeting, on July 15, 2021, was similar

to others with management invited to attend for part of the meeting to discuss

general compensation matters.70 After excusing members of management, the

Compensation Committee and its advisers discussed the framework for the mega

65
Id.
66
Id. Ex. 22.
67
Id. at TTD_Huizenga000482.
68
Id. at TTD_Huizenga000483–84.
69
Id. at TTD_Huizenga000484.
70
See generally id. Ex. 23. Green, Grant, Grayson, and Leite attended the meeting. Id. at
TTD_Huizenga000487. Rajaram was not in attendance and the minutes do not state the
reason for his absence. Id.

13
grant with Green’s counsel, 71 including vesting thresholds and an adjustment of each

tranche based on the Company’s performance relative to the Nasdaq 100. 72

On August 3, 2021, the Compensation Committee, joined by Buyer, discussed

the framework for the mega grant, and the Compensation Committee’s advisers

relayed input from Green’s counsel on which positions Green could hold without

forfeiting the award, the length of any holding period, and the length of the

measurement period for the achievement of milestones.73 “The Committee members

instructed [Compensia] to update the summary of terms for the potential grant and

instructed [Latham] to communicate with Mr. Green regarding the status of

discussions.”74

On September 17, 2021, the Compensation Committee, again joined by

Buyer, discussed a revised proposal for the equity grant based on input from Green’s

advisers. 75 No Compensia representative was present at this meeting. After

71
Green’s counsel is not listed as an attendee but is referenced multiple times in the
summary of the Compensation Committee’s discussion of the mega grant. Compare id. at
TTD_Huizenga000487, with id. at TTD_Huizenga000488.
72
Id. at TTD_Huizenga000488.
73
Id. Ex. 24 at TTD_Huizenga000489. It is not clear from the minutes why Buyer was
present at this meeting.
74
Id.
75
Id. Ex. 25 at TTD_Huizenga000491.

14
discussion, the Compensation Committee resolved to recommend the mega grant to

the Board.76

On October 6, 2021, the full Board held a special meeting, joined by several

members of management, the Compensation Committee’s counsel, Beucler from

Compensia, and Green’s counsel.77 Falberg and Beucler explained the background

and structure for the mega grant, members of management discussed its accounting

implications and the communications plan, and the Compensation Committee’s

counsel discussed the related SEC disclosures and amendment to Green’s

employment agreement.78 Non-director members of the management team left the

meeting, and the directors “continued discussion.”79 Green, Pickles, and Green’s

counsel then left the meeting, and the Director Defendants “continued discussion”

before unanimously approving the Award and accompanying amendment to Green’s

employment agreement.80

As approved, the Award differed structurally from the Straw Model mega

grant in the December 2020 Compensia Presentation.81 For example, the Straw

76
Id. at TTD_Huizenga000492; Compl. ¶ 138.
77
Dkt. 22 Ex. 26 at TTD_Huizenga000496.
78
Id. at TTD_Huizenga000496–97.
79
Id. at TTD_Huizenga000497.
80
Id.
81
Compare id. at TTD_Huizenga000500–09, with Compensia Presentation at
TTD_Huizenga000763.

15
Model mega grant had included a five-year time-vesting requirement for an award

that could grant options to purchase up to 2% of the Company’s outstanding equity

for increasing the Company’s stock price by approximately 130% over five to seven

years and had an estimated $352 million grant date fair value.82 By contrast, the

final Award had no time-vesting limitation for achieving an award granting options

to purchase up to 4% of the Company’s outstanding equity for increasing the

Company’s stock price by approximately 400% over a ten-year period and had an

$819 million grant date fair value.83 The final Award was divided into eight vesting

tranches, and each tranche provided Green with the option to purchase 2,000,000

shares of Class A stock. 84 The final Award also provided for +/-20% adjustments to

the size of the tranches based on the Company’s performance to-date relative to the

100 companies in the Nasdaq 100 on October 6, 2021. 85 Some main comparative

differences are that the final Award eliminated the Straw Model’s time-vesting

requirement entirely, raised the price targets in the final Award above those depicted

82
Compensia Presentation at TTD_Huizenga000763–64.
83
Dkt. 22 Ex. 26 at TTD_Huizenga000500–01; Compl. ¶ 4.
84
Dkt. 22 Ex. 26 at TTD_Huizenga000500–01.
85
Id. at TTD_Huizenga000502. If, at the time a tranche vested, the Company’s total
shareholder return (“TSR”) fell below the 50th percentile for this group, the tranche would
be adjusted downward by 20%. Id. If the TSR hit the 50th percentile exactly, the tranche
would not be adjusted. Id. If the TSR reached or exceeded the 75th percentile, the tranche
would be adjusted upward by 20%. Id. If the TSR fell between the 50th and 75th
percentiles, a percentage adjustment would be made based on a linear interpolation
between 0% and 20%. Id.

16
in the Straw Model,86 and doubled both the maximum size of the Award and its

vesting period. The final Award did not include any operational or financial targets,

conditioning vesting only on stock price. 87

To receive any benefits from the final Award, Green was required to remain

CEO for four years.88 Green continues to remain eligible for payouts thereafter if

he remains in a strategic position approved by the Board. 89 If Green is terminated

from a qualifying position for “Cause,” as defined,90 the Award terminates

immediately. 91 If Green is terminated without Cause or leaves for “Good Reason,”

as defined, the Award terminates nine months after his departure. 92 The Award does

86
In the Straw Model, Green could receive up to 2% of the Company’s outstanding equity
for 130% stock price growth, while in the final Award, 170% stock price growth would be
necessary to receive the first 2% of the Company’s outstanding equity, assuming no
relative performance-based adjustments were triggered. Compare Compensia Presentation
at TTD_Huizenga000763, with Dkt. 22 Ex. 26 at TTD_Huizenga000501. The Award’s
ten-year duration did give Green longer to hit these higher targets. That being said, if the
Company’s performance lagged behind its peers, the TSR-based adjustments would reduce
the size of any vesting tranches, including any tranches that might vest only by virtue of
the Award’s longer duration. If the Company outpaced its peers, Green still had to hit the
higher targets for tranches to vest but would be rewarded with more options under the TSR-
based adjustments.
87
Compl. ¶¶ 14, 92, 151(b); see Dkt. 22 Ex. 26 at TTD_Huizenga000500.
88
Dkt. 22 Ex. 26 at TTD_Huizenga000500, TTD_Huizenga000503,
TTD_Huizenga000507–08.
89
Id.
90
In conjunction with the Award, the Company removed “gross negligence” from its
definition of Cause. Compl. ¶ 85(c).
91
Dkt. 22 Ex. 26 at TTD_Huizenga000503, TTD_Huizenga000507,
TTD_Huizenga000509.
92
Id. at TTD_Huizenga000503, TTD_Huizenga000508–09.

17
not preclude Green from receiving cash compensation or additional equity awards

during the vesting period. 93 The Company did not seek stockholder approval of the

Award, and no other Company executives received similar compensation

packages.94 One tranche of the Award vested before Plaintiffs filed this action,

pursuant to which Green received options to purchase 2,400,000 shares of Class A

stock at $68.29 per share. 95

E. Procedural History
On August 18, 2022, the court consolidated two stockholder derivative actions

challenging the Award. 96 On November 10, 2022, Plaintiffs filed a consolidated

amended complaint,97 which relies in part on documents that the Company produced

to Plaintiffs in response to books and records demands under 8 Del. C. § 220. 98

All defendants have moved to dismiss under Court of Chancery Rule 23.1 for

failure to plead demand futility and under Court of Chancery Rule 12(b)(6) for

93
Id. at TTD_Huizenga000517; Compl. ¶¶ 61, 151(a).
94
Compl. ¶¶ 14, 92, 128, 151(e).
95
Id. ¶ 86.
96
Dkt. 10 ¶ 2. Plaintiff Leroy Huizenga filed his complaint on May 27, 2022. Dkt. 1.
Plaintiffs International Union of Operating Engineers Local 137, 137A, 137B, & 137R
Pension & Annuity Funds and Milton Pfeiffer filed their complaint a month later. Int’l
Union of Operating Eng’rs Loc. 137, 137A, 137B & 137R Pension & Annuity Funds v.
Green, C.A. No. 2022-0560-PAF (Del. Ch.), Dkt. 1.
97
Dkt. 15.
98
Compl. at 1 n.1.

18
failure to state a claim upon which relief can be granted.99 The parties have briefed

and presented argument on the motions, and have submitted supplemental authority

for the court’s consideration.100

II. ANALYSIS

The Defendants moved to dismiss the Complaint under Court of Chancery

Rules 23.1 and 12(b)(6), contending that Plaintiffs cannot assert this action on behalf

of the Company and that, in any event, Plaintiffs fail to state a claim upon which

relief can be granted. The court concludes that dismissal is warranted under Rule

23.1. Therefore, it need not reach Defendants’ arguments under Rule 12(b)(6).

A. Stockholder Challenges to Executive Compensation for
Controllers
There is a tension in our law regarding review of transactions involving

controlling stockholders and executive compensation decisions. On the one hand,

“[t]he directors of a Delaware corporation have the authority and broad discretion to

make executive compensation decisions.” In re Citigroup Inc. S’holder Deriv.

Litig., 964 A.2d 106, 138 (Del. Ch. 2009). Accordingly, “a board’s decision on

executive compensation is entitled to great deference. It is the essence of business

judgment for a board to determine if a particular individual warrants large amounts

of money, whether in the form of current salary or severance provisions.” Brehm v.

99
Dkts. 21–22.
100
Dkts. 21–22, 27, 31–32, 40, 54–55.

19
Eisner, 746 A.2d 244, 263 (Del. 2000) (cleaned up); accord Tornetta v. Musk

(Tornetta I), 250 A.3d 793, 796–97 (Del. Ch. 2019) (“A board of directors’ decision

to fix the compensation of the company’s executive officers is about as work-a-day

as board decisions get. It is a decision entitled to great judicial deference.”); see also

id. at 797 (explaining that stockholder approval of executive compensation typically

results in “even greater deference,” if properly obtained).

“On the other hand, as pled, the Award is a transaction with a conflicted

controlling stockholder.” Tornetta I, 250 A.3d at 797. “[I]n a suit claiming that a

controlling stockholder stood on both sides of a transaction with the controlled

corporation and received a non-ratable benefit, entire fairness is the presumptive

standard of review.” In re Match Gp., Inc. Deriv. Litig., 315 A.3d 446, 451 (Del.

2024).

As Vice Chancellor Slights observed in Tornetta I, these approaches “do[] not

jibe.” 250 A.3d at 798. But this conceptual tension is just that, and the doctrinal

path is clear: under well-established law, despite the considerable deference our

courts afford compensation decisions, they are not immune from judicial review.

“Like any other interested transaction, [fiduciary] self-compensation decisions lie

outside the business judgment rule’s presumptive protection, so that, where properly

challenged, the receipt of self-determined benefits is subject to an affirmative

showing that the compensation arrangements are fair to the corporation.” Telxon

20
Corp. v. Meyerson, 802 A.2d 257, 265 (Del. 2002); accord Valeant Pharms. Int’l v.

Jerney, 2007 WL 2813789, at *10 (Del. Ch. Mar. 1, 2007) (“Where the self-

compensation involves [fiduciaries] paying themselves bonuses, the court is

particularly cognizant to the need for careful scrutiny.”). “Self-interested

compensation decisions made without independent protections are subject to the

same entire fairness review as any other interested transaction.” Valeant, 2007 WL

2813789, at *10; accord In re Invs. Bancorp, Inc. S’holder Litig., 177 A.3d 1208,

1224–25 (Del. 2017), as revised (Dec. 19, 2017) (explaining that, absent properly

employed protective mechanisms, conflicted compensation decisions are subject to

entire fairness review).

In the recent Match decision, our Supreme Court specifically identified

compensation decisions to controlling stockholders as a transaction that is

presumptively subject to review under the entire fairness standard. 315 A.3d at 451–

52, 465 & n.129. As the Match Court also explained, a defendant in these

circumstances can obtain a pleadings-stage dismissal in one of two ways. First, a

defendant can satisfy the MFW framework, under which the transaction must be

negotiated by an independent and disinterested special committee and approved by

a fully informed, uncoerced vote of the unaffiliated stockholders. Id. at 451. Second,

a defendant can obtain dismissal under Rule 23.1 for failure to plead demand futility.

Id. at 451–52 (“Of course, derivative claims against controlling stockholders, which

21
typically arise from ordinary course transactions such as compensation decisions and

intercompany agreements, are subject to Court of Chancery Rule 23.1 and our

demand review precedent.”); see In re BGC P’rs, Inc. Deriv. Litig., 2019 WL

4745121, at *7 (Del. Ch. Sept. 30, 2019) (observing that Rule 23.1 “is not

automatically satisfied when the challenged transaction would be subject to entire

fairness review because it involves a controlling stockholder” (emphasis

omitted)). 101 “[I]n the demand context even proof of majority ownership of a

company does not strip the directors of the presumptions of independence, and that

their acts have been taken in good faith and in the best interests of the corporation.”

Aronson v. Lewis, 473 A.2d 805, 815 (Del. 1984), overruled on other grounds by

Brehm v. Eisner, 746 A.2d 244 (Del. 2000)102; accord Beam ex rel. Martha Stewart

101
“Admittedly, there is [also] a tension in our law” between the presumptive application
of the entire fairness standard to conflicted controller transactions and the lack of a
presumption that demand is futile in the same context. Match, 315 A.3d at 469. But as the
Court explained, “Aronson and our demand review precedent stand apart from the
substantive standard of review in controlling stockholder transactions. The distinction is
grounded in the board’s statutory authority to control the business and affairs of the
corporation, which encompasses the decision whether to pursue litigation.” Id.
102
In Brehm, the Delaware Supreme Court overruled seven precedents, including Aronson,
to the extent those precedents reviewed a Rule 23.1 decision by the Court of Chancery
under an abuse of discretion standard or otherwise suggested a deferential appellate review.
See Brehm, 746 A.2d at 253–54 & n.13. The Brehm Court held that going forward,
appellate review of a Rule 23.1 determination would be de novo and plenary. Id. at 253–
54. The seven partially overruled precedents otherwise remain good law. See Match, 315
A.3d at 459 n.85 (acknowledging the narrow scope of Brehm’s ruling on this point); id. at
869 (relying on “Aronson and our demand review precedent”); see also In re Trados Inc.
S’holder Litig., 73 A.3d 17, 43 n.17 (Del. Ch. 2013).

