Central Laborers' Pension Fund v. Alexander C. Karp.

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

CENTRAL LABORERS’ PENSION )
FUND, EZRA CATTAN, LISA CATTAN, )
SAUL CATTAN, SEAN ENDRESS, )
MIKHAIL KUPERMAN, HASSAN )
KUTOM, KRISTOPHER MARES, and )
TAYLOR MCGRAW, Derivatively on )
Behalf of PALANTIR TECHNOLOGIES )
INC., )
)
Plaintiffs, )
)
v. ) C.A. No. 2023-0864-LWW
)
ALEXANDER C. KARP, PETER THIEL, )
STEPHEN COHEN, ALEXANDER )
MOORE, RYAN TAYLOR, SPENCER )
RASCOFF, ALEXANDRA SCHIFF, )
LAUREN FRIEDMAN STAT, SHYAM )
SANKAR, DAVID GLAZER, and KEVIN )
KAWASAKI, )
)
Defendants, )
)
and )
)
PALANTIR TECHNOLOGIES INC., a )
Delaware Corporation, )
)
Nominal Defendant. )

MEMORANDUM OPINION

Date Submitted: January 15, 2025
Date Decided: April 25, 2025
Christine M. Mackintosh, Rebecca A. Musarra & Edward M. Lilly, GRANT &
EISENHOFER P.A., Wilmington, Delaware; David T. Wissbroecker, GRANT &
EISENHOFER P.A., San Francisco, California; Joseph H. Weiss, David C. Katz &
Mark D. Smilow, WEISS LAW, New York, New York; Brian J. Robbins, Stephen
J. Oddo & Eric M. Carrino, ROBBINS LLP, San Diego, California; Leonid
Kandinov, MORRIS KANDINOV LLP, San Diego, California; Peretz Bronstein &
Eitan Kimelman, BRONSTEIN, GEWIRTZ & GROSSMAN, LLC, New York,
New York; Counsel for Plaintiffs

Peter J. Walsh, Jr., T. Brad Davey, Jonathan A. Choa & Eric J. Nascone, POTTER
ANDERSON & CORROON LLP, Wilmington, Delaware; Boris Feldman,
FRESHFIELDS BRUCKHAUS DERINGER US LLP, Redwood City, California;
David Livshiz, Maria Slobodchikova & Susannah Benjamin, FRESHFIELDS
BRUCKHAUS DERINGER US LLP, New York, New York; Counsel for
Defendants Palantir Technologies Inc., Alexander C. Karp, Peter Thiel, Stephen
Cohen, Alexander Moore, Ryan Taylor, Spencer Rascoff, Alexandra Schiff, Lauren
Friedman Stat, Shyam Sankar, David Glazer, and Kevin Kawasaki

WILL, Vice Chancellor
In September 2020, Palantir, Inc. went public through a direct listing.

Palantir’s officers and directors sold shares into the public market. They made

billions of dollars in total.

Several stockholders of Palantir now claim that those sales, and others made

months later, amount to insider trading. The plaintiffs posit that the defendants

orchestrated the direct listing to offload shares before business setbacks were

disclosed. They also assert that, after the offering, Palantir announced an investment

scheme in special purpose acquisition companies (SPACs) to prop up its stock price

and facilitate additional insider trades.

The plaintiffs’ story unwinds upon closer inspection.

Contrary to the plaintiffs’ criticisms, there is nothing inherently suspect about

a company’s pursuit of a direct listing. The point is for existing stockholders to sell

their shares to achieve liquidity, rather than to raise new capital. The structure

requires sales of existing stock to create a public market since no new shares are

issued. Sales are made directly to the public, and prices are market-driven based on

supply and demand.

For Palantir, the direct listing marked the first time its investors had access to

liquidity. Many of the challenged sales were made under 10b5-1 plans or to cover

tax obligations, meaning that the insiders lacked discretion over them. The

information that purportedly motivated the trades was public, immaterial, or belied

1
by the very documents on which the plaintiffs rely. Notably, the defendants kept

about 75% of their Palantir stock.

The plaintiffs advance no well-pleaded facts from which I can reasonably

infer impropriety. Though some directors made substantial profits by selling stock,

that alone is insufficient to impugn them. Delaware law sets the bar to insider trading

liability high to avoid restricting legitimate market activity. Insiders are not

penalized for making investment decisions based on public information—even if

their trades are lucrative.

Because the plaintiffs have failed to satisfy the stringent Rule 23.1 standard,

this case is dismissed.

I. FACTUAL BACKGROUND

The following background is drawn from the plaintiffs’ Amended Verified

Stockholder Derivative Complaint (the “Complaint”), documents it incorporates by

reference, and facts subject to judicial notice.1

1
Verified Am. S’holder Deriv. Compl. (“Compl.”) (Dkt. 25); see Freedman v. Adams,
2012 WL 1345638, at *5 (Del. Ch. Mar. 30, 2012) (“When a plaintiff expressly refers to
and heavily relies upon documents in her complaint, these documents are considered to be
incorporated by reference into the complaint . . . .”), aff’d, 58 A.3d 414 (Del. 2013); In re
Books-A-Million, Inc. S’holders Litig., 2016 WL 5874974, at *1 (Del. Ch. Oct. 10, 2016)
(explaining that the court may take judicial notice of “facts that are not subject to
reasonable dispute” (citing In re Gen. Motors (Hughes) S’holder Litig., 897 A.2d 162, 170
(Del. 2006))); Omnicare, Inc. v. NCS Healthcare, Inc., 809 A.2d 1163, 1167 n.3 (Del. Ch.
2002) (“The court may take judicial notice of facts publicly available in filings with the
SEC.”).

2
A. Palantir’s Direct Listing

In 2003, Alexander Karp, Steven Cohen, and Peter Thiel co-founded Palantir

Technologies Inc.—a Delaware corporation with its principal executive offices in

Colorado.2 Palantir builds and deploys software platforms for big data analytics.3 It

initially focused on serving the government sector. Today, it provides software and

services to both government and commercial customers.4

Palantir was a private company for 17 years. On September 30, 2020, it went

public through a direct listing.5

In a traditional initial public offering, a company issues new shares under a

registration statement with an underwriter setting the initial sale price and acting as

Citations to “Defs.’ Opening Br. Ex. __” refer to exhibits to the Transmittal
Affidavit of T. Brad Davey in Support of Individual Defendants’ and Nominal Defendant’s
Opening Brief in Support of Their Motion to Dismiss or Stay Plaintiffs’ Verified Amended
Stockholder Derivative Complaint. Dkts. 38-41. These exhibits include documents
produced to the plaintiffs under 8 Del. C. § 220, which are deemed incorporated by
reference into the Complaint by agreement of the parties. See Amalgamated Bank v.
Yahoo! Inc., 132 A.3d 752, 797 (Del. Ch. 2016). Pincites to certain exhibits are the last
several characters of Bates stamps. Citations to “Defs.’ App. __” refer to appendices to
the defendant’s opening brief, which summarize information from Palantir public filings.
Dkt. 37.
2
Compl. ¶¶ 25, 57.
3
Palantir Techs. Inc., Am. No. 6 to Registration Statement on Form S-1/A (filed Sept. 21,
2020), https://www.sec.gov/Archives/edgar/data/1321655/000119312520249544/
d904406ds1a.htm (“Registration Statement”) 1, 6; see also Defs.’ Opening Br. Ex. 58
(Excerpt, Registration Statement).
4
Compl. ¶¶ 2, 57.
5
Id. ¶¶ 60, 62.

3
an intermediary. In a direct listing, by contrast, a company does not issue new shares

but offers preexisting shares for sale on a public stock exchange.6 Because no

underwriter is involved, the significant transaction costs of an IPO are reduced.

Current stockholders—founders, equity-compensated employees, and early

investors—are free to sell their shares to the public.7 Trading prices and volumes

are dictated by the supply of shares those current stockholders are willing to sell and

the demand from public investors.

A direct listing can promote a company’s goal of “affording [its] shareholders

(whether investors, employees, or others) the convenience of being able to sell their

existing shares on a public exchange.”8 In Palantir’s case, the direct listing provided

6
See Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of
Amendment No. 3 and Order Granting Accelerated Approval of Proposed Rule Change, as
Modified by Amendment No. 3, to Amend Section 102.01B of the NYSE Listed Company
Manual to Provide for the Listing of Companies that List without a Prior Exchange Act
Registration and that are Not Listing in Connection with an Underwritten Initial Public
Offering and Related Changes to Rules 15, 104, and 123D Exchange Act Release No. 34-
82627, 83 Fed. Reg. 5650 (Feb. 2, 2018), https://www.sec.gov/rules/sro/nyse/2018/34-
82627.pdf. Both registered and still unregistered shares can be sold to the public.
7
See Section 11 Liability and Direct Listing of Securities, 24 Sec. Pub. & Priv. Offerings
§ 12:5:20 (2d ed.), Westlaw (updated Nov. 2024); see also Maria Lucia Passador, Finding
an alternative to IPOs: direct listings and SPACs, RESEARCH HANDBOOK ON GLOBAL
CAPITAL MARKETS LAW 99 (Iris H.-Y Chiu & Iain G. MacNeil eds., 2023) (explaining that
though direct listings have been relatively rare, they may be beneficial for “well-
capitalized companies that do not need to raise additional capital, but [have] a large and
diverse shareholder base that can provide sufficient liquidity from day one of trading”).
8
See Slack Techs., LLC v. Pirani, 598 U.S. 759, 763-64 (2023) (describing the direct listing
process and observing that liquidity access rather than capital raising is a motivating factor
for some firms that seek to become public).

4
immediate liquidity to its current stockholders for the first time in 17 years.9 Its

cofounders and other Palantir officers and directors—the defendants in this suit—

sold a total of 47.8 Palantir shares for approximately $475 million within three days

of the offering.10

Although direct listings often lack the lock-up agreements typical of IPOs,

Palantir limited the defendants’ sales in two ways. Vesting schedules to the

defendants’ stock awards and options prevented them from selling all restricted

stock units and options.11 And Palantir voluntarily imposed a partial lockup that

prevented insiders from selling more than 20% of their shares before February 18,

2021.12

B. The Registration Statement

Nine days before the direct listing, on September 21, Palantir filed its

Registration Statement with the Securities and Exchange Commission.13 The

Registration Statement disclosed Palantir’s “accelerated” growth in 2020.14 It

9
Compl. ¶¶ 62, 65.
10
Id. ¶¶ 76-77.
11
Registration Statement 72, 125, 184-90 (describing executive compensation
arrangements).
12
Compl. ¶ 8 & n.2.
13
Id. ¶ 72.
14
Registration Statement 93.

