Adam Grabski ex rel. Coinbase Global, Inc. v. Marc Andreessen

COURT OF CHANCERY
OF THE
STATE OF DELAWARE
KATHALEEN ST. JUDE MCCORMICK LEONARD L. WILLIAMS JUSTICE CENTER
CHANCELLOR 500 N. KING STREET, SUITE 11400
WILMINGTON, DELAWARE 19801-3734

Date Submitted: October 13, 2025
Date Decided: January 30, 2026

Joseph R. Slights III Gregory V. Varallo
Brad D. Sorrels Mae Oberste
Daniyal M. Iqbal BERNSTEIN LITOWITZ BERGER
Nora M. Crawford & GROSSMANN LLP
Jordan L. Cramer 500 Delaware Avenue, Suite 901
Ashleigh L. Herrin Wilmington, DE 19801
WILSON, SONSINI, GOODRICH
& ROSATI, P.C. Elena C. Norman
222 Delaware Avenue, Suite 800 Paul J. Loughman
Wilmington, DE 19801 Alex B. Haims
YOUNG CONAWAY STARGATT
& TAYLOR, LLP
Rodney Square 1000 North King St.
Wilmington, DE 19801

Re: Adam Grabski ex rel. Coinbase Global, Inc.,
v. Marc Andreessen, et al., C.A. No. 2023-0464-KSJM

Dear Counsel:

This letter resolves the motion to strike and the motion to terminate and filed

by Coinbase Global, Inc.’s Special Litigation Committee (the “SLC”).1 The motion to

strike is granted. The motion to terminate is denied.

1 Terms not defined in this decision have the same meaning as in Grabski ex rel.

Coinbase Glob., Inc. v. Andreessen, 2024 WL 390890 (Del. Ch. Feb. 1, 2024).
I. FACTUAL BACKGROUND

The court assumes the reader’s familiarity with the factual and procedural

history of this case. This decision recounts the facts germane to the pending motions.2

A. The Board Forms The SLC.

To recap, Coinbase went public through a direct listing on April 14, 2021 (the

“Direct Listing”). In the Direct Listing, Defendants sold Coinbase stock worth

approximately $2.9 billion unrestrained by a lock-up period (the “Challenged

Trades”). A month later, the Company announced disappointing quarterly earnings

and that it was raising capital through a notes offering. After this announcement,

the Company’s stock price plummeted. By selling their shares before the

announcement, Defendants avoided losses of approximately $1.09 billion.

Plaintiff bought Coinbase stock on the first day of the Direct Listing. He filed

this action on April 26, 2023, asserting claims for breach of fiduciary duty and unjust

enrichment against the Director Defendants and Officer Defendants who sold stock

in the Direct Listing. When Plaintiff filed this action, the Coinbase Board comprised

Brian Armstrong, Marc Andreessen, Frederick Ernest Ehrsam III, Kathryn Haun,

2 The SLC redacted portions of the publicly filed versions of the SLC Report (defined

below) and the exhibits to the SLC Report, including deposition transcripts. C.A. No.
2023-0464-KSJM, Dockets (“Dkts.”) 107, 108. This decision cites to portions of the
redacted material that are “material to [the public’s] understanding [of] the nature of
the dispute.” In re Oxbow Carbon LLC, 2016 WL 7323443, at *2 (Del. Ch. Dec. 15,
2016) (internal quotation marks omitted) (quoting Al Jazeera Am., LLC v. AT & T
Servs., 2013 WL 5614284, at *7 (Del. Ch. Oct. 14, 2013)). The court’s decision to cite
to portions of the redacted material is without prejudice to the SLC’s ability to argue
that other aspects of the redacted material should remain confidential.

2
Fred Wilson, Kelly Kramer, Gokul Rajaram, and Tobias Lutke. All but Lutke were

members of the Board at the time of the Direct Listing.