22
Living Omnimedia, Inc. v. Stewart, 845 A.2d 1040, 1054 (Del. 2004) (“A

stockholder’s control of a corporation does not excuse presuit demand on the board

without particularized allegations of relationships between the directors and the

controlling stockholder demonstrating that the directors are beholden to the

stockholder.”). “Stated differently, the potential that the entire fairness standard may

govern Plaintiff’s breach of fiduciary duty claim against . . . an alleged controlling

stockholder . . . does not remove that claim . . . from” Rule 23.1’s pleading

requirements. Teamsters Union 25 Health Servs. & Ins. Plan v. Baiera, 119 A.3d

44, 68 (Del. Ch. 2015); accord Lenois v. Lawal, 2017 WL 5289611, at *13 n.103

(Del. Ch. Nov. 7, 2017) (“Thus, I do not find demand excused simply because the

proper standard of review is entire fairness solely due to an interested transaction

with a conflicted controller.”).

The Defendants did not attempt to satisfy MFW. Instead, they argue that

demand is not excused and, therefore, the Complaint must be dismissed under Rule

23.1.

B. Standard of Review
Section 141(a) of the Delaware General Corporation Law (“DGCL”) provides

that a corporation “shall be managed by or under the direction of [its] board of

directors.” 8 Del. C. § 141(a); McRitchie v. Zuckerberg, 315 A.3d 518, 536 (Del.

Ch. 2024) (“That statutory grant of authority forms the foundation of Delaware’s

23
board-centric model of governance.”). This managerial authority includes whether

the corporation should “initiate, or refrain from entering, litigation.” Zapata Corp.

v. Maldonado, 430 A.2d 779, 782 (Del. 1981); accord United Food & Com. Workers

Union v. Zuckerberg (Zuckerberg II), 262 A.3d 1034, 1047 (Del. 2021) (“The

board’s authority to govern corporate affairs extends to decisions about what

remedial actions a corporation should take after being harmed, including whether

the corporation should file a lawsuit against its directors, its officers, its controller,

or an outsider.”).

Plaintiffs seek to pursue a claim on behalf of the Company, thereby

“divest[ing] the directors of their authority to control the litigation asset.” Lenois,

2017 WL 5289611, at *9. “The question of whether a stockholder may act as a

volunteer in taking up the cudgels in behalf of his corporation . . . is one of his right

and authority to act.” Ainscow v. Sanitary Co. of Am., 180 A. 614, 615 (Del. Ch.

1935). Rule 23.1 provides a mechanism whereby a stockholder may do so, but it

sets a high bar.

The complaint in a derivative action must:
(1) state with particularity:
(A) any effort by the derivative plaintiff to obtain the
desired action from the entity; and
(B) the reasons for not obtaining the action or not making
the effort; and
(2) allege facts supporting a reasonable inference that the
derivative plaintiff has standing to sue derivatively under the law
governing the entity.

24
Ct. Ch. R. 23.1(a). The “stringent requirements of factual particularity . . . differ

substantially from the permissive notice pleadings governed solely by Chancery

Rule 8(a).” Brehm, 746 A.2d at 254.

The demand requirement in Rule 23.1 “is a basic principle of corporate

governance and is a matter of substantive law.” Grimes v. Donald, 673 A.2d 1207,

1216 (Del. 1996) (internal quotation marks omitted), overruled on other grounds by

Brehm v. Eisner, 746 A.2d 244 (Del. 2000). It is “a substantive requirement that

ensures that a stockholder exhausts his intracorporate remedies, provides a safeguard

against strike suits, and assures that the stockholder affords the corporation the

opportunity to address an alleged wrong without litigation and to control any

litigation which does occur.” Zuckerberg II, 262 A.3d at 1047 (cleaned up).

The Plaintiffs in this action did not make a pre-suit demand. Therefore, before

Plaintiffs may litigate these claims on behalf of the corporation, they must persuade

the court that any demand on the Board to pursue the claims is excused as futile.

Demand is futile if at least half of the members of the Demand Board are

unable to consider a demand for one of the three reasons outlined in Zuckerberg II:

(i) [T]he director received a material personal benefit from the
alleged misconduct that is the subject of the litigation demand;
(ii) [T]he director faces a substantial likelihood of liability on any of
the claims that would be the subject of the litigation demand; [or]
(iii) [T]he 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

25
substantial likelihood of liability on any of the claims that are the
subject of the litigation demand.

Id. at 1059. “To comply with Rule 23.1, the plaintiff must meet ‘stringent

requirements of factual particularity that differ substantially from . . . permissive

notice pleadings.’” Id. at 1048 (alteration in original) (quoting Brehm, 746 A.2d at

254). “When considering a motion to dismiss a complaint for failing to comply with

Rule 23.1, the Court does not weigh the evidence, must accept as true all of the

complaint’s particularized and well-pleaded allegations, and must draw all

reasonable inferences in the plaintiff’s favor.” Id. That being said, however,

“[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.” In re INFOUSA, Inc. S’holders

Litig., 953 A.2d 963, 985 (Del. Ch. 2007), as revised (Aug. 20, 2007) (internal

quotation marks omitted); Grimes, 673 A.2d at 1214 (“Conclusory statements

without supporting factual averments will not be accepted as true for purposes of a

motion to dismiss.”). “This analysis is fact-intensive and proceeds director-by-

director and transaction-by-transaction,” Khanna v. McMinn, 2006 WL 1388744, at

*14 (Del. Ch. May 9, 2006), and “assesses the ability of the Board in place as of the

date of the filing of a complaint.” Schoenmann v. Irvin, 2022 WL 1792976, at *12

(Del. Ch. June 2, 2022).

26
The burden at this stage is on the Plaintiffs to overcome a defendant-friendly

presumption. “It is a presumption that in making a business decision the directors

of a corporation acted on an informed basis, in good faith and in the honest belief

that the action taken was in the best interests of the company.” Aronson, 473 A.2d

at 812; Beam, 845 A.2d at 1048 (“The key principle upon which this area of our

jurisprudence is based is that the directors are entitled to a presumption that they

were faithful to their fiduciary duties.”). “In the context of presuit demand, the

burden is upon the plaintiff in a derivative action to overcome that presumption.”

Beam, 845 A.2d at 1048–49.

At the time of the original complaint, the Demand Board had eight members.

It is undisputed that Green would not be able to consider a demand regarding a suit

challenging the Award. It is also undisputed that Cunningham would be able to

consider a demand. The parties hotly contest the ability of the remaining six

directors to consider a demand: Pickles, Paley, Buyer, Falberg, Rajaram, and Wells.

To survive dismissal under Rule 23.1, Plaintiffs must raise a reasonable doubt as to

the ability of three of these six contested directors to consider demand. Plaintiffs

insist that demand is futile as to each of those six directors because they lack

independence from Green, face a substantial likelihood of liability, or both.

27
C. Plaintiffs Contend that There Is Reason to Doubt Whether Four
Members of the Demand Board Are Independent of Green.

Plaintiffs do not challenge the independence of Cunningham, Rajaram, or

Wells. Plaintiffs do, however, argue that Pickles, Paley, Buyer, and Falberg lack

independence from Green, the recipient of the Award.

To create a reasonable doubt about an outside director’s independence,
a plaintiff must plead facts that would support the inference that
because of the nature of a relationship or additional circumstances other
than the interested director’s stock ownership or voting power, the non-
interested director would be more willing to risk his or her reputation
than risk the relationship with the interested director.

Beam, 845 A.2d at 1052. “When assessing director independence, our courts do not

‘anthropologize’ directors as simply homo economicus; instead, other factors,

including personal and business relationships, can influence and, at times,

compromise independence. As commentators have noted, Delaware’s independence

analysis is context-specific and fact-intensive.” In re CBS Corp. S’holder Class

Action & Deriv. Litig., 2021 WL 268779, at *29 (Del. Ch. Jan. 27, 2021), as

corrected (Feb. 4, 2021). Director independence may be compromised by a single

conflict or a constellation of lesser connections. Cal. Pub. Empls.’ Ret. Sys. v.

Coulter, 2002 WL 31888343, at *9 (Del. Ch. Dec. 18, 2002) (“Our cases have

determined that personal friendships, without more; outside business relationships,

without more; and approving of or acquiescing in the challenged transactions,

28
without more, are each insufficient to raise a reasonable doubt of a director’s ability

to exercise independent business judgment.” (footnotes omitted)).

An additional overlay to the independence inquiry is Green’s position as the

Company’s controlling stockholder. But this, alone, does not render demand futile.

A derivative plaintiff cannot successfully rebut the presumption of a director’s

ability to consider demand by simply alleging the director was elected or appointed

by an interested party, or even a controller. Aronson, 473 A.2d at 815–16; see

Zuckerberg II, 262 A.3d at 1061–64 (determining that there was no reasonable doubt

about the independence of a majority of the directors from the controlling

stockholder); see also In re Rouse Props., Inc., 2018 WL 1226015, at *15 (Del. Ch.

Mar. 9, 2018) (recognizing that “the appointment of a director onto the board, even

by the controlling stockholder, is insufficient to call into question the independence

of that director”); Williamson v. Cox Commc’ns, Inc., 2006 WL 1586375, at *4 (Del.

Ch. June 5, 2006) (“The fact that Cox and Comcast nominated directors to the At

Home board does not, without more, establish actual domination or control. To hold

otherwise would have a chilling effect on transactions that depend on a particular

shareholder being able to appoint representatives to an investee’s board of directors.”

(footnote omitted)). To be sure, a director’s appointment by a controller “is not

necessarily irrelevant.” In re Ezcorp Inc. Consulting Agreement Deriv. Litig., 2016

WL 301245, at *41 (Del. Ch. Jan. 25, 2016), as modified on reargument (Feb. 23,

29
2016); accord In re HomeFed Corp. S’holder Litig., 2020 WL 3960335, at *14 (Del.

Ch. July 13, 2020) (“Although the presence of a controller does not alone overcome

the presumption of director independence, it is relevant when considering Plaintiffs’

allegations holistically.”). But “[t]here must be coupled with the allegation of

control such facts as would demonstrate that through personal or other relationships

the directors are beholden to the controlling person.” Aronson, 473 A.2d at 815; see

id. at 816 (“It is the care, attention and sense of individual responsibility to the

performance of one’s duties, not the method of election, that generally touches on

independence.”).

1. There is reason to doubt Pickles’s independence.
Pickles is both an officer and a director of Trade Desk.103 Pickles’s

relationship with Green dates back to 2007, when Green hired Pickles to work at

AdECN.104 Green and Pickles worked together at AdECN for two years, after which

they co-founded Trade Desk in November 2009.105 Pickles then left his previous

employer to become Trade Desk’s chief technology officer (“CTO”) in March 2010,

a position that he has held continuously through the filing of this action.106 Pickles

derives his principal income from his compensation as CTO, earning $4.26 million

103
Compl. ¶¶ 157, 162.
104
Id. ¶ 161.
105
Id. ¶¶ 161–62.
106
Id. ¶ 162.

30
in 2019, $4.79 million in 2020, and $7.24 million in 2021. 107 Pickles does not

qualify as an independent director under the NASDAQ listing requirements, and the

Company acknowledges as much.108 Pickles recused himself from the Board’s vote

approving the Award. 109

Pickles, as the highly compensated 110 CTO of a corporation that Green

controls, cannot impartially consider a demand to initiate litigation challenging

Green’s compensation. The proposition that “senior corporate officers generally

lack independence for purposes of evaluating matters that implicate the interests of

107
Id. ¶ 163.
108
Id. ¶ 165.
109
Id. ¶ 169; Dkt. 22 Ex. 26 at TTD_Huizenga000497.
110
Plaintiffs allege that Pickles “received a compensation package valued at $4.26 million
in 2019, $4.79 million in 2020, and $7.24 million in 2021,” an average of $5.43 million
over the three-year period preceding this suit. Compl. ¶ 163. These sums are
presumptively material at the motion to dismiss stage. Orman v. Cullman, 794 A.2d 5, 31
(Del. Ch. 2002), as revised (Mar. 1, 2002) (“I think it would be naïve to say, as a matter of
law, that $3.3 million is immaterial.”); see also In re The Limited, Inc. S’holders Litig.,
2002 WL 537692, at *5 (Del. Ch. Mar. 27, 2002) (“[D]uring the years 1996–1998, he
averaged $1.8 million in salary and bonuses. It is reasonable to infer that compensation of
this magnitude is material to him.”). Adjusting for inflation, Pickles’s $5.43 million
average compensation between 2019 and 2021 is greater than the $1.8 million at issue in
Limited and the $3.3 million at issue in Orman. A $1.8 million salary in January 1998
would have the same buying power as just over $3.25 million in May 2022, and a $3.3
million payment in March 2002 would have the same buying power as almost $5.4 million
in May 2022. See U.S. Dep’t of Labor, Bureau of Labor Statistics, CPI Inflation
Calculator, https://www.bls.gov/data/inflation_calculator.htm; see Menacker v. Overture,
L.L.C., 2020 WL 4463438, at *17 & n.7 (Del. Ch. Aug. 4, 2020) (taking judicial notice of
the U.S. Consumer Price Index on a motion to dismiss); see also In re MultiPlan Corp.
S’holders Litig., 268 A.3d 784, 813 (Del. Ch. 2022) (“A greater than half-million-dollar
payout is presumptively material at the motion to dismiss stage.”).

31
a controller” is supported by “the great weight of Delaware precedent.” Voigt v.

Metcalf, 2020 WL 614999, at *16 (Del. Ch. Feb. 10, 2020) (collecting cases).