5
explained that in the first half of fiscal 2020, Palantir had generated $481.2 million

in revenue, reflecting a 49% growth rate compared to the first half of fiscal 2019.15

Palantir’s comparisons of its 2019 and 2020 revenues were broken down by

two main business segments: government and commercial.16 The COVID-19

pandemic gave Palantir’s government segment a substantial boost.17 The

Registration Statement observed that recent growth in the government sector might

be unsustainable because “failure to receive and maintain government contracts or

changes in the contracting or fiscal policies of the fiscal sector could have a material

adverse effect on [Palantir’s] business.”18 On the commercial side, it acknowledged

that sales efforts “involve considerable time and expense and [Palantir’s] sales cycle

is often long and unpredictable.”19

More generally, the Registration Statement warned prospective investors

about the uncertainty of future growth. It noted that the company had “incurred

losses each year since [its] inception” and “may never achieve or maintain

profitability.”20 It provided “no assurances” of continued revenue growth and

15
Id.
16
Id. at 109.
17
Compl. ¶ 61.
18
Registration Statement 34.
19
Id. at 18.
20
Id.

6
cautioned against “rely[ing] on the revenue of any prior quarterly or annual period

as an indication of [Palantir’s] future performance.”21 It identified risks that could

cause a decline in revenue growth, including “increased competition, slowing

demand for [Palantir’s] platforms from existing and new customers, a failure . . . to

continue capitalizing on growth opportunities, terminations of existing contracts by

[Palantir’s] customers, and the maturation of [the] business.”22 And it acknowledged

the upsides and “negative headwinds” generated by the COVID-19 pandemic.23

C. The 10b5-1 Plans

Shortly after the direct listing, between October and December 2020, several

of the defendants entered into 10b5-1 trading plans.24 These plans allowed the

insiders to sell predetermined amounts of stock on predetermined dates.25 If sales

were made under a plan consistent with SEC Rule 10b5-1 and related guidance, the

seller could have an affirmative defense against any insider trading claim.26

21
Id.
22
Id.
23
Registration Statement 39.
24
Compl. ¶ 86; see Defs.’ Opening Br. Exs. 6-12 (10b5-1 plans).
25
See generally, “Demystifying 10b5-1 Plans,” Morgan Stanley At Work,
https://www.morganstanley.com/atwork/employees/learning-
center/articles/demystifying-10b5-1-plans (last visited Apr. 5, 2025) (“10b5-1 plans allow
corporate executives and other insiders to establish preset trading plans for transacting in
company stock holdings.”).
26
See Sec. and Exch. Comm’n, Fact Sheet: Rule 10b5-1: Insider Trading Arrangements
and Related Disclosure, https://www.sec.gov/33-11138-fact-sheet.pdf.

7
Palantir insiders sold their stock for over $2 billion during the nearly two-year

period after the public offering.27 Seventy-five percent of these trades (by total

proceeds) were made under 10b5-1 plans or automatically to cover tax withholding

obligations.28 The majority of the remaining sales occurred shortly after the direct

listing.29

D. Palantir’s 2020 and Early 2021 Performance

On November 9—almost six weeks after the direct listing—management

provided a business update to the Audit Committee of Palantir’s Board of

Directors.30 Palantir’s auditor, Ernst & Young LLP (“EY”), told the Audit

Committee that “[r]evenue growth continue[d] to primarily be driven by existing

customers” and that “incremental growth [was] related to COVID-19-related

developments.”31 Palantir subsequently issued a Form 8-K representing that

“growth and momentum across [Palantir’s] business ha[d] continued,” and

27
Compl. Ex. A.
28
See Defs.’ Opening Br. Exs. 49-56 (Forms 3 and 4); see also Defs.’ Opening Br. App. A
(summarizing sales based upon disclosures in Forms 3 and 4).
29
See Defs.’ Opening Br. App. A (representing that defendants sold a total of
$1,639,876,650 in shares subject to 10b5-1 plans or tax withholding, out of $2,184,562,002
total).
30
Compl. ¶ 81.
31
Id. ¶ 82.

8
announced in an investor call that it had “strong and increased visibility into future

revenue across [its] customer base.”32

Two months later, the Board met to consider Palantir’s 2021 projected

revenue. Management updated the Board on “visible” revenue Palantir had secured

and expected from existing contracts.33 A written presentation explained that

“[h]istorically ~80-85% of revenue [was] visible in January of that year,” with the

remaining 15 to 20% generated throughout the rest of the year.34 Based on the $1.28

billion in already-recorded revenue, management estimated that Palantir would need

to generate another $220 million to reach its 2021 revenue target.35 This additional

revenue was called the “gap-to-goal.”36

As Palantir booked additional revenue throughout the year, the gap-to-goal

narrowed. Later Board presentations reported that the gap-to-goal amount shrunk to

$138 million as of April 2021 and to $33 million as of July 2021.37 Palantir closed

the gap by October 2021.38

32
Id. ¶¶ 83-84.
33
Defs.’ Opening Br. Ex. 1 (“Jan. 2021 Board Presentation”) ‘734-RE.
34
Id.
35
Id.
36
Id.
37
Defs.’ Opening Br. Ex. 2 (“Apr. 2021 Board Presentation”) ‘865-RE; Defs.’ Opening
Br. Ex. 4 (“July 2021 Board Presentation”) ‘996-RE.
38
Defs.’ Opening Br. Ex. 5 (“Oct. 2021 Board Presentation”) ‘1082-RE.

9
In February 2021, EY reported to the Audit Committee that “incremental

growth” continued to come from “government and COVID-19 related deployments”

and that Palantir was signing “[f]ewer contracts with up-front payments.”39 Five

days later, Palantir provided guidance for 2021. Investors were told that Palantir

expected 45% year-over-year revenue growth for the first quarter of 2021.40

Palantir’s partial lockup expired on February 18. Several of the defendants

went on to sell millions of dollars in Palantir shares.41

E. Palantir’s SPAC Investments

In the months after its direct listing, Palantir’s government revenue growth

slowed. It declined from 68% in the third quarter of 2020 to 34% in the third quarter

of 2021.42 By the first quarter of 2022, government sector revenue growth had fallen

to 16%.43

39
Compl. ¶ 89.
40
Id. ¶ 90 (quoting Feb. 16, 2021 earnings call).
41
Id. ¶ 92 (“Thiel immediately dumped 20 million shares at an average price of $24.49 per
share, securing $504.8 million; Cohen sold 2 million shares between February 18-22, 2021,
reaping $53.6 million; Sankar sold almost 1 million shares between February 19-23, 2021,
pocketing $27.4 million; and Glazer sold over 100,000 shares on February 23, 2021,
reaping approximately $2.8 million.”).
42
Id. ¶ 93.
43
Id.

10
Palantir turned its focus to raising commercial sector revenue.44 It began to

invest in special purpose acquisition companies (SPACs), which were booming at

the time.45

Under Palantir’s SPAC investment strategy—dubbed a “strategic investments

program”—Palantir planned to make passive, minority investments (all smaller than

$50 million) in a diversified portfolio of early-stage SPACs.46 In exchange for these

investments, the SPACs would license Palantir’s software under multi-year, multi-

billion-dollar licensing agreements.47

The Board approved Palantir’s first SPAC investment of $21 million on

March 3, 2021.48 Palantir had $2.3 billion of cash and cash equivalents on hand at

the time.49 Palantir invested a total of $505.7 million in 27 SPACs and entered into

licensing agreements worth a projected $767.9 million over the next eight months.50

44
Id. ¶ 94.
45
Id. ¶ 348; cf. Michael Klausner, Michael Ohlrogge & Emily Ruan, A Sober Look at
SPACs, 39 Yale J. Reg. 228, 230-31 & 231 fig.1 (2022) (reporting that in January 2020
through November 2021, SPAC IPOs accounted for more than half of total IPOs). Palantir
made its investments alongside companies including BlackRock, Inc., Pacific Investment
Management Company LLC (PIMCO), and Microsoft Corporation. See Ex. 83 (Lilium
press release) 2, 4-5; Ex. 84 (Sarcos press release) 3.
46
Compl. ¶ 348.
47
See id. ¶¶ 93-102.
48
Id. ¶ 103 (citing Board unanimous written consent).
49
Defs.’ Ex. 66 (“Q1 2021 Form 10-Q”) 34.
50
Compl. ¶¶ 102, 348.

11
F. Disclosures About the SPAC Investments

Palantir disclosed the details of its strategic investment program to investors

shortly after it began. In its first and second quarterly reports for 2021, Palantir listed

the dates and names (or descriptions) of the investments, the number of shares

acquired, the total investment price, details of any accompanying commercial

agreements entered, the maximum potential revenue from the agreements, and the

revenue recognized.51 Its 2021 Form 10-K further disclosed that the SPAC

commercial contracts had a “total value of . . . $767.9 million . . . inclusive of

$116.2 million of contractual options” over the lifespan of the agreements (three to

ten years).52

Palantir’s 2021 Form 10-K also reported $48.3 million in total recognized

revenue from SPAC commercial contracts in fiscal 2021.53 Because the revenue was

recognized ratably, it made up less than 10% of Palantir’s $1.5 billion 2021 total

revenue.54

51
Q1 2021 Form 10-Q at 20, 58-59; Defs.’ Ex. 67 (“Q2 2021 Form 10-Q”) 15.
52
Defs.’ Opening Br. Ex. 75 (“2021 Form 10-K”) 120.
53
2021 Form 10-K at 120 (explaining that the revenue was assessed in accordance with
Accounting Standards Codification (ASC) 606, which required it to evaluate “the
commercial substance of each arrangement considering the customer’s ability and intention
to pay as well as the Company’s obligation to perform under each contract”).
54
2021 Form 10-K at 87 (reporting $897.4 million in government revenue and $644.5
million in commercial revenue for 2021, for a total of $1.542 billion); see also Defs.’ Ex. 70
(Aug. 12, 2021 earnings call transcript) 9, 12; Defs.’ App. D (comparing Palantir’s SPAC
revenue to its total commercial revenue).