Relevant to the SLC motions, Andreessen held his Coinbase interests through

Andreessen Horowitz, a venture capital firm.3 Andreessen is a co-founder and has

been a general partner of Andreessen Horowitz since July 2009. Andreessen

Horowitz is one of the largest venture capital firms in Silicon Valley.4

Andreessen Horowitz first invested in Coinbase in 2013, leading a $25 million

Series B round. Thereafter, Andreessen Horowitz invested in each of Coinbase’s

significant funding rounds. Andreessen Horowitz’s exit of its investment in Coinbase

in connection with the Direct Listing was the firm’s largest exit in its history.

Through it, Andreessen Horowitz sold over $118.7 million of Coinbase stock.5

Defendants moved to dismiss the Complaint under Court of Chancery Rules

23.1 and 12(b)(6).6 On February 1, 2024, the court denied the motion.7 The court

held that Plaintiff had pled with particularity that demand was futile against the

Director Defendants, who made up more than half of the Board.8 The court also held

that it was reasonably conceivable that Defendants possessed material, non-public

information, including a Section 409A report determining Coinbase’s fair value (the

3 Dkt. 53, Ex. A (“SLC Report”) at 39.

4 See SLC Report, Ex. B at 172:20–24; id., Ex. C (“Rajaram Dep. Tr.”) at 184:7–18.

5 See generally Compl. ¶ 21.

6 Dkt. 15.

7 Dkt. 37.

8 Grabski, 2024 WL 390890, at *12.

3
“Andersen Report”) and other information about Coinbase’s future financial

performance.9 The court further held that Plaintiff adequately pled scienter based

on the timing of the Challenged Trades, the absence of a lock-up, and the resulting

cash payout.10

Eight days after the court issued the dismissal decision, the Board formed the

SLC. The court granted the SLC’s motion to stay the litigation to allow it to

investigate the claims set forth in the Complaint.11 The SLC conducted a ten-month

investigation resulting in a 332-page report (the “SLC Report”).12 The SLC Report

concluded that this litigation lacks merit. On February 3, 2025, the SLC moved to

terminate the litigation.

B. The SLC Members

The SLC comprises two members: Kelly Kramer and Gokul Rajaram.13

Neither sold shares in the Direct Listing.14

Kramer has worked in the health and tech industries and has served on two

other public company boards.15 She has served as an independent director on

Coinbase’s Board since 2020.16 She chairs the audit and compliance committee and

9 Id. at *9–11.

10 Id. at *10–11.

11 Dkt. 42.

12 SLC Report at 30.

13 Id. at 23–25.

14 Id. at 25, 27.

15 Id. at 24.

16 Id.

4
serves on the compensation committee.17 Previously, Kramer was the Chief Financial

Officer of Cisco Systems, Inc. and Chief Financial Officer of GE Healthcare Systems

under General Electric. Kramer has no prior relationship with any member of

Coinbase’s Board or management team.18 Plaintiff does not challenge her

independence.

Rajaram has served in executive capacities across the tech industry, including

at Facebook and Google.19 He started Chai Labs, Inc., which Meta acquired. Rajaram

joined Coinbase as an independent director in 2020. He serves on the compensation

committee.20

Plaintiff challenges Rajaram’s independence based on his economic and

professional ties to Andreessen and Andreessen Horowitz.

In 2007, Andreessen invested approximately $200,000 in Rajaram’s startup,

Chai Labs. That investment was reported to be approximately 16% of the capital

raised then.21 The Chai Labs website listed Andreessen as a member of its three-

person advisory board.22 Rajaram testified that Chai Labs used Andreessen’s name

and reputation to attract talent and investors.23

17 Id.

18 Id. at 24–25.

19 Id. at 25–26.

20 Id. at 26.

21 SLC Report at 25–26; Rajaram Dep. Tr. at 62:11–15, 96:5–10; Dkt. 62 (“Pl.’s Mot.

to Compel”), Ex. A at 4–5.
22 Dkt. 77 (“Pl.’s Opp. Br.”), Ex. 2.