Pickles’s lengthy professional relationship with Green further strengthens the

reasonable inference that Pickles could not impartially consider a demand to pursue

litigation to challenge the Award. See Coulter, 2002 WL 31888343, at *9 (“[I]t is a

reasonable inference from the alleged particularized facts that the combination of

relationships between Coulter and Mandigo, along with Coulter’s position as CEO

of the company that employs Mandigo’s son, would be sufficiently material to

preclude Mandigo from being able to consider demand without improper

considerations intervening.”).

Absent some unusual fact—such as the possession of inherited
wealth—the remuneration a person receives from her full-time job is
typically of great consequence to her. It is usually the method by which
bills get paid, health insurance is affordably procured, children’s
educations are funded, and retirement savings are accumulated.

In re The Student Loan Corp. Deriv. Litig., 2002 WL 75479, at *3 n.3 (Del. Ch. Jan.

8, 2002). Defendants do not attempt to rebut the inference that Pickles’s salary and

other employment benefits are material to him.

For the foregoing reasons, there is reason to doubt that Pickles can consider a

demand impartially.

32
2. There is not reasonable doubt about Paley’s independence
from Green.

Paley is a co-founder of Founder Collective, a seed-stage venture capital

fund.111 Paley and his two co-founders make a point of being the largest investors

in each of their funds, “[s]o when entrepreneurs take our money, it’s really our

money.”112 Founder Collective was one of the Company’s initial two investors in

2010. 113 Paley joined the Board at the time and has remained a Trade Desk director

ever since. 114 Founder Collective’s investment in the Company of under $2 million

yielded over $100 million in profits over the course of its nine-year investment.115

Green has invested in Founder Collective’s 2016 and 2020 third and fourth funds.116

From these particularized allegations, Plaintiffs offer a host of arguments to cast

doubt about Paley’s independence from Green.

First, Plaintiffs contend that instituting suit against Green would have negative

implications on Paley’s and Founder Collective’s future earning potential. Plaintiffs

highlight the significant return that Founder Collective has enjoyed from its early

investment in Trade Desk and favorable comments about Green and the Company

111
Compl. ¶¶ 180–81.
112
Id. ¶ 182 (emphasis and internal quotation marks omitted).
113
Id. ¶ 185.
114
Id.
115
Id. ¶¶ 185, 190–91.
116
Id. ¶¶ 182, 193.

33
on Founder Collective’s website and Paley’s social media. According to Plaintiffs,

Paley’s reputation and earning potential are “inextricably intertwined with his

relationship with Green.”117 From this, Plaintiffs contend that Paley lacks

independence because he harbors a sense of “owingness” to Green and that

instituting suit against Green would have negative consequences on Paley and

Founder Collective.

Plaintiffs’ argument takes their particularized allegations too far. It is

reasonable to infer that Paley and Founder Collective value their business

relationship with Trade Desk and Green, but viewed holistically, the allegations do

not create reasonable doubt as to Paley’s independence from Green. Trade Desk is

not Founder Collective’s only investment. According to the Complaint, “[s]ince its

founding in 2009, Founder Collective has invested in hundreds of companies.”118

Nor is Trade Desk a lone success story among Founder Collective’s investments.

As described in an article cited in the Complaint, Founder Collective “backed ten

companies that have either exited or been valued at more than $1 billion in [its] first

two funds.”119 In light of the pleadings-stage record on Founder Collective’s

117
Pls.’ Answering Br. 74.
118
Compl. ¶ 183.
119
Connie Loizos, Founder Collective barrels forward, closing its fourth and newest fund
with $85 million, TechCrunch (May 20, 2020),

34
investments, Plaintiffs have not offered particularized allegations that Paley’s

service on Trade Desk’s Board is material to him. See Zuckerberg II, 262 A.3d at

1063 (explaining that, given a director’s wealth and stature, “[t]he complaint does

not support an inference that Thiel’s service on the Board is financially material to

him. Nor does the complaint sufficiently allege that serving as a Facebook director

confers such cachet that Thiel’s independence is compromised” (alteration in

original) (internal quotation marks omitted)). Plaintiffs’ allegations that Paley and

Founder Collective benefited from their association with Trade Desk lack the

particularity necessary to satisfy Rule 23.1. See id. (“While the complaint alleges

that Founders Fund gets good deal flow from Thiel’s high-profile association with

Facebook, the complaint does not identify a single deal that flowed to—or is

expected to flow to—Founders Fund through this association, let alone any deals

that would be material to Thiel’s interests.” (footnote and internal quotation marks

omitted)). Similarly, the reputational impacts of instituting suit against a founder do

https://techcrunch.com/2020/05/20/founder-collective-barrels-forward-closing-its-fourth-
and-newest-fund-with-85-million/; see Compl. ¶¶ 182–83 (citing and quoting material
from the TechCrunch article). The court considers this article to be incorporated by
reference in the Complaint. See Allen v. Encore Energy P’rs, L.P., 72 A.3d 93, 96 n.2
(Del. 2013) (“A judge may consider documents outside of the pleadings [] when . . . the
document is integral to a plaintiff’s claim and incorporated in the complaint . . . .” (citing
Vanderbilt Income & Growth Assocs., L.L.C. v. Arvida/JMB Managers, Inc., 691 A.2d 609,
613 (Del. 1996)).

35
not, alone, give rise to a reasonable inference that Paley would be unable to consider

a demand impartially. 120

Plaintiffs next point to Paley’s favorable public statements and social media

posts about his experience with Green and the Company. For example, on the day

of Trade Desk’s IPO, Paley posted “So lucky to have worked with [Green] from day

1 of [the Company]. What an amazing journey. Thank you!” with a picture of the

two of them at the IPO launch.121 From these particularized allegations, Plaintiffs

120
Plaintiffs cite Goldstein v. Denner, 2022 WL 1671006 (Del. Ch. May 26, 2022), in
support of their argument that “Trade Desk is by far Founder Collective’s most successful
investment, and Paley could not help but wonder what the impact on his firm’s business
would be, and what existing and potential clients would think, if he repaid Green by suing
him.” Pls.’ Answering Br. 79 (citing Goldstein, 2022 WL 1671006, at *47–48 & n.31).
The discussion in Goldstein upon which Plaintiffs rely was, however, about repeat director
nominees, not the venture capitalists themselves, and relied on case law discussing a lack
of independence where directors “had previously served on the board of directors of at least
two other [fund portfolio] companies” and “previously received $30,000 from [the
controller] for agreeing to be a director nominee in [the controller’s] proxy bid for another
company” in support of the proposition that “when an influential party has bestowed a
directorship on an individual in the past or has the power to reward an individual with
directorships in the future, then the individual may seek to serve the interests of that
influential party.” 2022 WL 1671006, at *47 (alterations in original) (internal quotation
marks omitted). That is not to say that the court is blind to the possibility that Paley might
engage in such a pragmatic calculus before deciding to institute suit against Green. But
Plaintiffs have not presented particularized allegations giving rise to a reasonable inference
that this would so dominate Paley’s decision-making as to render him unable to impartially
consider demand. See id. at *49 (“Outside of a Rule 12(b)(6) motion in a case governed
by enhanced scrutiny, it is unlikely that a similar constellation of facts would be sufficient
to overcome the presumption of good faith or to call a director’s independence into
question. For example, the reasonable doubt standard used in a demand futility analysis
provides a higher hurdle for a plaintiff than the relatively lenient standard of review
pursuant to Rule 12(b)(6).” (internal quotation marks omitted)).
121
Compl. ¶ 188.

36
argue that “Paley’s confession of feeling so lucky and thankful to be part of Green’s

success with Trade Desk, success that was incredibly profitable for Paley personally,

is tantamount to an admission that Paley harbors a sense of owingness towards

Green.”122 Plaintiffs overstate the legal force of these statements.

“[M]ere recitation of the fact of past business or personal relationships will

not make the Court automatically question the independence of a challenged

director.” Orman, 794 A.2d at 27 n.55. A plaintiff must “plead additional facts

concerning the length, nature or extent of those previous relationships that would put

in issue that director’s ability to objectively consider the challenged transaction.” Id.

Paley’s positive statements and past profits do not provide the plus-factor Plaintiffs

need to overcome “the general rule that past relationships do not call into question a

director’s independence.” In re Freeport-McMoran Sulphur, Inc. S’holder Litig.,

2005 WL 1653923, at *12 (Del. Ch. June 30, 2005); cf. id. at *11–12 (denying

summary judgment because material issues of fact remained as to a director’s ability

to objectively consider the challenged transaction where he “viewed the Freeport

entities as one collective unit and . . . spent his entire professional career at Freeport-

McMoRan” and “had worked for the Common Directors for almost twenty years

and had become a wealthy individual in their employ”); BGC P’rs, 2019 WL

122
Pls.’ Answering Br. 78 (cleaned up).

37
4745121, at *12 (inferring “a sense of owingness[] upon which a reasonable doubt

as to a director’s loyalty to a corporation may be premised” where the controller

donated “at least $65 million” to the school at which the director was provost during

the director’s tenure, the director’s board compensation was material, and the

controller had placed the director on multiple boards (internal quotation marks

omitted)); Marchand v. Barnhill, 212 A.3d 805, 820 (Del. 2019) (concluding that

there was reasonable doubt that a director could act impartially where “the pled facts

fairly support the inference that Rankin owes an important debt of gratitude and

friendship to the Kruse family for giving him his first job, nurturing his progress

from an entry level position to a top manager and director, and honoring him by

spearheading a campaign to name a building at an important community institution

after him”). In many ways, Plaintiffs’ arguments mirror those in Zuckerberg II that

were unsuccessful in challenging the independence of Peter Theil, an entrepreneur

and venture capitalist. 262 A.3d at 1062–63 (concluding that allegations including

“Thiel was one of the early investors in Facebook, [and] is its longest-tenured board

member besides Zuckerberg,” “Thiel is Zuckerberg’s close friend and mentor,” and

“[a]ccording to Facebook’s 2018 Proxy Statement, the Facebook shares owned by

the Founders Fund (i.e., by Thiel and Andreessen) will be released from escrow in

connection with an acquisition” did not raise a reasonable doubt as to Thiel’s ability

to consider demand (internal quotation marks omitted)). The allegations as to Paley

38
similarly fail, as none of Plaintiffs’ allegations or arguments that Paley harbors a

sense of “owingness” to Green create a reasonable doubt as to Paley’s independence.

Plaintiffs also seek to impugn Paley’s presumption of independence by

casting his relationship with Green as a personal one. For this, Plaintiffs again point

to certain of Paley’s public statements and social media posts about working with

Green and Trade Desk. Plaintiffs also highlight Paley’s statement that he and Green

“have had a phone call at least every two weeks by [Green’s] insistence” between

2011 and, at least, 2015.123 Plaintiffs also point to Green’s having invested in

Founder Collective’s third and fourth funds. 124

One consistent through-line for each of Plaintiffs’ allegations—with one

exception—is that they relate to Paley’s and Green’s professional capacities relative

to Trade Desk. Complementing a successful portfolio company and publicly

celebrating its IPO are part of being an effective venture capital investor. Cf. United

Food & Com. Workers Union v. Zuckerberg (Zuckerberg I), 250 A.3d 862, 894 (Del.

Ch. 2020), aff’d, 262 A.3d 1034 (Del. 2021) (“It is both expected and customary for

a chair and CEO to comment favorably on a new director who is joining the board.

Nothing about the post suggests a relationship of a bias-producing nature.”).

Communicating regularly with the Company’s CEO while Trade Desk was a private

123
Compl. ¶ 187 (emphasis and internal quotation marks omitted).
124
Id. ¶ 193.

39
company demonstrates Paley’s interest as a director and investor. It also reflects

Green’s desire to keep Paley informed. But these allegations do not raise a

reasonable doubt as to Paley’s independence. See Zuckerberg II, 262 A.3d at 1063

(“The complaint does not explain why Thiel’s . . . contributions to Facebook’s

business strategy make him beholden to Zuckerberg.”).

Plaintiffs also emphasize that Paley has been on the Board for 12 years. But

this alone does not convert Green and Paley’s 12-year working relationship into a

personal one. The particularized allegations here fall far short of those where

personal relationships created doubt as to a director’s independence. For example,

in Delaware County Employees Retirement Fund v. Sanchez, 124 A.3d 1017 (Del.

2015), the “director ha[d] been close friends with an interested party for a half

century.” Id. at 1022 (emphasis added); see id. (“Close friendships of that duration

are likely considered precious by many people, and are rare. People drift apart for

many reasons, and when a close relationship endures for that long, a pleading stage

inference arises that it is important to the parties.”). Unlike in Sanchez, Plaintiffs

here do not allege that Paley and Green are friends—in fact, the word “friend” does

not even appear in the Complaint.125 The Complaint contains no particularized

125
Nor does Plaintiffs’ briefing use the word to describe Paley and Green’s relationship
either. A version of “friend” appears but four times in Plaintiffs’ brief: once to describe
the relationship in Sanchez as one between “close friends,” and three times to emphasize
that Rule 12(b)(6) is a “plaintiff-friendly” standard. Pls.’ Answering Br. 77, 94–95, 97.

40
allegations that are comparable to the 50-year close friendship in Sanchez. Nor are

the Complaint’s allegations even close to Sandys v. Pincus, 152 A.3d 124 (Del.

2016), where a director was deemed to lack independence from a controller with

whom the director co-owned a private airplane, which “signaled an extremely close,

personal bond between” the director and controller. Id. at 130; see id. (“Co-

ownership of a private plane involves a partnership in a personal asset that is not

only very expensive, but that also requires close cooperation in use, which is

suggestive of detailed planning indicative of a continuing, close personal

friendship.”).

This leaves Green’s investments in Founder Collective’s third and fourth

funds, which Paley disclosed in a director questionnaire inquiring into

“relationships” the “Board should consider in evaluating your independence.”126

This particularized allegation identifies a business relationship suggestive of a level

of trust and respect involving matters outside the Company’s board room. See

Sciabacucchi v. Liberty Broadband Corp., 2018 WL 3599997, at *14 (Del. Ch. July

26, 2018) (“It is true that allegations of a mere outside business relationship, standing

alone, are insufficient to raise a reasonable doubt about a director’s independence.