12
Palantir’s disclosures cautioned investors that the company “may not realize

a return on [the SPAC] investments,” which could “decline in value or be entirely

lost.”55 It noted that the early stage companies in which it invested “may be engaged

in businesses that involve novel and unproven technologies, products, and services

and . . . may be unable to perform their obligations under any commercial contracts

that [Palantir] enter[ed] into with them, in a timely manner or at all.”56 These risks

could “negatively impact [Palantir’s] expected revenue and collections.”57

G. SPAC Underperformance

By early 2022, SPACs were experiencing a market-wide downturn.58

Palantir’s SPAC investment program saw considerable setbacks. Palantir suffered

$165.7 million of unrealized losses in its SPAC portfolio—a 42% decline—as of

April 2022.59 The Board abandoned Palantir’s SPAC investment strategy.60

55
Q1 2021 Form 10-Q at 59; Q2 2021 Form 10-Q at 45, 63.
56
Q1 2021 Form 10-Q at 59; Q2 2021 Form 10-Q at 63; Defs.’ Ex. 70 (“Q3 2021 Form
10-Q”) 65; 2021 Form 10-K at 38.
57
Q1 2021 Form 10-Q at 59; Q2 2021 Form 10-Q at 63, 65; Q3 2021 Form 10-Q at 65;
2021 Form 10-K at 36-38, 95.
58
See In re Hennessy Cap. Acq. Corp. IV S’holder Litig., 318 A.3d 306, 310 (Del. Ch.
2024) (“As the dust of SPAC mania settled, a sobering picture emerged. Early-stage
companies strained to adapt to the demands of being exchange listed and struggled to
remain viable amid economic headwinds. . . . Some companies filed for bankruptcy.”),
aff’d, 2024 WL 5114140 (Del. Dec. 16, 2024) (TABLE).
59
Compl. ¶ 399.
60
Id. ¶ 400 (citing internal documents confirming that Palantir had “no additional
commitments to strategic investments”).

13
In May 2022, Palantir publicly announced that it had “wound the [SPAC

investment] program down” and would not be accepting “additional new customers

from this program.”61 Despite the SPAC-related losses, Palantir reported that first

quarter 2022 revenue had exceeded its guidance.62 In November 2023, Palantir

disclosed that its SPAC investments were worth $392.1 million—$375.8 million less

than the $767.9 million initially projected.63

H. The Securities Action

In September 2022, Palantir stockholders filed a putative securities class

action in the United States District Court for the District of Colorado (the “Securities

Action”).64 The plaintiffs alleged that Palantir and certain directors and officers

deliberately misled investors by making false statements about Palantir’s growth and

engaging in a SPAC “scheme” to facilitate alleged insider trading.65

61
Id. ¶ 407 (quoting May 9, 2022 earnings call transcript); see Defs.’ Opening Br. Ex. 77
(May 9, 2022 earnings call transcript) 12. Palantir did not, however, end relationships with
all existing SPAC customers. See Defs.’ Opening Br. Ex. 82 (2023 Form 10-K) 100
(recognizing $87.3 million of revenue from strategic commercial contracts in 2023).
62
Q1 2022 Form 10-Q at 4 (reporting total revenue exceeding $446 million in the first
quarter of 2022).
63
Comp. ¶ 430; see supra note 53 and accompanying text (original $767.9 million
projection).
64
Cupat v. Palantir Techs., Inc., No. 22-cv-02384 (D. Colo.); Compl. ¶¶ 14, 417.
65
Defs.’ Ex. 91 (Securities Action complaint); see Compl. ¶ 419.

14
On March 31, 2024, the court dismissed the Securities Action without

prejudice for pleading deficiencies.66 An amended complaint was filed a few months

later.67 The Securities Action was recently dismissed with prejudice for failure to

state a claim.68

I. This Litigation

Palantir stockholders filed the present action in this court on August 22,

2023.69 The suit followed Palantir’s production of books and records to the plaintiffs

pursuant to 8 Del. C. § 220.

After the defendants moved to dismiss, the plaintiffs filed a 230-page

amended complaint (the operative Complaint) on February 16, 2024.70 The

Complaint advances four counts derivatively on behalf of Palantir.71

Count I is a breach of fiduciary duty claim against members of Palantir’s

Board for “causing the Company to engage in the SPAC scheme” and for issuing

false and misleading disclosures to raise Palantir’s stock price.72 Count II is a similar

66
Cupat v. Palantir Techs., Inc., 2024 WL 1374903, at *1, 3 (D. Colo. Mar. 31, 2024).
67
Second Am. Consol. Class Action Compl., Cupat v. Palantir Techs., Inc., No. 22-cv-
02384, 2024 WL 1374903 (D. Colo. May 24, 2024).
68
Dkt. 73.
69
Dkt. 1.
70
Dkts. 12, 25.
71
Compl. ¶¶ 486-512.
72
Id. ¶¶ 486-94. Count I is brought against the “Director Defendants,” as defined in
paragraph 56 of the Complaint.

15
breach of fiduciary claim against certain Palantir officers focused on disclosures.73

Count III is a Brophy claim for alleged insider trading against insiders who sold

Palantir shares during and after the direct listing.74 Count IV is a related unjust

enrichment claim.75

On April 15, 2024, the defendants moved to dismiss the Complaint.76 Briefing

on the motion was complete as of July 1.77 Oral argument was presented on January

15, 2025, after which the motion was taken under advisement.78

II. ANALYSIS

The individual defendants and Palantir seek dismissal of this suit under Court

of Chancery Rule 23.1 for failure to plead demand futility and under Rule 12(b)(6)

for failure to state a claim. The Rule 23.1 motion is dispositive. The plaintiffs chose

to forgo making a demand on the Board and have not demonstrated demand excusal.

73
Id. ¶¶ 495-502. Count II is brought against the “Officer Defendants,” as defined in
paragraph 56 of the Complaint.
74
Id. ¶¶ 503-07; see Brophy v. Cities Servs. Co., 70 A.2d 5 (Del. Ch. 1949). Count III is
brought against the “Insider Seller Defendants,” as defined in paragraph 56 of the
Complaint.
75
Compl. ¶¶ 508-12. Count IV is similarly brought against the “Insider Seller Defendants.”
See id. ¶ 56.
76
Dkt. 42. In the alternative, the defendants requested a stay in deference to the Securities
Action. That motion is moot since the Securities Action has been dismissed with prejudice.
See supra note 68 and accompanying text.
77
Dkt. 51.
78
Dkt. 65; Dkt. 67 (“Hr’g Tr.”).

16
In a demand futility analysis, “[t]he court is confined to the well-pleaded

allegations in the Complaint, the documents incorporated into the Complaint by

reference, and facts subject to judicial notice.”79 “Rule 23.1 requires that a plaintiff

who asserts demand futility must ‘comply with stringent requirements of factual

particularity that differ substantially from the permissive notice pleadings governed

solely by Chancery Rule 8(a).’”80 The court will draw “all reasonable factual

inferences that logically flow from the particularized facts alleged.”81

A. The Demand Futility Standard

In United Food & Commercial Workers Union v. Zuckerberg, the Delaware

Supreme Court adopted a three-part “universal test” for demand futility.82 The court

must consider, director-by-director:

(i) whether the director received a material personal benefit from
the alleged misconduct that is the subject of the litigation
demand;
(ii) whether the director faces a substantial likelihood of liability
on any of the claims that would be the subject of the litigation
demand; and

79
In re Kraft Heinz Co. Deriv. Litig., 2021 WL 6012632, at *4 (Del. Ch. Dec. 15, 2021),
aff’d, 282 A.3d 1054 (Del. 2022) (TABLE).
80
In re INFOUSA, Inc. S’holders Litig, 953 A.2d 963, 985 (Del. Ch. Aug. 13, 2007)
(quoting Zimmerman ex rel. Priceline.com, Inc. v. Braddock, 2002 WL 31926608, at *7
(Del. Ch. Dec. 20, 2002)).
81
Brehm v. Eisner, 746 A.2d 244, 255 (Del. 2000).
82
262 A.3d 1034, 1058 (Del. 2021).

17
(iii) whether the director lacks independence from someone who
received a material personal benefit from the alleged misconduct
that would be the subject of the litigation demand or who would
face a substantial likelihood of liability on any of the claims that
are the subject of the litigation demand.83
Demand is excused as futile if “the answer to any of the questions is ‘yes’ for at least

half of the members of the demand board.”84

“The court ‘counts heads’ of the members of a board to determine whether a

majority of its members are disinterested and independent for demand futility

purposes.”85 When this lawsuit was filed, Palantir’s Board had seven members:

cofounders Karp (CEO), Thiel (Chairman of the Board), and Cohen (President and

Secretary), and outside directors Alexandra Schiff, Alexander Moore, Lauren

Friedman Stat, and Eric Woersching.86 The Complaint calls these seven directors

the “Demand Board.”87 Other than Woersching, all Demand Board members are

named as defendants.88

83
Id. at 1059.
84
Id.
85
In re Zimmer Biomet Hldgs., Inc. Deriv. Litig., 2021 WL 3779155, at *10 (Del. Ch.
Aug. 25, 2021) (citation omitted), aff’d, 279 A.3d 356 (Del. 2022) (TABLE).
86
Compl. ¶ 436.
87
Id.
88
Id. Woersching replaced defendant Spencer Rascoff on the Board in June 2022. See id.
¶¶ 46, 482.

18
The demand futility analysis is conducted claim by claim. Against members

of the Demand Board, the plaintiffs advance (1) a Brophy claim, (2) a breach of

fiduciary duty claim regarding the SPAC investment program, and (3) an unjust

enrichment claim. Their demand futility arguments for these claims largely overlap.

The plaintiffs assert that demand is futile because the six defendants on the Demand

Board face a substantial likelihood of liability for breach of fiduciary duty and unjust

enrichment, the four members of the Demand Board who sold Palantir stock

received a material personal benefit, and various directors lack independence from

one another. The first argument fails because there are no particularized allegations

supporting a reasonable inference that the directors face likely liability for a non-

exculpated claim. The second argument fails because the benefit received was not

a result of misconduct, as Zuckerberg requires. The third argument is therefore

irrelevant.

B. Substantial Likelihood of Liability

Directors are unable to impartially consider a demand if they face a substantial

likelihood of personal liability on the claims asserted.89 “[T]he mere threat of

personal liability for approving a questioned transaction, standing alone, is

89
Rales v. Blasband, 634 A.2d 927, 936 (Del. 1993); see Zuckerberg, 262 A.3d at 1059
(explaining that the Zuckerberg “three-part test is consistent with and enhances Aronson,
Rales, and their progeny, . . . [so] cases properly construing Aronson, Rales, and their
progeny remain good law.”).