23 Rajaram Dep. Tr. at 99:4–6, 101:21–102:4.

5
In 2010, Rajaram invested in a fund affiliated with Andreessen. 24 That same

year, Facebook acquired Chai Labs for approximately $10 million in an “acqui-hire”—

that is, a deal to acquire talent.25 As of the acquisition, Andreessen was a member of

both the Facebook board of directors and Chai Labs’ board of advisors.26 Rajaram

testified that his proceeds from the Chai Labs sale represented nearly half of his net

worth at the time.27 After the acquisition, Rajaram worked in senior advertising

engineering roles at Facebook for years while Andreessen was on the Facebook

board.28

Rajaram’s primary investment vehicle during the years leading up to the SLC

investigation was Firebolt Ventures.29 Rajaram was a member of its leadership team

and was actively involved in investment decisions.30 Rajaram, either personally or

through Firebolt, invested in financing rounds alongside Andreessen Horowitz at

least 50 times since 2019.31 Between 2020 and 2023, Andreessen invested $850,000

in Firebolt.32 While the SLC was conducting its investigation, Firebolt’s website

listed Andreessen and another partner at Andreessen Horowitz as two of eleven

24 SLC Report at 26–27.

25 Rajaram Dep. Tr. at 106:25–108:16.

26 Pl.’s Mot. to Compel, Ex. D at 7; Pl.’s Opp. Br., Ex. 2.

27 Rajaram Dep. Tr. at 110:13–20.

28 Id. at 104:3–8, 298:17–20.

29 Rajaram Dep. Tr. at 125:9–19.

30 Id. at 250:21–251:11, 378:20–379:25, 391:16–23; Pl.’s Opp. Br., Ex. 26.

31 See, e.g., Pl.’s Opp. Br., Exs. 3–7; Rajaram Dep. Tr. at 127:20–129:3.

32 SLC Report at 26.

6
“Strategic LPs for Deal Flow, Diligence, Follow-ons, Exits.”33 Rajaram testified that

large leader-type funds like Andreessen Horowitz often “solicit people, smaller funds,

angels, et cetera, to fill [funding] round[s].”34 According to PitchBook, Rajaram is in

the top 1% of most frequent investors in funding rounds led by Andreessen

Horowitz.35 Rajaram avoided placing a hard value on those investments during his

deposition, but he testified that they could be worth $2 to $4 million.36 Rajaram also

testified that Andreessen “didn’t do anything to help [Firebolt] in any way,” and was

only listed on the website for marketing purposes, but agreed that Firebolt was

representing to others that Andreessen “can help provide dealflow.”37

The deal flow went both ways. During the SLC’s investigation, Rajaram

exchanged hundreds of emails with the Andreessen Horowitz team.38 The SLC

described many as “cut-and-paste emails Rajaram would quickly send to numerous

venture capital firms”39 to make introductions between Andreessen Horowitz and

founders looking for investment or collaboration.40 But Rajaram is a familiar name

33 Pl.’s Opp. Br., Ex. 26.

34 Rajaram Dep. Tr. at 266:4–15.

35 Pl.’s Mot. to Compel, Ex. F. The court acknowledges that the PitchBook data might

not be totally accurate or complete, but it is still a relevant source of information.
36 Rajaram Dep. Tr. at 111:21–24; 385:10–12.

37 Id. at 268:14–269:23.

38 SLC Opening Br., Ex. J at 3.

39 Id. at 54–55.

40 See, e.g., id., Ex. R; Pl.’s Opp. Br., Exs. 28–31, 34, 37–39, 41–45, 47.

7
to members of Andreessen Horowitz’s investment team. After one referral from

Rajaram, they praised him as “our MVP!!!!”41

Rajaram testified that these referrals were for his own “satisfaction,” but he

also hoped for the relationship to have some positive impact on his own investment

activity.42 In one email sent during the SLC’s investigation, Rajaram asked an

Andreessen Horowitz team member: “Please do keep me in mind for value-added

angel investors in your investments :)”43

Rajaram felt confident that he was independent.44 He viewed his financial

dealings with Defendants as de minimis. In his mind, the investments he had made

alongside Andreessen Horowitz “didn’t really matter,” because they were “negative

financially,” meaning they had yet to generate profit and had no impact on his net

worth.45 He testified: “[M]y dealings with the defendants occupy no space in mind.