But it does not follow that a business relationship between a director and an

126
Compl. ¶ 193 (internal quotation marks omitted).

41
interested party can never undermine the presumption of director independence.”

(cleaned up)). The question is one of degree: based on Plaintiffs’ particularized

allegations, is this a relationship that, alone, provides reason to doubt Paley’s ability

to consider demand, or is it a “without more” allegation that gets added to the mix

of allegations that must be considered holistically?

Plaintiffs do not plead with particularity the size of Green’s investments in

these funds. Plaintiffs brush this aside, arguing that “it is reasonable to infer that

Green’s investment is more than nominal” because “it is not plausible that Green

would have bothered to make only token investments.”127 But merely inferring that

Green invested more than a nominal sum does not satisfy Plaintiffs’ burden under

Rule 23.1 to plead with particularity. Paley is alleged to have invested more of his

own money in each fund than Green, and it is not reasonable to infer that Green’s

minority investments in a couple of eight-figure funds would give reason to doubt

Paley’s independence from Green. The magnitude of Paley’s and Green’s minority

investments in two eight-figure funds stand in stark contrast to those that have been

found to implicate a director’s independence. In Liberty Broadband, this court

concluded that a director was, for pleadings-stage purposes, unable to consider

demand based only on entities in which the director and interested party each had

127
Pls.’ Answering Br. 80–81.

42
significant minority interests co-investing in joint ventures worth approximately $1

billion. 2018 WL 3599997, at *14.128 The Liberty Broadband court acknowledged

that “more information would perhaps have made the pleadings stronger,” but

concluded that significant interests in $1 billion in co-investments “suffices to

impugn [the director’s] independence at the pleading stage.” Id. Plaintiffs’

allegations of Paley’s and Green’s smaller interests in funds totaling $160 million

pales in comparison to those at issue in Liberty Broadband, leading to the conclusion

that this relationship is not enough to cast a reasonable doubt as to Paley’s ability to

consider demand. See In re Goldman Sachs Gp., Inc. S’holder Litig., 2011 WL

4826104, at *11 (Del. Ch. Oct. 12, 2011) (concluding that a director could consider

demand despite a defendant having invested “at least $670 million in funds managed

by” the director in part because there were no allegations that the director relied on

managing those funds (internal quotation marks omitted)).129 Therefore, the court

128
The director was one of three founders of a private equity firm that held a 40% interest
in the joint ventures. Liberty Broadband, 2018 WL 3599997, at *13. The remaining 60%
interest was held by a corporation in which the interested party was a 25% owner and
served as board chairman. Id. The business enterprise “became the largest cable company
in Puerto Rico.” Id.
129
Plaintiffs’ other proffered authorities in support of the proposition that this was a “long-
standing pattern of mutually advantageous business relations” itself creating doubt as to
Paley’s ability to consider demand are similarly inapposite. Pls.’ Answering Br. 80
(internal quotation marks omitted); cf. Harbor Fin. P’rs v. Huizenga, 751 A.2d 879, 889
(Del. Ch. 1999) (explaining that it was reasonably conceivable that a director was unable
to impartially consider demand because the court could infer that the director lacked

43
concludes that Green’s investing in Founder Collective’s funds provides insufficient

support, either alone or together with Plaintiffs’ other allegations, to doubt Paley’s

ability to consider demand.

3. There is not reasonable doubt about Buyer’s independence
from Green.
Buyer is a principal at Class V Group LLC (“Class V Group”), a consulting

firm that she co-founded in 2006.130 “Buyer has only one employee at Class V

Group,” and Buyer’s “principal source of income” since 2006 has been through her

consulting firm. 131 Class V Group advises companies going public through initial

public offerings or direct listings, working with approximately four companies each

year.132 Green engaged Buyer in 2015 to advise on the Company’s IPO, for which

she was paid $175,000 in cash and received an option to purchase 2,500 shares of

independence from his brother-in-law who had been the director’s boss, co-founder, co-
investor, and co-director at various entities over the course of 30 years); Sandys, 152 A.3d
at 133–34 (finding reason to doubt the ability of two directors to consider demand where
the two were partners in a firm that owned 9.2% of the controlled company, invested in
another company co-founded by the controller’s wife, and invested in a third company with
another party who allegedly benefited from the challenged transaction); In re Loral Space
& Commc’ns Inc., 2008 WL 4293781, at *6, *17 (Del. Ch. Sept. 19, 2008) (explaining,
post-trial, that a director’s solicitation of $70 million in investments from the controller
while negotiating the challenged transaction with the controller evidenced a “close
relationship” between the director and controller). The magnitude of business relationships
in these cases is not comparable to that of Paley’s business relationship with Green here.
130
Compl. ¶ 170; Dkt. 22 Ex. 1 at 9.
131
Compl. ¶ 170.
132
Id. ¶¶ 170, 173.

44
Trade Desk stock at the then-current price. 133 Buyer’s consulting work for the

Company ended in early 2017. 134

Buyer joined the Board in March 2019. 135 The Company determined then that

she was not independent under the NASDAQ rules,136 “presumably due to her”

consulting work for the Company within the prior three years.137 The Company has

since reclassified Buyer as an independent director, and she was appointed as the

Board’s “lead independent” director in February 2021.138 The Company paid Buyer

$535,558 for her Board service in 2019, $408,492 in 2020, and $314,176 in 2021.139

In Buyer’s 2021 director and officer questionnaire, she identified her prior

consulting engagement with the Company as a “material relationship” and noted that

she has listed Trade Desk as a reference for future consulting jobs. 140 Buyer

133
Id. ¶ 172.
134
Id.
135
Id. ¶ 176.
136
Id. ¶ 177.
137
Pls.’ Answering Br. 87; see Sandys, 152 A.3d at 132 (explaining that, outside of
exceptions not applicable here, accepting “any compensation from the Company in excess
of $120,000 during any period of twelve consecutive months within the three years
preceding the determination of independence” “automatically preclude[s] a finding of
independence” under the NASDAQ rules (internal quotation marks omitted)).
138
Compl. ¶ 177.
139
Id. ¶ 178.
140
Id. ¶ 174; Dkt. 32 Ex. 30 at TTD_Huizenga000341.

45
“presume[s] some potential clients may have spoken with management at the

Company and may have subsequently hired” her.141

Plaintiffs argue that Buyer lacks independence from Green because she lists

the Company as a reference, earns good money as a director, and previously

provided consulting work for the Company—all benefits Plaintiffs contend can be

taken away by Green. Plaintiffs argue that Buyer’s prior classification as not

independent under the NASDAQ rules is another pertinent factor for consideration

in the analysis of whether she is independent of Green.

Buyer’s receipt of director compensation does not undermine her

independence. “Delaware law recognizes that directors will be paid a fair and

reasonable amount. For that reason, when director fees are not excessive, mere

allegations of payment of director fees are insufficient to create a reasonable doubt

as to the director’s independence.” Simons v. Brookfield Asset Mgmt. Inc., 2022 WL

223464, at *15 (Del. Ch. Jan. 21, 2022). Plaintiffs do not argue that Buyer’s director

fees are excessive, and her mere receipt of payment for her board service does not

create a reasonable doubt as to her independence from Green. Plaintiffs’ sole

allegation on this point—that “given that her only other source of income is her

consulting work, the handsome compensation she receives as a Trade Desk director

141
Compl. ¶ 175 (alteration in original) (quoting Dkt. 32 Ex. 30 at TTD_Huizenga000341).

46
is material to Buyer”—is conclusory.142 Plaintiffs make no attempt to compare

Buyer’s director’s fees with her other sources of income or accumulated wealth, and

this bare assertion does not satisfy Rule 23.1’s particularity requirement. 143

At its core, Plaintiffs’ argument as to Buyer is the same as their argument with

respect to Pickles—Plaintiffs contend that Buyer lacks independence from Green

because he could affect her livelihood. The allegation sticks to Pickles. Pickles is

the Company’s CTO and a subordinate to Green—the Company’s CEO and

controlling stockholder—who could directly affect Pickles’s livelihood. By

contrast, Buyer does not work for the Company (other than serving on the Board)

and runs her own business, which does not do any work for the Company. And

142
Id. ¶ 179. Plaintiffs allege that Buyer’s “principal source of income” since 2006 has
been through Class V Group. Id. ¶ 170.
143
Buyer’s classification as not independent under the NASDAQ rules in 2019 is similarly
unpersuasive. It is well established “that ‘the criteria NASDAQ has articulated as bearing
on independence are relevant under Delaware law,’” but they do not control this court’s
independence analysis under Rule 23.1. In re Kraft Heinz Co. Deriv. Litig., 2021 WL
6012632, at *12 (Del. Ch. Dec. 15, 2021) (quoting Sandys, 152 A.3d at 131), aff’d, 282
A.3d 1054 (Del. 2022) (TABLE). Buyer had been classified as independent under the
NASDAQ rules for years by the time Plaintiffs filed this suit, which is the relevant date for
purposes of determining Buyer’s independence. To the extent Buyer’s independence
classification under the NASDAQ rules carries any weight, it is against Plaintiffs. See
Ezcorp, 2016 WL 301245, at *36 (“The fact that a director qualifies as independent for
purposes of a governing listing standard is [] a helpful fact which, all else equal, makes it
more likely that the director is independent for purposes of Delaware law.”). Furthermore,
the fees paid to Buyer’s consulting firm five years before Plaintiffs initiated this suit do not
move the needle here. Plaintiffs do not allege that Buyer’s work in connection with the
Company’s IPO was anything other than an arms-length arrangement in which Buyer
performed her usual services for her standard compensation.

47
given the narrow scope of Class V Group’s focus—advising on go-public

transactions—there is no reasonable expectancy that the Company would ever re-

hire the firm.

Plaintiffs are then left with inferences to be drawn from Buyer’s listing the

Company as a reference for new engagements. These allegations do not create a

reasonable doubt as to Buyer’s ability to consider a demand impartially. None of

the authorities Plaintiffs proffer regarding the potentially conflicting nature of

consulting relationships were decided under Rule 23.1, 144 and none of them were

based upon consulting services that terminated half a decade before the filing of the

complaint.145 To call into question the independence of a director based upon her

144
See In re Emerging Commc’ns, Inc. S’holders Litig., 2004 WL 1305745 (Del. Ch. May
3, 2004), as revised (June 4, 2004) (post-trial entire fairness analysis); Loral, 2008 WL
4293781 (post-trial entire fairness analysis); Orman, 794 A.2d 5 (motion to dismiss under
Rule 12(b)(6)); HomeFed, 2020 WL 3960335 (motion to dismiss under Rule 12(b)(6));
Trade Desk, 2022 WL 3009959 (discussing, but not deciding, this same relationship on a
motion to dismiss under Rule 12(b)(6)). Moreover, one of the cases Plaintiffs rely upon
expressly distinguished the lower pleading threshold under which it was decided from that
which is controlling here. Goldstein, 2022 WL 1671006, at *2, *49 (“In granting the
plaintiff a pleading-stage inference sufficient to keep Protopapas [the analysis of whose
independence Plaintiffs reply upon here] and Germano in the case, this decision has taken
into account that the defendants moved to dismiss under Court of Chancery Rule 12(b)(6),
which imposes a lower pleading standard than a motion to dismiss under Court of Chancery
Rule 23.1, where particularized pleading is required. . . . To survive a motion to dismiss
under Rule 23.1, for example, a plaintiff would have to plead more.”).
145
Cf. Sandys, 152 A.3d at 126, 130, 134 (concluding that demand was futile based on
particularized allegations of one director’s “very close personal relationship that, like
family ties, one would expect to heavily influence a human’s ability to exercise impartial
judgment” and two other directors’ “mutually beneficial ongoing business relationship”

48
serving as a consultant, the complaint must allege facts to show the conflicted party

had a more direct influence over the director’s future workflow than has been

asserted here. 146 Rather, Plaintiffs’ allegations here are comparable to those rejected

with the conflicted party across several “interlocking relationships”); BGC P’rs, 2019 WL
4745121, at *11–14 (concluding that demand was futile based on particularized allegations
of, among other things, (i) one director’s professional relationship with the controlling
stockholder “span[ning] approximately twenty years, during which [the director] has
served with [the controlling stockholder] on the boards of four [controller]-affiliated
companies”; (ii) a second director’s benefiting professionally from $65 million in
donations by the controlling stockholder and service on multiple boards at his behest; and
(iii) a third director’s ties to the controlling stockholder pre-dating even his ten years on
the board, inclusion on a public list of the controller’s potential board appointees, and the
materiality of the director fees to the director).
146
See, e.g., Klein v. H.I.G. Cap., L.L.C., 2018 WL 6719717, at *11 (Del. Ch. Dec. 19,
2018) (concluding that a controlling stockholder’s control over the renewal of a consulting
agreement that paid a director more than his previous salary as CEO, along with other
allegations, created reasonable doubt as to the director’s ability to consider a demand
impartially). The same is true of assessments of independence in the non-derivative cases
upon which Plaintiffs rely. See Emerging Commc’ns, 2004 WL 1305745, at *34 (finding
that a director who was on an annual $200,000 retainer with one of the controller’s entities,
viewed the controller “as a source of additional future lucrative consulting fees,” and
recently sought a $2 million fee for providing advisory services was not independent); id.
at *33 (finding another director who was the controller’s “long time lawyer,” and virtually
all of his fees generated over the prior three-year period were attributable to services for
the controller and his entities, was “clearly conflicted” and not independent); Loral, 2008
WL 4293781, at *6, *17 (“Harkey and Rachesky [MHR’s principal] were business school
classmates at Stanford, have maintained a ‘long-time friendship,’ and serve as business
resources and references for each other. Based on Rachesky’s recommendation, Harkey
serves as a director on three boards . . . . Harkey’s close relationship with MHR was
evidenced by the fact that he was personally soliciting [a total of $70 million of unrelated,
personal] investments from MHR late in the negotiation process.” (footnotes omitted));
Orman, 794 A.2d at 30 (concluding that it was reasonable to infer that a director was
beholden to the controlling shareholders for future renewals of his existing consulting
contract); HomeFed, 2020 WL 3960335, at *13 (determining that it was reasonably
conceivable that a director lacked independence where “aside from his HomeFed director
role, Bienvenue’s consulting role was his ‘sole employment’” and the conflicted party
controlled both positions).