19
insufficient to challenge either the independence or disinterestedness of

directors . . . .”90 Plaintiffs must “make a threshold showing, through the allegation

of particularized facts, that their claims has some merit.”91 The court “must be

satisfied that . . . plaintiff[s] ha[ve] alleged facts with particularity which, taken as

true, support a reasonable doubt that the challenged transaction was the product of a

valid exercise of business judgment.”92

For the Demand Board members to be compromised, they must face a

substantial likelihood of liability on one of two related claims: (1) that they traded

Palantir stock based on material, nonpublic information in their possessions; or (2)

that they breached their duties of loyalty in connection with Palantir’s SPAC

investment program. The plaintiffs have not met their burden on either claim. The

unjust enrichment claim falls with the others.

1. The Brophy Claim

A Brophy claim is “a state version of a federal insider trading claim and has

its origins in Delaware law in the venerable case” by the same name.93 As a general

rule, “[c]orporate officers and directors may purchase and sell the corporation’s

90
Aronson v. Lewis, 473 A.2d 805, 815 (Del. 1984); see supra note 89.
91
Rales, 634 A.2d at 934.
92
Aronson, 473 A.2d at 815.
93
In re Oracle Corp. Deriv. Litig., 867 A.2d 904, 925 (Del. Ch. 2004) (citing Brophy, 70
A.2d 5), aff’d, 872 A.2d 960 (Del. 2005) (TABLE).

20
stock at will, without any liability to the corporation.”94 Delaware law consequently

“sets the bar for stating a claim for breach of fiduciary based on insider trading very

high.”95 To succeed on this theory, the plaintiffs must show that “1) the corporate

fiduciary possessed material, nonpublic company information [(MNPI)]; and 2) the

corporate fiduciary used that information improperly by making trades because she

was motivated, in whole or in part, by the substance of that information.”96

The plaintiffs advance a Brophy claim against four of the Demand Board’s

seven members: Karp, Thiel, Cohen, and Moore.97 They assert that these directors

“sold Palantir stock while in possession of MNPI that artificially inflated” the stock

price.98 They take issue with stock sales in two time periods. The first is within days

of the direct listing when insiders could “sell up to 20% of their shares

94
Tuckman v. Aerosonic Corp., 1982 WL 17810, at *11 (Del. Ch. May 20, 1982).
95
In re Clovis Oncology, Inc. Deriv. Litig., 2019 WL 4850188, at *15 (Del. Ch. Oct. 1,
2019).
96
Oracle, 867 A.2d at 934.
97
Compl. ¶ 56. The claim is also brought against officers Shyam Sankar, David Glazer,
and Ryan Taylor, and former Board member Rascoff. Id.
98
Id. ¶ 505; see also id. ¶ 15 (alleging that “[t]hrough the [d]irect [l]isting and the SPAC
scheme,” the defendants “used their access to MNPI to cause the Company to create a
market for their Palantir stock [and] . . . facilitate their continued sales of Palantir stock at
artificially inflated prices”).

21
immediately.”99 The second is in the months following the direct listing amid the

SPAC investment program.100

The plaintiffs have not established that any Demand Board members face a

substantial likelihood of liability for trades during either period. There is no rational

inference to be drawn that the directors had MNPI when they traded, much less that

they exploited MNPI for a trading advantage.

a. MNPI

The plaintiffs have not adequately pleaded that any of the directors had MNPI

when they sold Palantir shares. Material nonpublic information is—as the term

suggests—undisclosed confidential company data. The information must be of such

“magnitude” that its disclosure would have “actual significance in the deliberations”

of a reasonable investor “deciding whether to buy, sell, vote, or tender stock.”101 No

such information is described in the Complaint. The purported MNPI is either

immaterial in view of the complete Board documents relied on or was publicly

disclosed.

99
Id. ¶ 65 (emphasis removed); see also supra note 12 and accompanying text.
100
Compl. ¶¶ 1, 93, 100.
101
Oracle, 867 A.2d at 934 (citing Rosenblatt v. Getty Oil Co., 493 A.2d 929, 944 (Del.
1985)).

22
i. Pre-Direct Listing

The plaintiffs’ allegations about MNPI possessed by the directors before the

direct listing are particularly thin. They concern the directors’ purported knowledge

of Palantir’s “unsustainable” government segment revenue growth post-COVID and

difficulties signing new customers.102 Specifically, the plaintiffs assert the directors

knew “(i) Palantir relied on a small, existing customer base, (ii) Palantir’s new

customer acquisition timeline was protracted and expensive, and (iii) Palantir’s

revenue growth was boosted by COVID-related government contracts and thus was

exposed to rapid, significant reversals.”103

Because these facts were disclosed in the Registration Statement, they are not

MNPI.104 The Registration Statement detailed that Palantir had only 125 customers

in the first half of 2020 and that “[a] limited number of customers account[ed] for a

102
Compl. ¶¶ 7, 74, 490 (discussing COVID-related contracts); id. ¶¶ 71, 75 (describing
difficulties signing new customers).
103
Pls.’ Answering Br. in Opp’n to Individual Defs.’ and Nominal Def.’s Mot. to Dismiss
or Stay Pls.’ Verified Am. S’holder Deriv. Compl. (“Pls.’ Answering Br.”) (Dkt. 49) 23
(citing Compl. ¶¶ 81-82, 88-89).
104
See Guttman v. Huang, 823 A.2d 492, 505 (Del. Ch. 2003) (dismissing a Brophy claim
where the plaintiff failed to allege that the “directors possessed information about [the
company]’s actual performance that was materially different than existed in the
marketplace at the time they traded”); In re Camping World Hldgs., Inc. S’holder Deriv.
Litig., 2022 WL 288152, at *9-10 (Del. Ch. Jan. 31, 2022) (stating that information
“already known to the market” cannot be MNPI), aff’d, 285 A.3d 1204 (Del. 2022)
(TABLE).

23
substantial portion of [Palantir’s] revenue.”105 It also stated that Palantir’s sales

model was costly and time-consuming, involving the “invest[ment of] significant

resources working with customers on pilot deployments at no or low cost to them,

which may not result in any future revenue.”106 It further explained that, though the

pandemic “provided certain new opportunities for [Palantir’s] business,” “negative

headwinds” were created.107 Palantir warned there could be “no assurances that

revenue will continue to grow or do so at current rates.”108

Still, the plaintiffs say the defendants knew before the direct listing “that

Palantir was unlikely to continue on the high growth trajectory” it had touted.109

They base this assertion on a November 9, 2020 EY report to the Audit Committee

that observed Palantir’s “[r]evenue growth continue[d] to be primarily driven by

existing customers with incremental growth related to COVID-19 related

developments.”110 But this report was issued weeks after the direct listing.111

Although the plaintiffs suggest that EY’s reference to the “continue[d]” growth

105
Registration Statement 19, 94.
106
Id. at 18-19.
107
Id. at 39.
108
Id. at 18; see supra note 21 and accompanying text.
109
Pls.’ Answering Br. 26-27.
110
See supra note 31 and accompanying text.
111
See Camping World, 2022 WL 288152, at *9 (observing that information is not MNPI
if it came to light “after the challenged trades were executed”).

24
pattern makes it “reasonable to infer” that the defendants learned this information

earlier,112 they offer no particularized facts in support. “[M]ere speculation” cannot

satisfy Rule 23.1113

ii. Post-Direct Listing

The plaintiffs next allege that the directors had MNPI after Palantir went

public and when they entered into 10b5-1 trading plans. They assert that the

defendants “knew”: (1) Palantir was not growing its customer base; (2) Palantir had

a “gap-to-[revenue]-goal” shortfall; (3) the “SPAC scheme” falsely inflated revenue;

and (4) Palantir’s long-term guidance was unsustainable.114 None of these

contentions are grounded in particularized facts.

Customer Base. The plaintiffs’ allegations related to Palantir’s struggles to

grow its customer base and reliance on COVID-era government contracts are again

based on the November 9, 2022 EY Audit Committee report.115 Just one of the four

Demand Board members accused of insider trading (Moore) is on the Audit

112
Pls.’ Answering Br. 27.
113
In re Walt Disney Co. Deriv. Litig., 825 A.2d 275, 285 (Del. Ch. 2003).
114
Pls.’ Answering Br. 29-37.
115
See id. at 29 (citing Compl. ¶¶ 81-82); see supra notes 30-32 and accompanying text
(discussing the contents of this report). The same information was reiterated by EY in a
February 2021 report to the Audit Committee. Pls.’ Answering Br. 30 (citing Compl. ¶ 88).

25
Committee.116 There is no well-pleaded allegation that the other four directors

received the report, and Moore’s knowledge cannot be imputed to them.117 In any

event, Palantir’s customer counts, reliance on a small number of customers, and

COVID-related risks were disclosed to the market.118

Gap-to-Goal. The plaintiffs say that the defendants “possessed MNPI that

[Palantir] was not performing as well as they had conditioned the market to

expect.”119 The alleged MNPI is Palantir’s annual “gap-to-goal” figure. For

example, in January 2021, the Board was told that Palantir’s “gap-to-goal” for the

year was $220 million.120

116
See Compl. ¶¶ 42, 46, 50 (noting that the Audit Committee members were Moore,
Rascoff, and Stat, of which only Moore was both a Demand Board member and accused
of improperly selling shares).
117
See Desimone v. Barrows, 924 A.2d 908, 943 (Del. Ch. 2007) (rejecting the idea that
“knowledge on the part of any one board member can be imputed to other board members
as a result of their shared board or committee service”).
118
See supra notes 105-108 and accompanying text (outlining the disclosure of this
information in the Registration Statement); Registration Statement 18, 39-40, 93, see, e.g.,
2021 Form 10-K at 17 (“We derive a significant portion of our revenue from existing
customers that expand their relationship with us. . . . Our top three customers together
accounted for 18% and 25% of our revenue for the years ended December 31, 2021 and
2020, respectively. . . . Certain of our customers, including customers that represent a
significant portion of our business, have in the past reduced their spend with us or
terminated their agreements with us. . . . If our efforts to expand within our existing
customer base are not successful, our business may suffer.”); Q3 2021 Form 10-Q at 48-83.
119
Compl. ¶ 88.
120
Id.; see supra note 35 and accompanying text; see also Compl. ¶¶ 351, 388, 397, 411.