It’s not something that I even think about. . . . [I]t’s not something that affects my life

or my personal situation[.]”46 Rajaram concluded that from a financial, personal, or

professional perspective, he had no material ties to Andreessen.47 He would sue

Defendants, without hesitation, if the SLC’s investigation so required.48 “If

41 Pl.’s Opp. Br., Ex. 44.

42 Rajaram Dep. Tr. at 144:1–145:8; 180:20–182:8.

43 Id., Ex. 28.

44 Rajaram Dep. Tr. at 39:1–7; 48:13–18.

45 Id. at 384:9–16.

46 Id. at 49:25–50:4; see also id. at 49:21–25.

47 Id. at 384:21–23.

48 Id. at 48:20–22; 385:25–386:11.

8
[Andreessen Horowitz] disappeared, that’s okay. If they stayed around that’s okay.

. . . [He] was indifferent.”49

C. The SLC Counsel

After interviewing seven law firms, the SLC retained Wilson Sonsini Goodrich

& Rosati, P.C. as legal counsel.50 Plaintiff challenges Wilson Sonsini’s independence.

Wilson Sonsini ran a conflict check in connection with their potential

representation of the SLC.51 The report focused on Defendants, including

Andreessen. Wilson Sonsini’s conflict report reflected no open matters for any of the

named Defendants, including Andreessen.

Wilson Sonsini has represented Andreessen in the past. The firm “represented

Netscape in its [1995] IPO—widely considered [as] the dawn of the internet era” and

a seminal moment for Netscape’s co-founder Andreessen.52 In the 2000s, Wilson

Sonsini represented Andreessen personally in securities litigation involving

Loudcloud, as well as in shareholder derivative actions involving Blue Coat

Systems.53 During the 2022 litigation between Twitter, Inc. and Elon Musk, Wilson

Sonsini retained conflicts counsel to serve a subpoena on Andreessen.54

49 Id. at 384:23–25.

50 Dkt. 42 at 2.

51 SLC Opening Br., Ex. G (“Slights Dep. Tr.”) at 189:3–6.

52 Pl.’s Opp. Br., Ex. 53; id., Ex. 54 at 3–4.

53 Slights Dep. Tr. at 187:22–188:4; see Pl.’s Opp. Br., Exs. 55, 65.

54 See Pl.’s Opp. Br., Exs. 57, 58.

9
Wilson Sonsini also searched for active matters involving Defendants’

affiliates, including Andreessen Horowitz.55 Wilson Sonsini had the following “open

client matters involving entities affiliated with” Defendants, which it disclosed to the

SLC:56 providing general fund advice for Andreessen Horowitz; advising a

confidential startup founded by Surojit Chatterjee; providing trademark advice for a

venture capital firm affiliated with Kathryn Haun; and providing general commercial

work for a firm affiliated with Fred Ehrsam.57 Wilson Sonsini estimated that those

representations would produce approximately $800,000 in fees and disclosed that the

firm did not believe that those representations were “material or would impact [its]

independence.”58

It is unclear whether the conflict report distinguished between Defendants’

affiliates generally and affiliates involved in the Challenged Trades. Wilson Sonsini

did not view the open representations of Defendants’ affiliates—even those affiliates

involved in the Challenged Trades—as conflicts barring representation of the SLC.59

Wilson Sonsini represented Andreessen Horowitz while representing the SLC.