49
by our Supreme Court in Zuckerberg II, where the Court concluded that generalized

allegations that a director benefited from increased “deal flow” were insufficient to

impair his independence. 262 A.3d at 1063 (“While the complaint alleges that

Founders Fund gets good deal flow from Thiel’s high-profile association with

Facebook, the complaint does not identify a single deal that flowed to—or is

expected to flow to—Founders Fund through this association, let alone any deals

that would be material to Thiel’s interests.” (footnote and internal quotation marks

omitted)). Plaintiffs’ arguments fail here for the same reason: their generalized

allegations lack the particularity Rule 23.1 requires.147

147
See, e.g., Compl. ¶ 179 (alleging that “Buyer would likely consider whether initiating a
suit against Green would cause Green to no longer serve (or allow Trade Desk to serve) as
her consulting reference”). Plaintiffs take this argument still further in their briefing,
contending that, “[s]ince the income Buyer receives from her consulting business and her
directorship at Trade Desk are her only sources of income and she relies on Green to sustain
both sources, there is a reasonable pleadings-stage inference to be drawn that Buyer is
essentially ‘all in’ on Team Green and therefore beholden to him.” Pls.’ Answering Br. 86
(emphasis omitted). But based on the particularized allegations in the Complaint, it is not
reasonable to infer that Buyer relies on Green to sustain her consulting business. As is
apparent from the very director and officer questionnaire upon which Plaintiffs rely, and
as this court has previously observed, Buyer has extensive experience in a variety of hefty
roles, including as Director of Business Optimization at Google, General Partner of a
venture capital firm, and Director of Internet/New Media Research at Credit Suisse First
Boston. Dkt. 32 Ex. 30 at TTD_Huizenga000342. She has been running Class V Group
since 2006 and has over 15 years of experience doing this precise type of consulting work.
Additionally, as Plaintiffs allege, Buyer aims to work with “about four companies per
year.” Compl. ¶ 173 (emphasis omitted) (internal quotation marks omitted). Even
conservatively assuming that Buyer only worked with three companies per year since
founding Class V Group, she would still have roughly 50 available references. The
potential to impair one of those references does not raise a reasonable doubt that Buyer
would be unable to consider a demand impartially.

50
Considered individually or together, Plaintiffs’ allegations that Buyer lacks

independence from Green fall short of Rule 23.1’s pleading requirements, and the

court concludes that Buyer would be able to consider demand impartially.

4. There is not reasonable doubt about Falberg’s independence
from Green.
Falberg was an early investor in AdECN and served as its Chief Financial

Officer (“CFO”) in the months leading up to its acquisition by Microsoft in 2007.148

Falberg joined the Board six days before the Company announced its IPO, and she

has served as a member of the Compensation Committee and the Nomination and

Corporate Governance Committee since.149 Around the time Plaintiffs filed this

action, Falberg held approximately $14.4 million in Trade Desk Class A stock, and

over 100,000 shares of Class B stock.150

Both prior to and after her time at AdECN, Falberg served as the CFO for

several companies, ending her last such position in 2014. 151 Since 2004, Falberg has

served as a director of at least 13 publicly traded companies, 152 and, at the time of

the Complaint, she served on the boards of four publicly traded companies, in

148
Compl. ¶¶ 195–97.
149
Id. ¶¶ 199, 201. The Company issued an expected and customary press release in
connection with Falberg’s joining the Board, which featured positive statements from
Falberg and Green. Id. ¶¶ 199–200; see Zuckerberg I, 250 A.3d at 894.
150
Compl. ¶ 203.
151
Id. ¶¶ 195–96, 198.
152
Id. ¶¶ 205–06.

51
addition to Trade Desk.153 The director fees from these positions are Falberg’s

principal source of income.154 Plaintiffs do not allege that Green had any role in

Falberg’s obtaining any of her other directorships.

Plaintiffs contend that Falberg’s previous work at AdECN, significant

holdings of Trade Desk stock, and director fees impair her ability to consider

demand. Individually and collectively, Plaintiffs’ allegations fall short.

First, Falberg’s brief overlap with Green at AdECN does not undermine the

presumption of her independence. Unlike Pickles, who continued to work with

Green at Microsoft and then co-founded the Company with him, Falberg spent a

matter of months at AdECN.155 Plaintiffs do not allege any interaction between her

and Green over the following nine years. Falberg’s brief tenure at AdECN, which

ended 15 years before this action, her 2003 investment in AdECN, and her six-year

tenure on the Board do not, individually or collectively, create reason to doubt her

independence from Green. See Zuckerberg II, 262 A.3d at 1063 (“The complaint

does not explain why [Falberg’s] status as a long-serving board member[] [or] early

investor . . . make [her] beholden to [Green].”).

153
Id. ¶ 205.
154
Id. ¶ 204.
155
Id. ¶ 197.

52
Second, the timing of Falberg’s first obtaining Trade Desk stock does not

affect her independence. Plaintiffs allege that “while Trade Desk still was private,

Falberg owned 30,303 shares (which have since split ten-for-one),” and that she

owns Trade Desk Class A stock worth more than $14 million.156 Plaintiffs argue

that “[i]f Green had not appointed Falberg to the Board before the Company’s IPO,

she would not own millions of dollars in Trade Desk stock.” 157 The Complaint does

not, however, actually allege when or how Falberg acquired these shares. In any

event, that Falberg has derived substantial wealth from holdings in Trade Desk does

not impair her independence from Green. There are no allegations that Green “has

any means to deprive [Falberg] of the wealth [Falberg] has accumulated, or that

[Green] has the ability to deprive [Falberg] of wealth—let alone wealth that is

material to [Falberg]—going forward.” McElrath ex rel. Uber Techs., Inc. v.

Kalanick, 2019 WL 1430210, at *18 (Del. Ch. Apr. 1, 2019), aff’d, 224 A.3d 982

(Del. 2020). Of course, it is possible for past benefits of sufficient materiality in the

specific circumstances of a particular director to give rise to a sense of owingness.

See BGC P’rs, 2019 WL 4745121, at *12. But Plaintiffs have not made

particularized allegations regarding a past benefit that would give rise to a sense of

owingness that would affect Falberg’s independence from Green, and Falberg’s

156
Id. ¶ 203.
157
Pls.’ Answering Br. 90.

53
ownership of Trade Desk stock does not create reason to doubt her independence.

Owens ex rel. Esperion Therapeutics, Inc. v. Mayleben, 2020 WL 748023, at *10

(Del. Ch. Feb. 13, 2020) (“Nor does our law infer a lack of director independence

simply because that director owns stock in the company on whose board he sits;

indeed, that dynamic is common and is generally regarded as a desirable alignment

of incentives between fiduciaries and beneficiaries.”), aff’d, 241 A.3d 218 (Del.

2020), as corrected (Nov. 18, 2020) (TABLE). Plaintiffs’ allegations regarding

Falberg’s stock holdings provide Plaintiffs no support.158

Finally, Plaintiffs argue that Falberg’s fees for her board service with the

Company are material to her. The Complaint highlights that Falberg has earned

approximately $1,868,344 over the course of her time on the Board and, on average,

a little over $300,000 per year. 159 The Complaint also alleges that Falberg’s other

158
Plaintiffs’ allegation that “Falberg thus owes a substantial portion of her net worth to
Green’s decision to appoint her to the Board” also fails for lack of specificity. Compl.
¶ 203. Merely asserting that Falberg’s Trade Desk stock constitutes “a substantial portion
of her net worth,” without attempting to contextualize those holdings or quantify her net
worth, is conclusory and falls short of Rule 23.1’s requirement that Plaintiffs plead with
particularity.
159
Id. ¶ 202. Plaintiffs’ reliance on Trados for the proposition that a “salary of $1 million
is material” misconstrues the nature of the conflict they purport to analogize. Pls.’
Answering Br. 91 n.326 (citing Trados, 73 A.3d at 46). As a factual matter, the only salary
identified on the page to which Plaintiffs cite was $190,000 plus unspecified bonuses, and
the $1 million payment discussed therein was a one-time payment in connection with the
challenged transaction. Trados, 73 A.3d at 46. Moreover, the director estimated his net
worth to be $2 to $4 million, so the $1 million payment alone increased the director’s

54
income is derived from other directorships. 160 Plaintiffs’ particularized allegations

provide but one year of compensation for comparison: 2021. 161 In that year,

according to the Complaint, Falberg earned $1,553,670, 19.1% of which is attributed

to her director fees at Trade Desk.

The particularized allegations of Falberg’s director compensation at Trade

Desk cannot, without more, create a reasonable inference that Falberg cannot

consider demand. Compare BGC P’rs, 2019 WL 4745121, at *12–13 (holding that

compensation constituting “over 30%” of a director’s annual income, together with

$65 million in donations to the director’s then-employer, further ties through that

personal wealth by up to 50%. Id. By contrast, going only off Falberg’s wealth as alleged
in the Complaint, even aggregating six years of director compensation from Trade Desk
matches a mere 12–13% of Falberg’s personal wealth, and her annual director
compensation from Trade Desk was only 19% of her publicly reported income in 2021.
Trados discussed a different issue of a different magnitude, and Plaintiffs’ reliance thereon
is unavailing.
160
See Compl. ¶ 205 (“In addition to Trade Desk, Falberg currently serves on the board of
four other publicly-traded companies: (a) Arcus Biosciences, Inc., where she has served
since September 2017, earning $1,265,047 compensation in the aggregate, including
$373,270 in 2021; (b) Nuvation Bio, where she has served since October 2020, earning
$1,152,600 compensation in the aggregate, including $351,726 in 2021; (c) Urogen Pharma
Ltd., where she has served since April 2017, earning $1,348,231 compensation in the
aggregate, including $202,688 in 2021; and (d) Tricida, Inc., where she has served since
May 2018, earning $1,700,459 compensation in the aggregate, including $329,000 in
2021.”).
161
Plaintiffs contend in their briefing, without citation to the record, that Falberg’s income
from her service on Trade Desk’s Board “represents over 25% of her total income.” Pls.’
Answering Br. 90. It is not clear to the court how Plaintiffs got to this number, and
Plaintiffs only specifically alleged Falberg’s actual income from her other positions, year
for year, in 2021.

55
institution, and an expectancy of future positions, supported a pleadings-stage

conclusion that demand was futile as to that director), and Emerging Commc’ns,

2004 WL 1305745, at *34 (concluding that amounts representing 22.5% of a

director’s income, together with a one-time payment of similar value the year of the

challenged conduct, additional annual payments, and the controller’s power over the

director’s son-in-law’s consulting arrangement, supported a post-trial finding that

the director was not independent), with Kraft Heinz, 2021 WL 6012632, at *11–13

(concluding that a director’s compensation constituting 17% of his publicly reported

income, classification as not independent under the NASDAQ listing standards, and

prior consulting relationship did not overcome the director’s presumed

independence for purposes of demand).

The well-pleaded, particularized allegations in the Complaint concerning

Falberg’s brief tenure at AdECN 15 years before this action, along with her director

compensation and stock holdings, do not give rise to a reasonable inference that

Falberg lacks independence from Green. Accordingly, the court concludes that

Plaintiffs have not sufficiently called into question Falberg’s ability to consider a

demand impartially. 162

162
This is so even if the court considers Plaintiffs’ “controlled mindset” argument in the
analysis of Falberg’s independence, as this court did in In re Viacom Inc. Stockholders
Litigation, 2020 WL 7711128 (Del. Ch. Dec. 29, 2020), as corrected (Dec. 30, 2020).

56
* * *

In sum, the well-pleaded, particularized allegations in the Complaint give rise

to a reasonable inference that Pickles lacks independence from Green. The

allegations as to Paley, Buyer, and Falberg, however, are insufficient to create

reasonable doubt as to their independence. The court turns next to Plaintiffs’

argument that the Director Defendants face a substantial likelihood of liability.

D. The Director Defendants Do Not Face a Substantial Likelihood of
Liability from This Litigation.

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.”

Zuckerberg II, 262 A.3d at 1059. Plaintiffs contend that Falberg, Rajaram, Wells,

Buyer, and Paley cannot consider a demand because they face a substantial

likelihood of liability from Plaintiffs’ claims.

Falberg, Rajaram, and Wells served on the Compensation Committee which

negotiated and recommended that the Board approve the Award to Green. They,

There, on a motion to dismiss under Rule 12(b)(6), this court concluded that the
circumstances of directors’ appointments, the directors’ prior relationships with the
controller, the controller’s demonstrated history of ouster, and the special committee’s
“controlled mindset,” “taken together,” impugned directors’ independence. Id. at *25. But
here, Plaintiffs’ allegations regarding Falberg’s personal relationships and controlled
mindset are weaker than in Viacom, Plaintiffs proffer no allegations regarding retributive
behavior by Green, and the relevant standard of review is materially higher. And, in any
event, Plaintiffs themselves did not advance this lack of independence argument with
respect to Falberg, or any of the other Director Defendants.

57
along with Buyer and Paley, also approved the Award at the Board level. Each has

been named as a defendant for alleged breach of fiduciary duty.

Having been named as defendants in this action does not mean that these five

directors are incapable of considering a demand. “Demand is not excused solely

because the directors would be deciding to sue themselves.” Citigroup, 964 A.2d at

121. It is also beyond question that a director does not face a substantial likelihood

of liability for demand purposes merely because the director voted to recommend or

approve the transaction that is at issue in the litigation. Aronson, 473 A.2d at 815

(“[T]he mere threat of personal liability for approving a questioned transaction,

standing alone, is insufficient to challenge either the independence or

disinterestedness of directors.”); Grobow v. Perot, 526 A.2d 914, 924 (Del. Ch.

1987) (“It is now well-settled that an allegation that a majority of directors approved,

participated, or acquiesced in a challenged transaction will not, in and of itself,

establish demand futility. The claim that the directors would be required to sue

themselves, or that any action brought would be in hostile hands and not diligently

prosecuted, has also been rejected by the Delaware Supreme Court and this Court.”