26
The plaintiffs describe the 2021 “gap-to-goal” as representing a $220 million

revenue “shortfall.”121 This framing is contradicted by the very Board presentation

on which plaintiffs rely, which shows that “gap-to-goal” is the difference between

the revenue Palantir had secured and the in-year revenue creation needed to hit

guidance.122 The presentation states: “Assuming 15% of total revenue is created in-

year and is not visible in January, this gap-to-goal is estimated to be $220 million.”123

It also explains that “80-85% of [Palantir’s] revenue [wa]s visible in January,” with

the rest to be generated during the year.124 The Complaint omits these portions of

the document.125

Based on the full presentation, it would be unreasonable to infer that Palantir

was experiencing a “staggering” revenue “shortfall.”126 The only fair reading is that

121
Compl. ¶ 88 (“The 15% gap between Palantir’s projected revenue and actual revenue
was comprised of a $68.4 million shortfall in actual commercial revenue and a
$151.4 million shortfall in actual government revenue.”).
122
Jan. 2021 Board Presentation at ‘734-RE; see supra notes 35-38 and accompanying text.
123
Jan. 2021 Board Presentation at ‘734-RE.
124
See supra note 35 and accompanying text; Jan. 2021 Board Presentation at ‘734-RE.
125
See Compl. ¶ 88.
126
Id. The plaintiffs insist that rejecting their interpretation of the document would involve
drawing a “defense-friendly inference[].” Pls.’ Answering Br. 31. Not so. “If a plaintiff
chooses to refer to a document in its complaint, the Court may consider the entire
document, even those portions not specifically referenced in the complaint.”
Okla. Firefighters Pension & Ret. Sys. v. Corbat, 2017 WL 6452240, at *13 n.233 (Del.
Ch. Dec. 18, 2017) (quoting Donald J. Wolfe, Jr. & Michael A. Pittenger, Corporate and
Commercial Practice in the Delaware Court of Chancery § 4.06[b][2][i] (2016 ed.)). The
court is not required to defer to the plaintiffs’ facially unsupported interpretation of a
document or ignore unquoted portions of it.

27
$220 million was the estimate needed to reach Palantir’s $1.5 billion revenue target

since $1.281 billion was “visible” in January.127

SPAC Investments. The plaintiffs next aver that the directors possessed

MNPI about Palantir’s SPAC investments when some of their stock was sold. They

claim that the directors knew the SPAC program was a “sham” to shore up Palantir’s

revenue projections and hide “deteriorating profit margins and declining

government-sector revenue.”128 They also allege that the directors understood—but

did not disclose—that “Palantir conducted virtually no diligence” before committing

over $500 million to SPAC investments.129

These arguments are unconvincing for several reasons.130

First, the Complaint lacks particularized allegations suggesting that the

defendants knew when Palantir’s investments were made that the SPACs would later

falter. The plaintiffs’ contrary views are akin to “fraud by hindsight.”131 Delaware

127
Jan. 2021 Board Presentation at ‘734 RE. In fact, Palantir exceeded its 2021 goal by
generating almost $450 million in new revenue. 2021 Form 10-K at 87.
128
Compl. ¶¶ 10-11, 100-01; see also Pls.’ Answering Br. 32-34.
129
Pls.’ Answering Br. 32.
130
In addition to issues with the plaintiffs’ specific arguments, many of the challenged
stock sales predate the first SPAC investment in March 2021 (59% of all sales by proceeds,
and 100% of those not subject to a 10b5-1 plan or for tax withholding). Defs.’ App. A.
Even if the directors had MNPI about the SPAC investments—which is not well-pleaded—
such knowledge would therefore be irrelevant to a significant portion of the challenged
sales.
See In re Molycorp, Inc. S’holder Deriv. Litig., 2015 WL 3454925, *8 & n.67 (Del. Ch.
131

May 27, 2015) (dismissing derivative duty-of-loyalty claim and rejecting reliance on fraud
28
courts will not infer bad faith from an ill-fated business decision on a notice pleading

standard, much less a particularity standard.132

Second, the plaintiffs’ belief that the Board knew “SPAC investments were

not generating substantial revenue [while] Palantir’s losses on these dubious

investments w[ere] mounting” is unsupported.133 The Complaint states only that the

Board was told actual cash collections from the SPACs were materially less than the

revenue projected over the lifespan of the commercial agreements.134 This

information was publicly disclosed. Palantir’s quarterly public filings expressly

broke out the revenue attributable to SPACs and detailed the sums collected versus

projected.135 Palantir also cautioned that its SPAC investment strategy involved

risks in “expected revenue and collections.”136

by hindsight); Lewis v. Austen, 1999 WL 378125, at *5 (Del. Ch. June 2, 1999) (dismissing
derivative claims and noting that “fraud by hindsight” is “legally insufficient” in the
absence of “a contemporaneous fact from which ‘guilty knowledge’ could be inferred”).
132
See, e.g., Hennessy, 2024 WL 2799044, at *1 (“[P]oor performance is not . . . indicative
of a breach of fiduciary duty.”); IBEW Loc. Union 481 Defined Contribution Plan & Tr. v.
Winborne, 301 A.3d 596, 621 (Del. Ch. 2003) (“Inferring bad faith because a decision
turned out badly would impose liability by hindsight.”).
133
Pls.’ Answering Br. 32.
134
Compl. ¶¶ 362-63, 391-401; see also ¶ 394 (noting that “negative results of the[] SPAC
investments” were “with[eld],” since this information had not yet been incorporated into
Palantir’s financial reporting).
135
Q1 2021 Form 10-Q at 20; Q2 2021 Form 10-Q at 15; Q3 2021 Form 10-Q at 65; 2021
Form 10-K at 120; Defs.’ Ex. 76 (“Q1 2022 Form 10-Q”) 50.
136
See supra note 57 and accompanying text.

29
Finally, it cannot reasonably be inferred that the specifics of Palantir’s

diligence before making the SPAC investments was material information. “An

omitted fact is material if there is a substantial likelihood that . . . the disclosure of

the omitted fact would have been viewed by the reasonable investor as having

significantly altered the ‘total mix’ of information made available.”137 The

transactions were each small relative to Palantir’s cash on hand and revenues.138

Stockholders were not asked to weigh in on the investments.

Long-Term Guidance. The last category of information concerns the

COVID-related slowdowns that purportedly put Palantir’s long-term guidance in

doubt.139

The plaintiffs assert that the directors had MNPI based on an April 2021 Board

presentation that explained: “(1) Palantir had lost two government sector customers;

(2) there was ‘[i]nsecurity around what public budgets/spend will look like post

COVID’; and (3) ‘big pre-COVID spending commitments’ were ‘wobbling.’”140

That is a mischaracterization of the document. The slide from which the plaintiffs’

allegations are drawn pertains solely to Palantir’s international government

137
Rosenblatt v. Getty Oil Co., 493 A.2d 929, 944 (Del. 1985).
138
See supra note 47 and accompanying text.
139
Pls.’ Answering Br. 34-37.
140
Id. at 35 (citing Compl. ¶¶ 351-52).

30
sub-segment—not its entire government segment.141 The plaintiffs omit the

observed 83% year-over-year growth in the larger U.S. government sub-segment,

which the presentation described as “a positive signal.”142 They also ignore that,

according to the presentation, Palantir gained a new customer during the same period

that it lost the other two.143 Overall, the information cannot fairly be read to suggest

that the Board knew Palantir’s long-term guidance was infeasible.

The plaintiffs next cite a November 2021 management presentation to the

Audit Committee.144 Setting aside that just one of the Demand Board members

(Moore) is alleged to have received the report, the information is a summary of

public analyst reports.145 Public information does not become MNPI just because it

is summarized in a nonpublic presentation.146

141
Apr. 2021 Board Presentation ‘883-RE.
142
Id. at ‘882-RE.
143
Reply Br. in Supp. of Individual Defs.’ and Nominal Def.’s Mot. to Dismiss or Stay
Pls.’ Verified Am. S’holder Deriv. Compl. (Dkt. 51) Ex. 92 (full Apr. 2021 Board
Presentation) ‘896-RE (discussing customer changes).
144
Pls.’ Answering Br. 35-36 (citing Compl. ¶ 375).
145
See Compl. ¶ 81 (describing the presentation as informing the Board about the doubts
of “analysis covering Palantir”); Defs.’ Ex. 41 at ‘4961; Defs.’ Ex. 47 at ‘5373.
146
The plaintiffs argue that because the presentation was labeled “[p]rivileged and
confidential,” it would be “procedurally improper” to infer that the presentation lacks
MNPI. Pls.’ Answering Br. 36. It is not an inference to conclude that public analyst
statements summarized in a document marked “confidential” are not MNPI. Under
Delaware law, labeling a document “privileged and confidential” does not make it so. See
Maverick Therapeutics, Inc. v. Harpoon Therapeutics, Inc., 2019 WL 3763953, at *2 (Del.
Ch. Aug. 9, 2019) (“[M]erely labeling a communication as ‘privileged’ does not make it
so.”); see also Camping World, 2022 WL 288152, at *10 (explaining that information
31
b. Scienter

A plaintiff pursuing a Brophy claim must sufficiently plead that a fiduciary’s

trades were at least partly motivated by the substance of MNPI she possessed.147

Although a plaintiff is “not required to uncover and plead the ‘smoking scienter gun’

or “plead evidence,” this element requires “particularized facts that would support a

reasonable inference of knowledge.”148 The plaintiff must allege that “each sale by

each individual defendant” was an act of intentional misconduct.149

Here, the plaintiffs advance no specific facts about each defendant’s purported

conduct or knowledge for each trade.150 They instead engage in group pleading,

ignoring that the defendants entered into 10b5-1 plans and transacted at different

known to the market was not MNPI simply because it was presented to the board). There
are no particularized allegations in the Complaint supporting an inference otherwise.
147
In re Fitbit, Inc. S’holder Deriv. Litig., 2018 WL 6587159, at *13 (Del. Ch. Dec. 14,
2018); Guttman, 823 A.2d at 505.
148
Fitbit, 2018 WL 6587159, at *15.
149
Stepak v. Ross, 1985 WL 21137, at *5 (Del. Ch. Sept. 5, 1985) (“In order for there to
be a recovery [on a Brophy claim], it must be shown that each sale by each individual
defendant was entered into and completed on the basis of, and because of, adverse material
non-public information.”).
150
See Tilden v. Cunningham, 2018 WL 5307706, at *20 (Del. Ch. Oct. 26, 2018) (stating
that a plaintiff must “plead facts to support a reasonable inference that ‘each sale by each
individual defendant was entered into and completed on the basis of, and because of,
adverse material nonpublic information’” (quoting Rattner v. Bidzos, 2003 WL 2228433,
at *11 (Del. Ch. Sept. 30, 2003))).