During the SLC investigation, Wilson Sonsini represented Andreessen Horowitz in

at least ten financing rounds raising over $700 million.60 The team advising the SLC

55 Slights Dep. Tr. at 189:3–6.

56 Id. at 189:8–25, 239:25–240:6; SLC Opening Br., Ex. H.

57 SLC Opening Br., Ex. H.

58 Id.

59 Slights Dep. Tr. at 189:18–191:18.

60 Pl.’s Opp. Br. Exs. 59–66.

10
did not overlap with the team advising Andreessen Horowitz.61 The team advising

the SLC did not receive incremental updates on the new financing transactions on

which the firm advised Andreessen Horowitz as part of its “general fund advice.”

Plaintiff argues that Wilson Sonsini harbored ideological conflicts impeding its

representation of the SLC, but that argument is conjectural. It is true that Wilson

Sonsini has built a reputation as the go-to law firm for Silicon Valley. But former

Vice Chancellor Joseph R. Slights III, who decided cases against prominent Silicon

Valley figures during his tenure on the bench,62 led the Wilson Sonsini team that

advised the SLC.63 And Wilson Sonsini cleared the conflict check knowing that it was

possible that the SLC might recommend pursuing Plaintiff’s claims.64 Slights

testified during his deposition that he would have had no compunction recommending

that the SLC pursue claims against Defendants.65 Plaintiff does not challenge

Slights’s testimony or independence.

D. The SLC Findings

The SLC reviewed roughly 60,000 documents, collecting materials from 31

document custodians and interviewing 21 witnesses.66 Houlihan Lokey served as the

61 Slights Dep. Tr. at 190:20–191:2.

62 See Id. at 220:5–23 (discussing cases)

63 See SLC Opening Br. at 17.

64 See Slights Dep. Tr at 216:20–217:3.

65 Id. at 214:21–216:15.

66 SLC Report at 3, 34.

11
SLC’s independent financial advisor.67 After completing its investigation, the SLC

concluded that the Complaint’s allegations lack merit.68

The SLC found no evidence to suggest that Defendants pursued the Direct

Listing for their personal benefit or because it would involve reduced oversight.

According to the SLC, Coinbase concluded that its strong financials and its

institutional interest in financial transparency militated in favor of the Direct

Listing.69

The Board and management decided on a direct listing by initiating a “RAPID,”

Coinbase’s internal decision-making tool. According to the SLC, CEO Armstrong and

the Board preferred a direct listing, while officers Haas, Chatterjee, Aggarwal, and

Choi supported a modified IPO.70 Ultimately, Armstrong decided that Coinbase

would pursue the Direct Listing for these reasons:

(i) “We don’t need to raise money right now”; (ii) “I don’t
trust the modified IPO process” (noting recent examples he
deemed “wildly underpriced”); (iii) “I want to have the
market tell us the fair price, not have to guess (or ask
someone else to guess) the fair price”; and (iv) a direct
listing is “more in line with the ethos of crypto to have a
fair open market for all participants.”71

The SLC found no evidence that any Defendant was interested in selling large

blocks of shares. According to the SLC, many Defendants did not want to sell their

67 Id. at 3.

68 Id. at 329.

69 Id. at 95–99.

70 Id. at 88, 98–99.

71 Id. at 100–01.

12
shares at all and only did so to create a liquid market for the stock.72 It was Coinbase

that rejected a lock-up because a lock-up period risked constraining supply for the

Direct Listing.73

The SLC found no evidence that any Defendant possessed MNPI in connection

with the Direct Listing. Coinbase identified MNPI concerns early and structured

both the Secondary Trading Program and the Direct Listing to avoid MNPI exposure

for directors and officers. No Defendant believed that he or she held MNPI at the

time of the Challenged Trades, and Coinbase had disclosed all material information

concerning its financial condition before the Direct Listing.74

The SLC concluded that the Andersen Report did not constitute MNPI because

it would not be material to a rational investor.75 The SLC noted that Coinbase had

received multiple, widely varying valuations before the Direct Listing and explained

that investors and executives often view 409A valuations with skepticism due to their

regulatory limits and narrow purpose.76 According to the SLC, companies have a bias