(citations omitted)), aff’d, 539 A.2d 180 (Del. 1988), overruled on other grounds by

Brehm v. Eisner, 746 A.2d 244 (Del. 2000).

58
Rather, demand will be excused based on a possibility of personal
director liability only in the rare case when a plaintiff is able to show
director conduct that is “so egregious on its face that board approval
cannot meet the test of business judgment, and a substantial likelihood
of director liability therefore exists.”

Citigroup, 964 A.2d at 121 (quoting Aronson, 473 A.2d at 815).

Plaintiffs cannot satisfy their burden by engaging in group pleading. “[E]ach

director has a right to be considered individually when the directors face claims for

damages in a suit challenging board action.” In re Cornerstone Therapeutics Inc.,

S’holder Litig., 115 A.3d 1173, 1182 (Del. 2015); see also id. at 1183 (explaining

that our Supreme Court has “refused to presume that an independent director is not

entitled to the protection of the business judgment rule solely because the controlling

stockholder may itself be subject to liability for breach of the duty of loyalty if the

transaction was not entirely fair to the minority stockholders”). Therefore,

notwithstanding the presumptive application of the entire fairness standard of review

to a claim challenging Green’s conduct, “a separate, start-from-scratch review of the

allegations against the Director Defendants is necessary.” CBS, 2021 WL 268779,

at *37.

As a matter of first principles, each director is presumed to have acted in

conformity with her fiduciary duties. Aronson, 473 A.2d at 812; Beam, 845 A.2d at

1048. To rebut this presumption on the grounds that a director faces a substantial

likelihood of liability, Plaintiffs must “make a threshold showing, through the

59
allegation of particularized facts, that their claims [against each director] have some

merit.” Rales v. Blasband, 634 A.2d 927, 934 (Del. 1993). Plaintiffs cannot make

this showing with allegations supporting a breach of the duty of care because the

Trade Desk directors possess the protection of an exculpatory provision in the

Company’s certificate of incorporation. Under that provision, adopted in accordance

with Section 102(b)(7) of the DGCL, the directors cannot be held liable for money

damages for violations of the duty of care. 8 Del. C. § 102(b)(7) (providing that a

certificate of incorporation may include a provision “eliminating or limiting the

personal liability of a director or officer to the corporation or its stockholders for

monetary damages for breach of fiduciary duty as a director or officer,” subject to

specified exceptions). As a result, Plaintiffs acknowledge that they must plead with

particularity a substantial likelihood of liability on a non-exculpated claim.163 Under

Section 102(b)(7), a director cannot be exculpated for violations of the duty of

loyalty. Id. (providing that “such provision shall not eliminate or limit the liability

of . . . [a] director or officer for any breach of the director’s or officer’s duty of

loyalty to the corporation or its stockholders”). Where, as here, there is no allegation

that the Director Defendants received a personal financial benefit or were otherwise

interested in the transaction, the Plaintiffs can only establish a claim for breach of

163
Pls.’ Answering Br. 40 (“Because the Company’s Charter has an exculpation clause,
that analysis turns on whether Plaintiffs adequately pled that these Defendants breached
their duty of loyalty.”); see Zuckerberg II, 262 A.3d at 1054, 1060.

60
the duty of loyalty by alleging that the Director Defendants’ conduct amounted to

bad faith. “Whether a director faces a substantial likelihood of liability from a non-

exculpated claim ‘turns primarily on . . . whether the complaint pleads particularized

facts that support a reasonable inference that the director’s decision could be

attributed to bad faith.’” Brookfield, 2022 WL 223464, at *11 (alteration in original)

(quoting Zuckerberg I, 250 A.3d at 890); see In re Chelsea Therapeutics Int’l Ltd.

S’holders Litig., 2016 WL 3044721, at *1 (Del. Ch. May 20, 2016) (indicating that

even independent, disinterested directors can violate their fiduciary duties by

engaging in bad faith conduct).

Plaintiffs contend that they have alleged particularized facts supporting a

reasonable inference that all three members of the Compensation Committee

structured, and that each of the Director Defendants approved, the Award in bad

faith. This is no easy task. “Demonstrating that directors have breached their duty

of loyalty by acting in bad faith goes far beyond showing a questionable or debatable

decision on their part.” Ironworkers Dist. Council of Phila. & Vicinity Ret. &

Pension Plan v. Andreotti, 2015 WL 2270673, at *27 (Del. Ch. May 8, 2015), aff’d,

132 A.3d 748 (Del. 2016) (TABLE). Instead, Plaintiffs must plead facts giving rise

to a reasonable inference that each of the Director Defendants acted with scienter.

See IBEW Local Union 481 Defined Contribution Plan & Tr. ex rel. GoDaddy, Inc.

v. Winborne, 301 A.3d 596, 619–23 (Del. Ch. 2023), as corrected (Sept. 7, 2023);

61
Kahn v. Stern, 183 A.3d 715 (Del. 2018) (TABLE) (citing Brinckerhoff v. Enbridge

Energy Co., Inc., 159 A.3d 242, 258–60 (Del. 2017), as revised (Mar. 28, 2017));

Morrison v. Berry, 2019 WL 7369431, at *14 (Del. Ch. Dec. 31, 2019) (“A

demonstration of bad faith requires acts or omissions taken against the interest of the

Company, with scienter.”); Ironworkers, 2015 WL 2270673, at *27 (“For the actions

of directors to have been in bad faith, the directors must have acted with scienter,

i.e., with a motive to harm, or with indifference to harm that will necessarily result

from the challenged decision.”). “Where (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.” In re USG Corp. S’holder Litig.,

2020 WL 5126671, at *29 (Del. Ch. Aug. 31, 2020) (cleaned up), aff’d sub nom.

Anderson v. Leer, 265 A.3d 995 (Del. 2021) (TABLE). Because Plaintiffs allege

bad faith as the basis for demand futility, they must “plead particularized facts that

can support a reasonable inference about the directors’ state of mind.” Winborne,

301 A.3d at 619.

The exact scope of conduct constituting bad faith has gone intentionally

undefined in our case law. See In re Walt Disney Co. Deriv. Litig., 906 A.2d 27, 67

(Del. 2006) (“To engage in an effort to craft [] a definitive and categorical definition

62
of the universe of acts that would constitute bad faith would be unwise.” (footnote

and internal quotation marks omitted)); Chelsea Therapeutics, 2016 WL 3044721,

at *1 (explaining that “[t]he good-faith corollary to the duty of loyalty is something

of a catchall,” prohibiting knowing harm, intentional dereliction of duty, and

providing “the equity judge something akin to a ‘fiduciary out’ from the business

judgment rule, for situations where, even though there is no indication of conflicted

interests or lack of independence on the part of the directors, the nature of their action

can in no way be understood as in the corporate interest: res ipsa loquitur,” among

other theories). 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.” Disney, 906 A.2d at 64, 66; but see id. at 64–66 (explaining

that “fiduciary action taken solely by reason of gross negligence and without any

malevolent intent” is “clearly” not bad faith conduct and that “[t]here is no basis in

policy, precedent or common sense that would justify dismantling the distinction

between gross negligence and bad faith”).

1. Plaintiffs cannot satisfy their pleading burden by pointing to
process flaws and accusing the Director Defendants of having
acted with a “controlled mindset.”

Plaintiffs do not allege specific conduct, on a director-by-director basis,

giving rise to an inference of bad faith conduct. Rather, they argue that, collectively,

the Director Defendants face a substantial likelihood of liability for having acted

63
with a “controlled mindset.” Plaintiffs’ controlled mindset theory relies on a mix of

cases discussing “controlled mindset” and others discussing bad faith conduct.

The phrase “controlled mindset” finds its origins in our law in Chief Justice,

then-Chancellor, Strine’s post-trial opinion in In re Southern Peru Copper Corp.

Shareholder Derivative Litigation, 52 A.3d 761 (Del. Ch. 2011), aff’d sub nom.

Americas Mining Corp. v. Theriault, 51 A.3d 1213 (Del. 2012). There, a special

committee of “competent, well-qualified individuals with business experience,”

sufficient resources, and respected advisers had their “hands [] on the oars,” but

“their boat [went], if anywhere, backward.” Id. at 797. The court concluded that

this seemingly capable crew foundered because it had been “stilted and influenced

by its uncertainty about whether it was actually empowered to negotiate,” “accepted

that only one type of transaction was on the table,” and “allowed [itself] to be

hemmed in by the controlling stockholder’s demands.” Id. at 797–98, 801. Thus,

the process was flawed from the outset and the facts revealed that the special

committee engaged in the “self-defeating practice of negotiating with itself—

perhaps without even realizing it—through which it nixe[d] certain options before

even putting them on the table.” Id. at 800. As the Chief Justice described this

phenomenon, “from inception, the Special Committee fell victim to a controlled

mindset” and the resulting “strange deal dynamic” manifested an unfair process and

produced an unfair price. Id. at 798, 813.

64
Since Southern Peru, the phrase “controlled mindset” has become a

shibboleth for stockholder plaintiffs to characterize the conduct of a board or

committee that negotiates against an alleged controller. 164 So too here, as the

Plaintiffs rely on Southern Peru and other post-trial opinions discussing various

process failures in support of their theory of bad faith conduct.165 For starters, it is

important to note that in Southern Peru, controlled mindset was not applied as a

164
See, e.g., Sciabacucchi v. Liberty Broadband Corp., C.A. No. 11418-VCG (Del. Ch.),
Dkt. 326 at 123; In re BGC P’rs, Inc. Deriv. Litig., Consol. C.A. No. 2018-0722-LWW
(Del. Ch.), Dkt. 268 at 66–67; Franchi v. Firestone, C.A. No. 2020-0503-KSJM (Del. Ch.),
Dkt. 18 at 25–27, 31; In re Match Gp., Inc. Deriv. Litig., C.A. No. 2020-0505-MTZ (Del.
Ch.), Dkt. 100 at 48, 51, 54; City Pension Fund for Firefighters & Police Officers in City
of Mia. v. The Trade Desk, Inc., C.A. No. 2021-0560-PAF (Del. Ch.), Dkt. 1 ¶¶ 17, 112–
13; Harrison Metal Cap. III, L.P. v. Mathé, C.A. No. 2022-0261-PAF (Del. Ch.), Dkt. 35
at 45; Sciannella v. AstraZeneca UK Ltd., C.A. No. 2023-0125-PAF (Del. Ch.), Dkt. 1 ¶
162.
165
For example, Plaintiffs spent much of oral argument analogizing the allegations in the
Complaint to the facts found in the post-trial opinion in the Tornetta action. But see
Tornetta v. Musk (Tornetta II), 310 A.3d 430, 510–11, 520, 522, 531–32 (Del. Ch. 2024)
(invoking the concept of a “controlled mindset” in concluding that the CEO was a
controller, that disclosures that directors were “independent” were misleading, and that the
process was unfair, but not in support of the proposition that any of the directors had acted
in bad faith). Plaintiffs also relied on comparisons to Loral in their briefing. But see Loral,
2008 WL 4293781, at *33 & n.163 (observing that the court “would have to find that the
Special Committee members . . . acted in bad faith” to hold them liable for a monetary
remedy but declining to do so because it was unnecessary for what the court considered
the appropriate remedy, stating that “[i]f MHR or another party has my judgment
overturned and the Supreme Court returns the case to me for the entry of a damages award,
I can address the individual responsibility of these defendants then”—an appeal not taken
after the court denied the plaintiffs’ motion for reargument).

65
theory of liability against the special committee.166 It was a description of extreme

and otherwise inexplicable process failures that contributed to a finding of liability

against the controlling stockholder in that case.

What, then, of Plaintiffs’ theory that controlled mindset can itself give rise to

liability? Plaintiffs argue that it is grounded in Viacom, which explained that a

“controlled mindset” contributed to the court’s conclusion that it was reasonably

conceivable that a board committee lacked independence. 167 Plaintiffs then point to

CBS, where this court concluded that it was reasonably conceivable that directors

breached their duty of loyalty through bad faith conduct, and later cases citing CBS.

Plaintiffs also rely generally on a mix of post-trial decisions discussing unfair

processes.

166
The special committee members faced no liability in Southern Peru. They had been
dismissed earlier on a motion for summary judgment “because the plaintiff had failed to
present evidence supporting a non-exculpated breach of their fiduciary duty of loyalty.” S.
Peru, 52 A.3d at 785; see In re S. Peru Copper Corp. S’holder Deriv. Litig. (S. Peru MSJ
Transcript), C.A. No. 961-CS, at 123:22–129:5 (Del. Ch. Dec. 21, 2010) (TRANSCRIPT).
The plaintiffs had not raised the controlled-mindset argument at that stage and did not
challenge the committee members’ independence. See Viacom, 2020 WL 7711128, at *24
n.265.
167
Vice Chancellor Slights provided a careful analysis and application of the controlled-
mindset theory in Viacom, which the court need not attempt to replicate here.