32
times.151 This shortcoming is enough to conclude that scienter has not been

adequately pleaded.

Beyond that, any inference of scienter that could be drawn from the plaintiffs’

generalizations is negated by the timing of the challenged trades. Most of the

allegedly suspicious trades (97% by proceeds) were made either pursuant to a 10b5-1

plan, for tax withholding purposes, or within 30 days of the direct listing.152 The

substantial percentages of stock retained by the directors further undercuts plaintiffs’

claim.

i. Direct Listing Sales

The plaintiffs contend that Palantir’s choice of a direct listing rather than an

underwritten IPO is indicative of the defendants’ ulterior motives. The direct listing,

they claim, was designed to avoid “outside scrutiny” that would have prevented the

defendants from selling “at an artificially high price.”153

This broad critique of direct listings falls short of the particularity standard.

There is nothing intrinsically suspect about corporate insiders participating in a

151
E.g., Compl. ¶¶ 70-74, 83, 98, 350-55, 358-60, 366; see also In re Cornerstone
Therapeutics Inc. S’holder Litig., 115 A.3d 1173, 1182 (Del. 2015) (noting that “each
director has a right to be considered individually”); In re Citigroup Inc. S’holder Deriv.
Litig., 964 A.2d 106, 121 n.36 (Del. Ch. 2009) (rejecting a “‘group’ accusation mode of
pleading demand futility”).
152
See Compl. ¶ 77; Defs.’ App. A.
153
See Compl. ¶¶ 62, 64-65.

33
direct listing. The offering structure requires existing stockholders to sell shares to

create a public market, since no new shares are issued. Market activity and pricing

depend on the willingness of current stockholders to sell shares to public buyers.154

The fact that sales were made in conjunction with the offering weakens any

inference of scienter that could be drawn from the plaintiffs’ allegations. “[E]arly

investors and promoters routinely sell stock in IPOs” to gain liquidity. 155 In

Palantir’s case, the direct listing was the first liquidity event for its stockholders after

17 years as a private company.156 Even “large sales” of stock by insiders “become

far less eyebrow raising” where the stock had “previously been subject to restrictions

on sales.”157

154
See supra notes 6-8 and accompanying text.
155
In re Facebook, Inc. IPO Sec. and Deriv. Litig., 922 F. Supp. 2d 445, 470 (S.D.N.Y.
2013) (rejecting “generic accusations” about directors selling stock in an IPO), aff’d, 797
F.3d 148 (2d Cir. 2015); see also In re Accuray, Inc. Sec. Litig., 757 F. Supp. 2d 936, 950
(N.D. Cal. 2010) (observing that directors and officers selling stock in an IPO “is not
suspicious or unusual”); Chi. & Vicinity Laborers’ Dist. Council Pension Fund v.
Amplitude, Inc., 2025 WL 82206, at *2 (N.D. Cal. Jan. 13, 2025) (holding that allegations
about financial motives for a direct listing did not “bolster a strong inference of scienter”).
156
The federal court in the Securities Action similarly observed that the sales in the direct
listing were “not suspicious” because the “whole point of the Offering was so that [insiders]
could gain access to liquidity after running Palantir as a private company for 17 years.”
Cupat v. Palantir Techs., Inc., No. 22-cv-02384-GPG-SBP, slip op. at 20 (D. Colo. Apr. 4,
2025).
157
Guttman, 823 A.2d at 504 n.24.

34
ii. 10b5-1 and Tax-Related Sales

The majority of stock sales made by Karp, Cohen, Thiel, and Moore were

made under 10b5-1 plans or automatically to cover tax withholding obligations.158

Rule 10b5-1 plans require corporate insiders to specify upfront the amount, price,

and date ranges of anticipated trades and to cede the ultimate execution of these

trades.159 Insiders entering into a 10b5-1 plan must certify when the plan is adopted

that they are “not aware of any material nonpublic information about the security or

issuer . . . .”160 Each of Karp, Cohen, Thiel, and Moore made that representation.161

The Complaint lacks well-pleaded allegations indicating that these directors had

MNPI when they entered into their 10b5-1 plans.

Because 10b5-1 plans give “trading authority to third parties with exclusive

discretion to execute trades under certain pre-determined parameters,” they

generally “offer a safe harbor for corporate insiders to sell stock.”162 For equity

158
According to the defendants, $1,539,046,671 out of $2,033,454,183 in total proceeds
(or 76%) of the four directors’ sales fall into these categories. See Defs.’ App. A (outlining
when trades occurred based upon each individual defendants’ Forms 3 and 4 filings with
the SEC); see Registration Statement 86 (“To fund the personal tax withholding and
remittance obligations arising in connection with the [restricted stock units] that will vest
and settle on that day, we expect that current and former employees will use a broker or
brokers to sell a portion of such shares into the market on the first trading day.”).
159
17 C.F.R. § 240.10b5-1(c)(1)(i)(B).
160
Id. § 240.1b5-1(c)(1)(ii)(C)(1).
161
Defs.’ Exs. 6-7, 9, 12 (10b5-1 plans for Karp, Moore, Thiel, and Cohen, respectively).
162
Laborers’ Dist. Council Constr. Indus. Pension Fund v. Bensoussan, 2016 WL
3407708, at *2 (Del. Ch. Jun. 14, 2016); see also Tilden, 2018 WL 5307706, at *7 n.79.

35
awards, the company’s sale of stock to cover tax obligations are similarly routine,

automatic, and not within the grantee’s control.163 These facts may “weigh against

a finding that insider trading occurred.”164

Of course, the “mere existence” of a trading plan and “fact that its mechanics

literally may have been adhered to do not, in and of themselves, preclude insider

trading.”165 The insider subject to a plan could, for example, “tip[] off the broker

handling the [t]rading [p]lan.”166 But the Complaint provides no well-pleaded basis

from which it could be reasonably inferred that such wrongful action occurred here.

163
Companies commonly sell stocks to satisfy the income and payroll taxes associated with
an award of stock, with no input from the grantee on whose behalf such shares are sold.
See Fidelity, Tax Withholding in Company Stock Plans: Net Shares, Sell to Cover, Cash.
164
In re Lululemon Athletica Inc. 220 Litig., 2015 WL 1957196, at *13 (Del. Ch. Apr. 30,
2015); see also Glaser v. The9, Ltd., 772 F. Supp. 2d 573, 592 (S.D.N.Y. 2011) (“[I]t is
well established that trades under 10b-5-1 plan[s] do not raise a strong inference of
scienter.” (internal citation omitted)); In re IAC/InterActiveCorp Sec. Litig., 478 F. Supp.
2d 574, 604 (S.D.N.Y. 2007) (explaining that because sales were made as “part of a
periodic divestment plan” under Rule 10b5-1, the “timing and amount of the sales do not
raise a strong inference of scienter”); cf. Pfeiffer v. Toll, 989 A.2d 683, 699 (Del. Ch. 2010)
(explaining why Delaware’s Brophy doctrine is “consistent with—and supportive of—the
federal securities regime”).
165
Lululemon, 2015 WL 1957196, at *13; see also Micholle v. Ophthotech Corp., 2019
WL 4464802, at *17 (S.D.N.Y. Sept. 17, 2019) (noting that a 10b5-1 plan entered into
during the class period was “not a cognizable defense to scienter allegations on a motion
to dismiss” (citation omitted)).
166
Lululemon, 2015 WL 1957196, at *13.

36
iii. Stock Retained

The plaintiffs lay significant emphasis on the massive profits Karp, Cohen,

Thiel, and Moore made from selling their Palantir stock.167 Delaware courts have

held, however, that “the sheer size of [selling defendants’] sales are not sufficient to

support a reasonable inference of scienter” where most of their shares were

retained.168 Karp and Cohen each kept 81% of their Palantir shares.169 Moore kept

70%.170 And the plaintiffs do not allege that Thiel sold most of his stake.171

2. The Fiduciary Duty Claim

The plaintiffs bring an additional breach of fiduciary duty claim against six of

the seven Demand Board members regarding Palantir’s SPAC investment

167
See Pls.’ Answering Br. 40; see also infra Section II.C.
168
In re TrueCar, Inc. S’holder Deriv. Litig., 2020 WL 5816761, at *25-26 (Del. Ch. Sept.
30, 2020); see also Guttman, 823 A.2d at 504 (expressing a lack of receptiveness to
plaintiffs’ claims against directors who sold 32%, 20%, and 10% of their stakes); Oracle,
867 A.2d at 954 (noting that large stock sales by insiders did not support an inference of
scienter because they amounted to a small percentage of overall holdings); accord In re
Oxford Health Plans, Inc., 187 F.R.D. 133, 140 (S.D.N.Y.1999) (“Large volume trades
may be suspicious but where a corporate insider sells only a small fraction of his or her
shares in the corporation, the inference of scienter is weakened.” (citing Acito v. IMCERA
Group, Inc., 47 F.3d 47, 54 (2d Cir. 1995))).
169
Defs.’ App. B.
170
Id.
171
The defendants’ counsel represented at oral argument that Thiel retained a sizeable
amount of Palantir shares, but the precise percentage could not be computed since Thiel
invested in Palantir partly through various entities. Hr’g Tr. 21.

37
program.172 It has two components: (1) “issuing [o]ffering [m]aterials and other

public filings and statements containing materially misleading information” about

the SPAC investments;173 and (2) approving the SPAC investments in bad faith.174

That is, the plaintiffs allege that both making disclosures about and approving the

investments are disloyal acts.

The claim is intertwined with the plaintiffs’ Brophy theory. According to the

Complaint, the defendants concocted and misrepresented the “SPAC scheme” to

“prop[] up the Company’s revenue growth and projected growth” so that insiders

could “unload shares on the unsuspecting public” while they possessed MNPI.175

This theory rests on conjecture and hindsight bias rather than particularized facts.176

None of the plaintiffs’ allegations show that any of the Demand Board members face

a substantial likelihood of liability for a non-exculpated claim.177

Palantir took a risk by investing in SPACs. As the Complaint acknowledges,

though, it did some diligence, was advised by outside counsel, and publicly disclosed

each of the investments. There are no particularized facts fairly suggesting that the

172
See supra note 88 and accompanying text (explaining that all the Demand Board
members except Woersching are named as defendants); Compl. ¶¶ 487-94.
173
Compl. ¶ 492.
174
Id. ¶ 489.
175
Id. ¶ 492.
176
See supra note 131 and accompanying text.
177
See Defs.’ Ex. 60 (Palantir certificate of incorporation) Art. VII (exculpation provision).