66
Under Southern Peru,168 “controlled mindset” describes a latent inability to

perceive a conflict that is, at its core, a process failure.169 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.170 But a stockholder plaintiff cannot merely slap a “controlled

mindset” label onto a process or result with which it disagrees and expect to wrest

168
Only one opinion of our Supreme Court has used the “controlled mindset” moniker:
Americas Mining, in which the Court affirmed Southern Peru. There, the Supreme Court
accepted post-trial findings of unfair process and unfair price. But the Court’s opinion in
Americas Mining did not opine upon the scope of “controlled mindset” beyond affirming
the findings of the court below. Cf. generally Viacom, 2020 WL 7711128 (citing to and
discussing Southern Peru, not Americas Mining, for the scope of this theory). The phrase
has not appeared in any Supreme Court opinion since then.
169
S. Peru, 52 A.3d at 800 (explaining that a special committee operating under a controlled
mindset “engages in the self-defeating practice of negotiating with itself—perhaps without
even realizing it”). As articulated in Southern Peru, operating under a controlled mindset
is, alone, at most a breach of the duty of care. S. Peru MSJ Transcript, C.A. No. 961-CS,
at 123:22–129:5 (“Where I am going to grant summary judgment is for the members of the
special committee. [Section] 102(b)(7) is in our law. It’s an important thing. . . . The
dismissal of the special committee defendants doesn’t do anything to diminish the right to
recover against the interested party. It represents no finding about the effectiveness of the
special committee. It simply means that I don’t believe the record contains evidence
supporting a rational inference of a nonexculpated breach of fiduciary duty claim against
those defendants, and I’m going to grant their dismissal.”).
170
See, e.g., Viacom, 2020 WL 7711128, at *23–25 (concluding that a controlled mindset,
taken together with other allegations, undermined directors’ independence from a
controller); cf. CBS, 2021 WL 268779, at *37–43 (eschewing an independence analysis
entirely and instead determining that directors faced a substantial risk of liability because
objective facts gave rise to a reasonable inference that they “breached their fiduciary duty
of loyalty by approving the patently unfair Merger in order to appease [] Redstone”—a
quintessential bad faith analysis without a single mention of “controlled mindset”). This
court has also found the existence of a controlled mindset in negotiators to support a finding
of transaction-specific control, reasoning that negotiators’ inability to perceive a conflict
enhanced the controller’s influence over the transaction. Tornetta II, 310 A.3d at 520.

67
control of a claim from a majority independent and disinterested board of directors.

Plaintiffs must still satisfy their obligations under Rule 23.1 to plead particularized

facts supporting an inference of bad faith conduct amounting to a breach of the duty

of loyalty. See Winborne, 301 A.3d at 623 (“At the pleading stage, the test is whether

the complaint alleges a constellation of particularized facts which, when viewed

holistically, support a reasonably conceivable inference that an improper purpose

sufficiently infected a director’s decision to such a degree that the director could be

found to have acted in bad faith. Everything goes into that mulligan stew.”).

2. Plaintiffs rely on authorities addressing extreme facts not
present here.
Plaintiffs attempt to equate the Compensation Committee’s process with the

processes depicted in Viacom, CBS, Tornetta II, and Berteau.171 A brief review of

those cases shows much more controller interference and resulting influence than

what can be reasonably inferred here. 172

In Viacom, the plaintiffs challenged the independence of the members of the

special committee that negotiated a merger between Viacom, Inc. (“Viacom”) and

171
Only two of these cases discuss controlled mindset. Compare Viacom, 2020 WL
7711128 (citing Southern Peru and discussing controlled mindset), and Tornetta II, 310
A.3d 430 (same), with CBS, 2021 WL 268779 (citing Southern Peru but not discussing
controlled mindset), and Berteau v. Glazek, 2021 WL 2711678 (Del. Ch. June 30, 2021)
(neither citing Southern Peru nor discussing controlled mindset).
172
This opinion does not attempt to replicate the painstakingly detailed recitations of
pertinent facts and allegations in each of these lengthy opinions, of which this opinion
repeats but a small fraction.

68
CBS Corporation (“CBS”), both of which were controlled by National Amusements,

Inc. (“NAI”), and, ultimately, Shari Redstone. 2020 WL 7711128, at *2. Redstone

installed these individuals to replace non-compliant independent directors, and the

facts created a reasonable inference that they had consistently prioritized Redstone’s

interests over years of negotiation over the transaction. Id. at *6–9, *23. The Viacom

court determined that a collection of well-pleaded allegations detailing the

individuals’ relationships with Redstone, Redstone’s demonstrated history of

retributive behavior, and years of pervasive subservience indicating a controlled

mindset by the directors who Redstone brought in after cleaning house several years

earlier supported a pleadings-stage inference that these directors lacked

independence from Redstone. See id. at *25.

CBS addressed a pleadings-stage challenge on the other side of the

Viacom/CBS transaction.173 In CBS, the plaintiffs alleged a history of the prior

board’s having rejected Redstone’s insistence upon a Viacom/CBS deal, after which

173
“In a rare, but not unheard of twist,” Vice Chancellor Slights was tasked with
considering “the same story, the story of the Viacom/CBS merger” as alleged by aggrieved
stockholders of each company. CBS, 2021 WL 268779, at *1. As Vice Chancellor Slights
explained in CBS, it was reasonable to infer that Redstone had pushed for a transaction that
appeared value destructive for both corporations individually because it provided a non-
ratable benefit to NAI, which Redstone hoped to sell. Id. at *8, *36 (“According to NAI’s
advisors, if Viacom and CBS were to combine, then NAI could expect a sale premium as
high as 50%. . . . Plaintiffs’ particularized allegations allow a reasonable inference that
CBS’s acquisition of Viacom was motivated not only by [] Redstone’s concerns about
Viacom’s viability as a going concern, but also her desire to shop NAI following their
consolidation.”).

69
Redstone replaced six of the CBS directors. The new board “stood in stark contrast”

to the members of the predecessor board, and “welcomed the controller, with all her

self-interest, into the huddle.” CBS, 2021 WL 268779, at *43. The members of the

new CBS committee—a majority of whom were new Redstone appointees—then

capitulated on nearly every point, “assent[ed] to . . . constraints on their mandate

without protest,” ignored Redstone’s violation of a settlement agreement prohibiting

merger talks, and did not attempt to secure the unaffiliated vote condition that had

been a constant for years of negotiation. Id. at *9, *37, *40–42; see also id. at *41

(recounting that the few holdover directors “did not even explain to the CBS

Committee the reasons for their past fervent opposition to a Viacom/CBS merger,

even though no relevant circumstances had changed”). These and other

particularized “unique” and “extreme” facts, “combined with the documented

evidence of [] Redstone’s dogged determination to make this deal happen ‘one way

or the other,’” supported the court’s conclusion that a majority of the demand board

faced a substantial likelihood of liability. Id. at *42–43, *47.

In Tornetta II, a post-trial opinion, this court found that an entirely conflicted

compensation committee negotiated and recommended the challenged equity grant,

which was ultimately approved by a majority conflicted board. 310 A.3d at 508–10,

70
532.174 In addition to the conflicts identified in Tornetta II, the controller, Elon

Musk, was found to have exercised extraordinary influence on the entire process.

For example, “before the Board or Compensation Committee had a substantive

discussion concerning the Grant, Musk’s team proposed a highly accelerated

schedule that contemplated approval of the Grant within less than two months,”

“[t]he committee’s independent advisors asked for more time and were told no,” and

Musk unilaterally stalled and accelerated the process over a period of months in a

manner that “made it tough for the directors and their advisors to meaningfully

evaluate the Grant and respond.” Id. at 528–29. The Tornetta II court also found

that: (a) “Musk made an initial proposal, and that proposal was the only one

seriously considered until Musk unilaterally changed it six months later,” (b) “[t]he

Compensation Committee did not consider alternatives,” and (c) the compensation

committee neither received nor asked its advisers to provide a benchmarking

analysis to compare the grant to awards made by other corporate boards, even though

“[b]enchmarking is the foundation of a compensation advisor’s analysis.” Id. at 515,

517–19, 530–31.

174
This case and the opinions in the Tornetta action involve fundamentally different
inquiries, rendering their comparison inexact. As a procedural matter, the defendants in
Tornetta elected not to seek dismissal under Rule 23.1. Tornetta I, 250 A.3d at 797 n.5;
Tornetta II, 310 A.3d at 496 n.541. And substantively, the issue before the court here is
whether the directors face a substantial likelihood of liability for having engaged in bad
faith conduct; Tornetta II was an entire fairness analysis, and neither opinion in Tornetta
addressed whether the directors’ conduct amounted to bad faith.

71
Each of these cases—Viacom, CBS, and Tornetta II—involved extreme,

exhaustively detailed facts showing pervasively flawed processes. And in Berteau,

the court, which never used the phrase “controlled mindset,” considered stark,

startling facts that gave rise to a pleadings-stage inference of disloyal conduct under

the more permissive Rule 12(b)(6) standard. The Berteau court concluded that it

was reasonably conceivable that the special committee allowed management of a

controlled company to select its counsel, successfully negotiated for but inexplicably

abandoned a majority-of-the-minority vote condition, and capitulated to the

controller’s price terms after the controller flexed its authority in a hastily convened

Sunday morning board meeting. Berteau, 2021 WL 2711678, at *22–24; see also

id. at *23 (noting that the complaint further alleged that, after closing, the special

committee failed to respond to the controller’s breach of the merger agreement to

profit the controller at the company’s expense). The complaint contained well-

pleaded facts which, collectively, created a reasonable inference that the controller

overtly influenced the special committee’s process on multiple occasions, and that

the special committee was doing little more than trying to hide its abdication of its

fiduciary duties behind negotiations “limited to the minimum necessary to confer a

scintilla of legitimacy” to its process. Id. at *24.

As this court recently observed in Winborne, “[b]ad faith is a state of mind,”

and “[a]n individual’s mental state is not directly observable.” 301 A.3d at 619–20.

72
“Without the ability to read minds, a trial judge only can infer a party’s subjective

intent from external indications. Objective facts remain logically and legally

relevant to the extent they permit an inference that a defendant lacked the necessary

subjective belief.” Allen v. El Paso Pipeline GP Co., L.L.C., 113 A.3d 167, 178

(Del. Ch. 2014), aff’d, 2015 WL 803053 (Del. Feb. 26, 2015) (TABLE). In each of

Southern Peru, Viacom, CBS, Tornetta II, and Berteau, this court focused on

directors’ responses to interfering actions, not merely the presence of a controlling

stockholder, as the pertinent objective indicia. What mattered was the “mindset,”

not the existence of “control.” 175

175
“To be sure, a director’s appointment by a controller ‘is not necessarily irrelevant.’”
Harrison Metal Cap. III, L.P. v. Mathé, 2024 WL 1299579, at *10 (Del. Ch. Mar. 27, 2024)
(quoting Ezcorp, 2016 WL 301245, at *41). And “the Court cannot ignore the role of the
controller in evaluating the loyalty of the Director Defendants.” CBS, 2021 WL 268779,
at *38. But the mere presence of a controller is not enough to undermine our law’s
fundamental presumption that directors “were faithful to their fiduciary duties”—a
foundation of Delaware’s board-centric model of corporate governance. Beam, 845 A.2d
at 1048; see id. at 1054 (explaining that, without more, a “stockholder’s control of a
corporation does not excuse presuit demand on the board”); Aronson, 473 A.2d at 815
(“[E]ven proof of majority ownership of a company does not strip the directors of the
presumptions of independence, and that their acts have been taken in good faith.”); cf.
Ezcorp, 2016 WL 301245, at *40, *42 (“[A] director’s nomination or election by an
interested party is, standing alone, insufficient to raise a reasonable doubt about his or her
independence. . . . [But] giving pleading-stage effect to a controller’s actual threats and
retributive behavior has important integrity-preserving consequences. If a controller
anticipates that threats will have legal consequences for demand futility and other
doctrines, then he should be less likely to make and carry them out. That in turn should
enable outside directors to better fulfill the meaningful role that Delaware law
contemplates.”); see, e.g., Viacom, 2020 WL 7711128, at *21–22 (discussing “Redstone
and NAI’s Demonstrated History of Ouster”); CBS, 2021 WL 268779, at *38 (describing
Redstone as “active, and at times, retributive”).

73
In sum, to give rise to a reasonable inference that the members of the

Compensation Committee are subject to a substantial likelihood of liability,

Plaintiffs’ particularized allegations must paint a picture not only of unfair process,

or even of gross negligence,176 but rather must point to external indications from

which the court can infer a bad faith state of mind. Winborne, 301 A.3d at 619–20.

3. Plaintiffs’ well-pleaded, particularized allegations do not
give rise to a reasonable inference that the Director
Defendants acted in bad faith.
Plaintiffs point to several observable indications that they argue support a

reasonable inference of bad faith conduct. First, Plaintiffs emphasize Green’s

presence, either personally or through counsel, at Compensation Committee

meetings, including during portions of the discussions of the Award. But Plaintiffs

do not allege that Green or his counsel improperly influenced the Compensation

Committee by their attendance and discussions with the committee. Green’s mere

presence does not provide meaningful support for an inference that the

Compensation Committee acted in bad faith.

176
Our Supreme Court has squarely rejected the proposition that “fiduciary action taken
solely by reason of gross negligence and without any malevolent intent” violates the duty
of loyalty. Disney, 906 A.2d at 64. As the Court explained, “[t]o adopt a definition that
conflates the duty of care with the duty to act in good faith by making a violation of the
former an automatic violation of the latter, would nullify” Section 102(b)(7) and portions
of Section 145 of the DGCL, “and defeat the General Assembly’s intent.” Id. at 66. “There
is no basis in policy, precedent or common sense that would justify dismantling the
distinction between gross negligence and bad faith.” Id.

74
The presence of Green and his counsel during portions of the Compensation

Committee’s meetings pales in comparison to the controllers’ conduct in CBS,

Viacom, Tornetta II, and even Berteau. The Complaint does not allege

particularized facts comparable to the unflinching, reflexive capitulation of

Viacom’s special committee. Nor does it even hint of any history of threats or

retributive conduct that would intimidate the Compensation Committee or cause its

members to abandon their fiduciary obligations. Plaintiffs’ allegations also fall well

short of those in CBS, where directors reversed years of faithful conduct for no

reason other than the controller’s pressure. See CBS, 2021 WL 268779, at *41

(explaining that despite “independent CBS fiduciaries [having] recently and

consistently worked strenuously to preserve” stockholders’ interests, “each member

resigned to [] Redstone’s will, without regard for the stockholders to whom they

owed fiduciary duties” even though “no relevant circumstances had changed” other

than that “their will to resist was gone”); see also Brookfield, 2022 WL 223464, at

*13 (explaining that “the court in CBS reached this conclusion in the face of

particularly egregious facts, where controller-selected directors approved a merger

with the controller after several previous failed merger attempts and after the board

had repeatedly been advised that the merger was unfavorable”). And unlike in

Tornetta II, Plaintiffs make no allegations regarding Green’s control of the

Compensation Committee’s timing or process. See Tornetta II, 310 A.3d at 528–

75
29; see also Berteau, 2021 WL 2711678, at *23 (noting that the special committee

appeared to capitulate to pressure from the controller, which abruptly put an end to

negotiations).