38
Board knew in real time that the investments would underperform, much less that it

set out to mislead the market. Consequently, the plaintiffs’ disclosure and approval

arguments are unsuccessful.

a. Disclosures

Under Rule 23.1’s “stringent standard of factual particularity,” plaintiffs must

allege “which disclosures were misleading, when the Company was obligated to

make disclosures, what specifically the Company was obligated to disclose,” and

“how the Company failed to do so.”178 They must plead specific facts showing

“board involvement in the preparation of the disclosures” and “that the violation was

made knowingly or in bad faith.”179 The Complaint does not meet these

requirements.

To begin, the plaintiffs’ brief neglected to address the defendants’ arguments

about the alleged disclosure violations, thereby waiving that aspect of their claim.180

Second, apart from Karp,181 the Complaint lacks particularized allegations that any

178
Citigroup, 964 A.2d at 133.
179
Id. at 134.
180
See Louden v. Archer-Daniels-Midland Co., 700 A.2d 135, 140 n.3 (Del. 1997)
(concluding that a plaintiff waived the review of claims it chose not to brief); Emerald P’rs
v. Berlin, 726 A.2d 1215, 1224 (Del. 1990) (“Issues not briefed are deemed waived.”).
181
The plaintiffs aver that a press release was “disseminated in connection with a Form 8-K
executed by Karp.” Compl ¶ 83. But Delaware courts have held that signatures on public
filings are insufficient to support a substantial likelihood of liability for alleged
misrepresentations. See Seminaris v. Landa, 662 A.2d 1350, 1354 (Del. Ch. 1995).

39
other director prepared, drafted, or made the challenged disclosures.182 It instead

group pleads that the Board issued misleading statements.183 Finally, many of the

challenged statements are not linked to the Board but were made by Palantir

executives during earnings calls.184

b. Approval

The approval-related aspect of this claim fares no better. To succeed, it must

overcome two key impediments. One obstacle is that capital allocation decisions

generally fall within a board’s business judgment.185 The other is that only two of

the seven directors on the Board when the SPAC investments were made (Thiel and

182
See Citigroup, 964 A.2d at 133 n.91, 134 (holding that a plaintiff failed to establish a
substantial likelihood of liability for a disclosure violation where the plaintiff did “not
allege facts suggesting that the director defendants prepared the financial statements or that
they were directly responsible for the misstatements or omissions”); see also Zimmer
Biomet, 2021 WL 3779155, at *15 (“The lack of well-pleaded allegations about the
[d]irector [d]efendants’ involvement in the disclosures ‘independently preclude[s] a
finding of demand futility.’” (quoting Ellis v. Gonzales, 2018 WL 3360816, at *9 (Del. Ch.
July 10, 2018))).
183
See Compl. ¶ 492; see also supra note 175 and accompanying text.
184
Defs.’ App. C; see Ellis, 2018 WL 3360816, at *9 (rejecting liability for director
defendants where the purported misstatements were made by the CEO and the plaintiff
failed to allege that the director defendants personally played a role in “approv[ing]” or
“prepar[ing]” the statements); In re Dow Chem. Co. Deriv. Litig., 2010 WL 66769, at *11
(Del. Ch. Jan. 11, 2010) (explaining that absent “particularized facts to connect the board”
to disclosures, “there is reason to doubt that the board knew that the statements were false
or misleading or acted in bad faith by not adequately informing themselves about the
statements”).
185
Geller v. Tabas, 462 A.2d 1078, 1082 (Del. 1983) (explaining that directors are
“protected in their investment decisions by the presumption of propriety afforded them by
the business judgment rule”).

40
Rascoff)—one of whom (Thiel) is on the Demand Board—have alleged conflicts.186

These purported conflicts involve just four of the 27 SPAC transactions.187 The

Complaint lacks particularized facts suggesting that Thiel or Rascoff materially

benefited from Palantir’s investments in these SPACs.188

To compensate for these deficiencies, the plaintiffs assert that a majority of

the Demand Board—Karp, Cohen, Thiel, Moore, and Schiff—face a substantial

likelihood of liability for approving the SPAC investments in bad faith. 189 They

allege that Thiel and Karp “delegated unfettered power” to a special committee “to

approve any SPAC deal and any attendant licensing agreement.”190 Cohen, Moore,

and Schiff, as members of that committee, allegedly “approved the disastrous SPAC

deals, often without even conducting bare minimum due diligence and often without

even holding a [committee] meeting to discuss the proposed deals.”191

186
See Compl. ¶¶ 136-37, 283-84, 318, 338, 343; see also Orman v. Cullman, 794 A.2d 5,
23 (Del. Ch. 2002) (“If a plaintiff alleging a duty of loyalty breach is unable to plead facts
demonstrating that a majority of a board that approved the transaction in dispute was
interested and/or lacked independence, the entire fairness standard of review is not applied
and the Court respects the business judgment of the board.”).
187
See Compl. ¶¶ 136-37, 283-84, 318-19, 338, 343; see also id. ¶ 348 (listing the 27
SPAC investments).
188
See In re Transkaryotic Therapies, Inc., 954 A.2d 346, 364 (Del. Ch. 2008) (“[T]he
mere fact that a director received some benefit that was not shared generally by all
shareholders is insufficient; the benefit must be material.”).
189
See Pls.’ Answering Br. 40-41.
190
Compl. ¶¶ 445-46 (Thiel), 458-59 (Karp); see also id. ¶ 152 (describing the formation
of the special committee).
191
Id. ¶¶ 452-53 (Cohen), 465-66 (Moore), 468 (Schiff).

41
The plaintiffs cite an array of facts in an attempt to bolster these assertions,

including:

• The timing of the first SPAC investment coming “mere weeks
after the [Board] learned revenues were declining and Palantir
had nonetheless affirmed lofty 2021 guidance”;192

• The size of the total investments ($500 million) without
“retaining any advisors” to diligence the SPACs or “open[ing] a
data room”;193

• The limited information—primarily “sales pitch presentation[s]
prepared by each SPAC’s management”—received by the Board
before the investments were made;194

• The absence of discussions reflected in minutes about the
SPACs’ prospects, execution of written consents approving 16
of the 27 investments “following no deliberation at all,” and
approval of ten other investments during “telephonic
meetings”;195 and

• The entry into a multi-year licensing agreement with each SPAC
concurrent with Palantir’s investment at a time when EY had
“expressed concerns about changes to the ‘Company’s customer
credit profile’ . . . .”196

192
Pls.’ Answering Br. 44 (citing Compl. ¶¶ 88-89, 94 n.48, 103, 113, 348).
193
Id. (citing Compl. ¶¶ 105, 119, 126-27, 135, 143, 159-61, 169-70, 183-84, 188-89, 201-
02, 214-15, 220-21, 225-26, 241-42, 247-48, 250, 256-57, 268-69, 276, 280, 288, 295-96,
305, 311, 314, 322, 335, 342).
194
Id. at 45 (citing Compl. ¶¶ 141 n.93, 143, 255-56, 258 n.202, 283, 288, 294-95, 302,
305, 311-12, 320, 322, 339-42).
195
Id. at 45-46 (citing Compl. ¶¶ 10, 98, 103-348, 386).
196
Id. at 47 (citing Compl. ¶¶ 103, 105, 113, 119, 127, 137, 143-44, 158, 160, 168, 170,
182, 184, 187, 189, 200, 202, 213, 215, 217, 221, 223, 226, 238, 242, 245, 250, 252, 257,
264, 269, 272, 278, 280, 285, 288-89, 293, 295-96, 301, 304-06, 309, 311, 319, 322, 332,
335, 338, 364).

42
The plaintiffs argue that these facts give reason to doubt that the “directors honestly

and in good faith believed” their actions were “in the best interests of [Palantir].”197

But none support a reasonable inference that the SPAC investments were made in

bad faith.

On timing, as discussed above, the suggestion that Palantir’s revenue was

declining rests on a misconstrual of the underlying Board records.198

On the Board’s diligence, the allegations—taken as true—suggest negligence

at best. The Complaint cites Board presentations that show some diligence into the

SPAC investments and discussions of risks and benefits with Palantir management

and outside counsel.199 The Board committee formed for this purpose also rejected

two proposed investments after exploring them.200 To the extent more diligence

might have lowered the risk of underperformance—a speculative counterfactual—

197
Id. at 40 (quoting In re Walt Disney Co. Deriv. Litig., 825 A.2d 275, 268 (Del. Ch.
2003)).
198
See supra notes 141-142 and accompanying text.
199
See, e.g., Compl. ¶¶ 104, 114-15, 125, 134, 283, 294, 302-03, 334; Defs’ Ex. 16; Defs.’
Ex. 15; Defs.’ Ex. 21. Additional meeting minutes and memoranda produced in response
to the plaintiffs’ Section 220 demand further demonstrate diligence. E.g., Defs.’ Ex. 3 at
‘923 (minutes for a Board meeting describing the discussion and approval of a SPAC
investment); Defs.’ Ex. 28 at ‘3723 (minutes for a special committee meeting describing
the discussion and approval of SPAC investments); Defs.’ Ex. 31 at ‘4043 (same); Defs.’
Ex. 32 at ‘4110 (describing diligence on a particular SPAC); Defs.’ Ex. 34 at ‘4387 (same);
Defs.’ Ex. 35 at ‘4388 (minutes for a special committee meeting describing the discussion
and approval of SPAC investments); Defs.’ Ex. 36 at ‘4489 (describing diligence on a
particular SPAC); Defs.’ Ex. 39 at ‘4587 (same).
200
Defs.’ Opening Br. Exs. 38, 48.