“[T]he reality is that controllers come in different forms depending, in large

measure, upon the extent to, and purpose for, which they exert their influence.” CBS,

2021 WL 268779, at *38. In each of the cases upon which Plaintiffs rely, controlling

stockholders waded into the fray and conspicuously influenced the process, flexing

their authority to obtain the result they wanted at the expense of those to whom the

directors owed fiduciary duties. By contrast, Plaintiffs’ argument here largely boils

down to gesturing at the nature of the Award and Green’s having been present for

portions of the Compensation Committee’s meetings and discussing a framework

for the Award. But that does not satisfy Plaintiffs’ burden to plead facts with

particularity to create a reasonable inference of bad faith conduct.

Plaintiffs also rest their bad faith argument on the theory that “the Mega Grant

was ‘initiated’ by Green’s demands at the January 6, 2021 [Compensation]

Committee meeting and that he was ‘the driving force behind it.’”177 This contention

177
Pls.’ Answering Br. 47 (quoting Frederick Hsu Living Tr. v. Oak Hill Cap. P’rs III,
L.P., 2020 WL 2111476, at *36 (Del. Ch. May 4, 2020)). The full language, which
Plaintiffs selectively quoted from Oak Hill, states: “The fair process inquiry examines how
the decision under challenge was initiated. This includes examining the source of the idea
and who was the driving force behind it.” 2020 WL 2111476, at *36. It bears emphasis

76
ignores that the source of the idea for the Award was not Green—nor do Plaintiffs

allege or argue that it was. Based on the pleadings-stage record, the idea originated

either from Compensia or the Compensation Committee sometime in 2020.178

Plaintiffs allege that the Straw Model was the first mega grant proposal before the

that a fair process inquiry and a bad faith inquiry are not a perfect match conceptually. As
Chief Justice Strine cautioned in his post-trial opinion in Southern Peru:
The entire fairness standard ill suits the inquiry whether disinterested
directors who approve a self-dealing transaction and are protected by an
exculpatory charter provision authorized by 8 Del. C. § 102(b)(7) can be held
liable for breach of fiduciary duties. Unless there are facts suggesting that
the directors consciously approved an unfair transaction, the bad faith
preference for some other interest than that of the company and the
stockholders that is critical to disloyalty is absent. The fact that the
transaction is found to be unfair is of course relevant, but hardly sufficient,
to that separate, individualized inquiry. In this sense, the more stringent,
strict liability standard applicable to interested parties . . . is critically
different than that which must be used to address directors such as those on
the Special Committee.
52 A.3d at 787 n.72. In any event, the Complaint does not plead with particularity that
Green initiated the Award.
178
Plaintiffs highlight that the phrase “the Committee determined to consider a large CEO
equity grant further” does not appear in the minutes of the Compensation Committee’s
December 4, 2020 meeting, but does appear in several subsequent meeting minutes.
Compare Dkt. 22 Ex. 16, with id. Exs. 17–19. From this, it is reasonable to infer that the
Compensation Committee was undecided when it sought Green’s input. Plaintiffs take this
inch and try to stretch it a mile to suggest that the Compensation Committee did not initiate
the process that led to the final Award. That is not a reasonable inference on this pleadings-
stage record. The Complaint alleges that the Compensation Committee initially acquired
advice on such a package alone, discussed it alone, and then brought the idea and the Straw
Model to Green. Compl. ¶¶ 89, 115–16. In addition, the Complaint does not allege with
particularity that Green drove the process or terms thereafter. Cf. Tornetta II, 310 A.3d at
514, 528–29 (explaining that, while the committee had proposed the concept of a grant,
Musk then “repeatedly and unilaterally manipulated the timeline of the process” and
proposed the initial structure and the subsequent changes, which he described as “me
negotiating against myself” (internal quotation marks omitted)).

77
Compensation Committee and that it did not come from Green. 179 Cf. Tornetta II,

310 A.3d at 530 (“Musk made an initial proposal, and that proposal was the only

one seriously considered until Musk unilaterally changed it six months later.”). But

even if the idea had come from Green, the central inquiry into whether the directors

engaged in bad faith conduct is not how the concept originated, but rather how they

reacted in response to it.

Plaintiffs next argue that the Compensation Committee “Knew a Mega Grant

Was Unnecessary to ‘Retain’ Green.”180 Plaintiffs contend that, because of Green’s

significant existing equity stake and the recent amendments to the Company’s

certificate of incorporation extending Green’s voting control, “the Committee knew

that Green was not going anywhere.”181 This is a decent argument on unfair price.

See Tornetta II, 310 A.3d at 537–38. It is not, however, a particularly strong

argument on bad faith. See Tornetta I, 250 A.3d at 813–14 (describing similar

pleadings-stage allegations regarding unfair price as “lodged on the very outer

margins of adequacy” and allowing a claim for breach of fiduciary duty to proceed,

but explaining that the burden of “attacking a corporate transaction as wasteful is

179
See Compl. ¶¶ 89–115 (alleging that “[t]he possibility of a Mega Grant was first
discussed by the Compensation Committee at a December 4, 2020 meeting” not attended
by Green, describing the Straw Model and other contents of the Compensia Presentation,
and subsequently alleging “then Green intervened”).
180
Pls.’ Answering Br. 54.
181
Id. at 55.

78
necessarily higher than that of a plaintiff challenging a transaction as unfair” and

dismissing a claim for waste (internal quotation marks omitted)); Chelsea

Therapeutics, 2016 WL 3044721, at *1 (explaining that this form of circumstantial

bad faith allegation “is similar to the much older fiduciary prohibition of waste, and

like waste, is a rara avis”). Of course, it is reasonable to infer that Green may have

remained at the Company without the Award, and as a result, the Company might

not have gotten the best deal. But it is not reasonable to infer based on the Plaintiffs’

well-pleaded, particularized allegations that the Compensation Committee’s

decision to restructure Green’s compensation to provide him further incentive to

remain at Trade Desk was made in bad faith.

Plaintiffs’ final theory is that the Compensation Committee “Disregarded

Compensia’s Recommendations.”182 This contention relies primarily on Plaintiffs’

assertion that “Compensia had found no legitimate reason to deviate from the

historical compensation structure.”183 This statement reflects Plaintiffs’ independent

assessment of the merits of the transaction, not a recommendation by the

Compensation Committee’s advisers. The Compensia Presentation provided the

Straw Model mega grant, pros and cons of that and other compensation approaches,

comparable special equity awards to CEOs, and a model directly comparing the

182
Id. at 57.
183
Id. at 46.

79
historic, Large Cap, and mega grant structures, and identified considerations for the

Compensation Committee to evaluate. 184 It did not, however, provide explicit

recommendations—to the contrary, it was a “DRAFT DISCUSSION

DOCUMENT”185 that presented a “summary of founder CEO compensation

considerations” and “[k]ey questions and open issues.”186 Plaintiffs believe that

another approach would have been more appropriate, and they attack Compensia’s

list of pros and cons. 187 But Plaintiffs’ opinions on the merits of different approaches

to executive compensation do not give rise to a substantial likelihood of outside-

director liability here. Brehm, 746 A.2d at 266 (“[M]ere disagreement cannot serve

as grounds for imposing liability based on alleged breaches of fiduciary duty and

waste.” (internal quotation marks omitted)).

Plaintiffs are correct that the final Award deviated from the Compensia

Presentation’s Straw Model mega grant. Several of the decision points were

resolved in a manner favorable to Green, but some were not. For example, the final

Award contained higher stock price hurdles than those contemplated in the Straw

184
Compensia Presentation at TTD_Huizenga000762–65, TTD_Huizenga000767–69; cf.
Tornetta II, 310 A.3d at 517–19, 531 (expressing concern about the committee’s failure to
seek or obtain a benchmarking analysis).
185
Compensia Presentation at TTD_Huizenga000759.
186
Id. at TTD_Huizenga000760.
187
See Compl. ¶¶ 108–15 (challenging Compensia’s pros and cons for various approaches
by, for example, stating that “any reasonable person would realize this was not really a
‘Con’ at all” and complaining that “[t]here is no explanation why this is a ‘Pro’”).

80
Model. Plaintiffs’ allegations over the difference between the terms of the Straw

Model and final Award differ materially from CBS and Berteau, where directors’

reversal of their own approach contributed to a constellation of facts giving rise to a

reasonable inference of bad faith. Comparison to the Straw Model is of significantly

lesser weight in the analysis than comparison to multiple rounds of negotiations by

some of the same directors, and the clear interference that preceded the pivots in

CBS and Berteau goes unalleged here. Moreover, the terms of the final Award are

not so extreme as to, themselves, exceed the realm of reason and Plaintiffs, who have

not asserted a waste claim, do not contend otherwise. See Tornetta I, 250 A.3d at

813–14 (dismissing a waste claim challenging a larger compensation package).

At bottom, Plaintiffs argue that the Compensation Committee recommended,

and the Director Defendants approved, a “facially excessive Mega Grant through an

unfair process [and] face a substantial likelihood of liability for doing so.”188 But “a

failure to follow best practices is not necessarily a breach of fiduciary duty.”

McElrath, 2019 WL 1430210, at *16.

[C]oncerns about lavish executive compensation and our institutional
aspirations that boards of directors of Delaware corporations live up to
the highest standards of good corporate practices do not translate into a
holding that these plaintiffs have set forth particularized facts excusing
a pre-suit demand under our law and our pleading requirements.

188
Pls.’ Answering Br. 39.

81
Brehm, 746 A.2d at 249. The business judgment rule seeks to serve boards of

directors and stockholders alike by enabling fiduciaries to take business risks. See

Goldman, 2011 WL 4826104, at *23 (“Through the business judgment rule,

Delaware law encourages corporate fiduciaries to attempt to increase stockholder

wealth by engaging in those risks that, in their business judgment, are in the best

interest of the corporation ‘without the debilitating fear that they will be held

personally liable if the company experiences losses.’” (quoting Citigroup, 964 A.2d

at 139)).

The business judgment rule is an acknowledgment of the managerial
prerogatives of Delaware directors under Section 141(a). It is a
presumption that in making a business decision the directors of a
corporation acted on an informed basis, in good faith and in the honest
belief that the action taken was in the best interests of the company.
Absent an abuse of discretion, that judgment will be respected by the
courts.

Aronson, 473 A.2d at 812 (citations omitted). This level of deference is the default

applicable to the Compensation Committee’s conduct, and Plaintiffs face an

extraordinarily high bar to rebut the presumptive applicability of the business

judgment rule to the conduct of disinterested and independent directors.

Only when a decision lacks any rationally conceivable basis will a court
infer bad faith and a breach of duty. The business judgment rule thus
provides something as close to non-review as our law contemplates.
This standard of review reflects and promotes the role of the board of
directors as the proper body to manage the business and affairs of the
corporation.

82
In re McDonald’s Corp. S’holder Deriv. Litig., 291 A.3d 652, 685 (Del. Ch. 2023)

(citations and footnotes omitted) (internal quotation marks omitted); see also Zucker

v. Andreessen, 2012 WL 2366448, at *8 (Del. Ch. June 21, 2012) (“While the

discretion of directors in setting executive compensation is not unlimited, it is the

essence of business judgment for a board to determine if a particular individual

warrants large amounts of money, whether in the form of current salary or severance

provisions.” (cleaned up)). Plaintiffs’ contention that the members of the

Compensation Committee face a substantial likelihood of liability because they

engaged in an “unfair process” misapprehends the governing standard, and

Plaintiffs’ allegations fall far short of impugning the Compensation Committee’s

ability to consider demand.

In sum, the Compensation Committee comprised disinterested and

independent directors who sought reasoned advice, repeatedly met and discussed the

challenged transaction, and made a business decision. As unconflicted fiduciaries

who showed up and took steps to make a reasoned decision, their decisions are

entitled to considerable deference under our law, and only extreme facts can give

rise to a reasonable inference of bad faith conduct. Plaintiffs do not allege that Green

has a history of retribution or exerted influence that inexplicably caused the Director

Defendants to abandon a faithful course of action. Plaintiffs’ well-pleaded,

particularized allegations do not give rise to a reasonable inference that the

83
Compensation Committee—or any of the other Director Defendants—negotiated or

approved the Award in bad faith. 189 Therefore, Plaintiffs’ allegations fail to give rise

to a reasonable inference that any of the Director Defendants face a substantial

likelihood of liability in connection with this litigation.

E. Plaintiffs Have Failed to Plead Particularized Facts Giving Rise to
a Reasonable Inference that Demand Was Futile.

The Demand Board has eight members. Plaintiffs’ particularized allegations

only raise reasonable doubt as to the ability of Green and Pickles to consider a

demand. Plaintiffs have failed to call into reasonable doubt Buyer’s, Paley’s,

Falberg’s, Rajaram’s, Wells’s, and Cunningham’s ability to have considered a

demand to institute litigation challenging the Award. Because demand was not futile

as to a majority of the Demand Board as of the filing of the original complaint,

Plaintiffs have failed to plead sufficient facts to cause the court to divest the Board

of its authority to control the litigation asset.

189
Plaintiffs’ also proffer this theory against Buyer and Paley, who, respectively, attended
five and one of the Compensation Committee’s meetings and, like the rest of the Director
Defendants, voted to approve the Award. Dkt. 22 Ex. 18 at TTD_Huizenga000474; id. Ex.
19 at TTD_Huizenga000476; id. Ex. 20 at TTD_Huizenga000478; id. Ex. 24 at
TTD_Huizenga000489; id. Ex. 25 at TTD_Huizenga000491. Plaintiffs’ arguments against
Buyer and Paley, which were presented in tandem with their arguments against the
Compensation Committee, fail, both for the reasons discussed above and because Plaintiffs
have failed to plead any particularized facts as to either’s involvement other than their
having voted for the transaction and sitting in on a few of the Compensation Committee’s
meetings.

84
III. CONCLUSION
For the forgoing reasons, Defendants’ motions to dismiss under Rule 23.1 are

GRANTED, and the Complaint is dismissed with prejudice.

85