43
there remains “a vast difference between an inadequate or flawed effort to carry out

fiduciary duties and a conscious disregard for those duties.”201

The plaintiffs insist that, viewed together, the various flaws in the Board’s

process become substantial enough to support an inference of bad faith. They

analogize their approach to a “mulligan stew” of facts that the court must

“sample.”202 If the “pleading-stage flavor is foul,” they say, the motion to dismiss

must be denied.203

To be sure, this court must view well-pleaded facts holistically in assessing

demand futility.204 But the adequacy of a complaint is not measured by the quantity

of allegations; the assembled facts must qualitatively meet the plaintiffs’ pleading

burden. Here, the plaintiffs must make particularized allegations supporting a

201
Lyondell Chem. Co. v. Ryan, 970 A.2d 235, 243 (Del. 2009); see also Wayne Cnty.
Emps.’ Ret. Sys. v. Corti, 2009 WL 2219260, at *14 (Del. Ch. July 24, 2009) (“Bad faith
cannot be shown by merely showing that the directors failed to do all they should have
done under the circumstances.”); McElrath v. Kalanick, 224 A.3d 982, 993 (Del. 2020)
(rejecting allegations of bad faith where the board “heard a presentation that summarized
the transaction, reviewed the risk of litigation . . . , generally discussed due diligence, asked
questions, and participated in a discussion”).
202
Pls.’ Answering Br. 41 (quoting Winborne, 301 A.3d at 623); see also id. at 47 (arguing
that the defendants are “[u]nable to eliminate the ‘foul’ ‘pleading-stage flavor’ of th[eir]
‘concoction’” (citation omitted)); see also infra note 206 (defining a “mulligan stew”).
203
Pls.’ Answering Br. 41 (quoting Winborne, 301 A.3d at 623).
204
Id.; see also 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.”).

44
reasonable inference that the defendants “acted with scienter, meaning that ‘they had

actual or constructive knowledge that their conduct was legally improper.’”205

Mixing together “odds and ends”206 of minor critiques is not a recipe for bad faith,

even with a hearty serving of plaintiff-friendly inferences.

* * *

The plaintiffs’ narrative of misconduct is multi-faceted. It begins with an

ambitious plan to leverage Palantir’s direct listing for insider trades. It then pivots

to a SPAC investment scheme meant to distract from slowing revenue and enable

additional stock sales.

The story breaks apart in context. The trades, though large, took place in

circumstances that are typically proper: in connection with a public offering, under

10b5-1 plans, or to cover tax withholding. Though insider trading could still occur

in those cases, the Complaint lacks well-pleaded facts supporting a reasonable

inference that the sales were made on the basis of MNPI.

The plaintiffs’ claims are not strengthened by their allegations about Palantir’s

SPAC investments. Disinterested business decisions that are imprudent in hindsight

205
McElrath, 224 A.3d at 991 (citing City of Birmingham Ret. and Relief Sys. v. Good, 177
A.3d 47, 55 (Del. 2017)).
206
“Mulligan Stew,” Wikipedia, https://en.wikipedia.org/wiki/Mulligan_stew (explaining
that “mulligan stew” refers to “hobo stew” that was prepared in camps in the early 1900s
and was “broadly defined as a stew made of odds and ends or any available ingredients”)
(last visited Apr. 12, 2025).

45
are not indicative of bad faith. The SPAC program was also disclosed, and the

purported misstatements about it are not attributed to the Board.

Accordingly, the plaintiffs have not established that a majority of the Demand

Board members face a substantial likelihood of liability on a non-exculpated Brophy

or breach of fiduciary duty claim. The unjust enrichment claim falls alongside the

others.207 The second prong of Zuckerberg is unmet.

C. Material Personal Benefit

The plaintiffs also assert that demand is futile because Thiel, Karp, Cohen,

and Moore received material personal benefits from the challenged trades.208 They

insist that the scale of the directors’ trade proceeds alone impugns their impartiality,

making demand futile. This argument invokes the first prong of Zuckerberg.

Thiel, Karp, Cohen, and Moore collectively made billions of dollars selling

their Palantir stock.209 In the three days after the direct listing, for example, Karp

made over $135 million, Cohen made over $37 million, Thiel made over $278

207
Clovis, 2019 WL 4850188, at *17 n.236 (explaining that a “claim for unjust enrichment
rises or falls with [a] Brophy claim”); Calma v. Templeton, 114 A.3d 563, 591 (Del. Ch.
2015) (“At the pleadings stage, an unjust enrichment claim that is entirely duplicative of a
breach of fiduciary duty claim—i.e., where both claims are premised on the same purported
breach of fiduciary duty—is frequently treated ‘in the same manner when resolving a
motion to dismiss.’” (citation omitted)).
208
Compl. ¶ 437.
209
Id. ¶ 12.

46
million, and Moore made over $3.5 million by selling Palantir shares.210 The Court

of Chancery has remarked, in the merger context, that much smaller sums are

sufficient to infer materiality at the pleading stage.211

Yet the demand futility test does not view materiality in a vacuum.

Zuckerberg directs this court to consider whether a material personal benefit was

obtained “from the alleged misconduct.”212 Intentionally exploiting MNPI to gain a

trading advantage is misconduct; selling company stock at a profit is not.213 Absent

“special circumstances,” Delaware law permits officers and directors to freely trade

their corporations’ stock.214 The bar to Brophy liability is set high in recognition of

the benefits gained by “aligning [fiduciaries’] interests with the company through

210
Id. ¶¶ 439-40, 449-50, 456, 463-64.
211
See, e.g., In re MultiPlan Corp. S’holders Litig., 268 A.3d 784, 813 (Del. Ch. 2022)
(concluding that a “greater than half-million-dollar payout [wa]s presumptively material at
the motion to dismiss stage”); Frank v. Elgamal, 2012 WL 1096090, at *11 (Del. Ch. Mar.
30, 2012) (explaining that a $250,000 fee was sufficient to “reasonably infer that [a party]
was interested in [a] [m]erger”).
212
Zuckerberg, 262 A.3d at 1059 (emphasis added).
213
See Rosenberg v. Oolie, 1989 WL 122084, at *3-4 (Del. Ch. Oct. 16, 1989) (discussing
Brophy’s requirement that “some causal link must be established between the confidential
information the corporate insiders possess and any profits they accumulate” and that,
without this link, an insider is “free to trade in the market place [sic] in his company’s
stock”).
214
Brophy, 79 A.2d at 8 (explaining that trading in company stock is only inappropriate
where the person trading is “a person in a confidential or fiduciary position,” and “in breach
of his duty, uses his knowledge to make a profit for himself”); see also Tuckman, 1982 WL
17810, at *11 (“[C]orporate officers and directors may purchase and sell the corporation’s
stock at will, without any liability to the corporation.”).

47
stock ownership, a dynamic facilitated by the fact that many directors and officers

are compensated in stock.”215

In Guttman v. Huang, Chief Justice (then-Vice Chancellor) Strine likewise

observed the perils of declaring directors who sold stock conflicted without first

considering the allegations of misconduct.216 There, as here, the director defendants

sold stock to marketplace buyers.217 The court observed that “such sales, in

themselves, are not quite as suspect as a self-dealing transaction in which the buyer

and seller can be viewed as sitting at both sides of the negotiating table.”218 Further,

the court expressed that it would be “unwise to formulate a common law rule that

makes a director ‘interested’ whenever a derivative plaintiff cursorily alleges that he

made sales of company stock in the market at a time when he possessed material,

non-public information.”219

The court outlined a more “balanced approach” to the demand futility analysis

tailored to the unique features of a Brophy claim. It turns on “whether the plaintiffs

have pled particularized facts regarding the directors that create a sufficient

likelihood of personal liability because [the directors] engaged in material trading

215
Clovis, 2019 WL 4850188, at *15.
216
823 A.2d 492, 502 (Del. Ch. 2003).
217
Guttman, 823 A.2d at 502.
218
Id.
219
Id.

48
activity at a time when . . . they knew material, non-public information about the

company’s financial condition.”220 This more nuanced assessment avoids the sort of

“hair-trigger demand excusal that Aronson and Rales eschewed.”221

More recently, in Grabski v. Andreessen, the Court of Chancery recognized

the importance of a context-specific approach to demand futility for insider trading

claims.222 Citing Guttman, the court noted that ”[j]ust as it would be ‘unwise’ to say

that a director always materially benefits under Zuckerberg when she sells company

stock, it would be unwise to say a director never materially benefits under

Zuckerberg even if she receives a gargantuan financial benefit.”223 There, the

challenged sales were made when the defendants allegedly knew about an internal

valuation of the company’s common stock “well below its trading price when they

sold into the [d]irect [l]isting.”224 The court held that the “billions of dollars made

by” directors who traded were “material personal benefit[s] that would render [them]

incapable of impartially considering a demand attacking those sales.”225

220
Id.
221
Id.; see supra note 89 (explaining that Aronson and Rales remain “good law”).
222
2024 WL 390890 (Del. Ch. Feb. 1, 2024).
223
Id. at *9.
224
Id.
225
Id.

49
In this case, the plaintiffs have not adequately pleaded that the directors

received a material benefit from wrongdoing. The Complaint fails to show that any

Demand Board member faces a substantial likelihood of personal liability for insider

trading. Certain directors sold stock in a direct listing, which is designed for that

purpose, and under 10b5-1 plans, which removed their trading discretion. Neither

MNPI nor purposeful trading on the substance of MNPI is well-pleaded. On these

facts, it would be inequitable to consider demand futile simply because the directors

made large profits selling their stock to the public.

Zuckerberg did not transform the demand futility analysis into a rigid

checklist. The test remains a contextual one that allows the court to consider

multiple, interrelated factors. For Brophy claims, the second prong of the

Zuckerberg test logically informs the first. Myopically focusing on the profits a

board made selling stock, without regard to the circumstances, would lower the bar

to Brophy liability and upset the “incentive[s] that holding company stock provides

directors.”226

226
Zimmerman v. Braddock, 2005 WL 2266566, at *7 (Del. Ch. Sept. 8, 2005) (“Not
permitting directors adequate opportunities . . . to liquidate their holdings (or placing
potential insider trading liability upon them without sufficient allegations of fault) destroys
the very incentive that holding company stock provides directors.”), rev’d on other
grounds, 906 A.2d 776 (Del. 2006); see also Clovis, 2019 WL 4850188, at *15; Guttman,
823 A.2d at 502.

50
D. Independence

The plaintiffs also assert that Karp, Theil, Cohen, Moore, Schiff, and

Woersching “lack independence from other Demand Board members who either

face a substantial likelihood of liability or who received a material personal

benefit.”227 This argument invokes the third Zuckerberg prong. Because the

plaintiffs have not adequately pleaded that any Demand Board member either faces

a substantial likelihood of liability or received a material personal benefit from

wrongdoing, that prong does not apply.

III. CONCLUSION

The plaintiffs have failed to plead particularized facts demonstrating that

demand is futile as to a majority of the Demand Board members. The defendants’

motion to dismiss is therefore granted. The Complaint is dismissed in its entirety

under Rule 23.1.

227
Compl. ¶ 469.

51