toward keeping 409A valuations as low as possible to minimize the risk of under-

withholding taxes associated with employee stock options.77 And the SLC found no

72 Id. at 76–77.

73 Id. at 126–27.

74 Id. at 225–26, 229.

75 Id. at 236.

76 Id. at 236–37.

77 Id. at 237–38.

13
evidence that Defendants considered the Andersen Report when making the

Challenged Trades.78

The SLC also considered the allegations that management pursued a direct

listing based on non-public information about fee compression. The SLC

acknowledged that management “worried about” fee compression79 but stated that

witnesses did not recall focusing on fee compression during Board meetings before

the Challenged Trades.80 Management viewed fee compression as a long-term

concern, and analysts had cautioned Coinbase about fee compression risks in the

brokerage industry.81 But the SLC concluded that fee compression did not drive the

decision to opt for a direct listing and that Coinbase had disclosed the related risks

in its public disclosures.82 The SLC also found no evidence that Coinbase was

experiencing any fee compression before the Direct Listing.83

E. The SLC Moves To Terminate This Litigation.

In February 2025, The SLC filed a motion to terminate the litigation, attaching

the SLC Report.84 The court entered a scheduling order for Plaintiff’s Zapata

discovery.85 The order stipulated that Zapata discovery, including any depositions,

78 Id. at 239–40.

79 Id. at 190.

80 Id. at 186, 268.

81 Id. at 193.

82 Id. at 263.

83 Id. at 265, 268.

84 Dkt. 53.

85 Dkt. 56.

14
would be completed by June 6, 2025.86 On May 15, Plaintiff moved to compel

responses related to the independence of Wilson Sonsini and Rajaram.87 A day later,

the parties came to an agreement to allow certain depositions to take place in mid-

June.88 The court entered a revised scheduling order on July 7.89

After the SLC filed its opening brief on July 8, Plaintiff asked for an extension

for the answering brief and revealed that he sought to introduce expert opinions.90

Plaintiff’s answering brief, filed on August 19, referenced three expert opinions

contained in reports filed with the brief.91 The SLC filed a motion to strike those

opinions, arguing that they were introduced after the close of discovery and left the

SLC with no opportunity to cross-examine the experts or submit rebuttal opinions.92

The parties completed briefing on the motion to strike on September 4,93 and briefing

on the motion to terminate on September 23.94 The court heard oral argument on

both motions on October 13.95

86 Id.

87 Dkt. 62

88 Dkt. 63.

89 Dkt. 71.

90 Dkts. 72, 76; Dkt. 82 (“SLC Mot. to Strike”) ¶ 10.

91 Dkts. 80, 81.

92 SLC Mot. to Strike at ¶¶ 2,3.

93 Dkt. 91.

94 Dkt. 101.

95 Dkt. 106.

15
II. LEGAL ANALYSIS

The SLC has moved to strike the expert opinions submitted by Plaintiff and

moved to terminate this litigation based on the SLC Report.

A. Motion To Strike

The motion to strike the expert opinions is granted, solely because Plaintiff

submitted expert opinions after the close of discovery. Plaintiff admitted to as much

when he offered to modify the existing schedule to allow the SLC to depose his

proffered experts.96 The timing of the production created unfair surprise for the

SLC.97 The below analysis does not consider the experts’ opinions.

B. Motion To Terminate

Delaware law allows a corporation to shut down a derivative lawsuit after a

stockholder plaintiff defeats a motion to dismiss by establishing an SLC. This is

because “derivative claim[s] belong[] to the corporation, not to the shareholder

plaintiff who brings the action.”98 Delaware courts thus permit the corporation a “last

chance . . . to control a derivative claim” through an SLC process, even in cases where

“a majority of its directors cannot impartially consider a demand.”99

96 See Dkt. 86 at 13.

97 See Levy v. Stern, 1996 WL 742818, at *2 (Del. 1996) (TABLE); IQ Hldgs., Inc. v.

Am. Com. Lines Inc, 2012 WL 3877790, at *1–2 (Del. Ch. Aug. 30, 2012); In re
ExamWorks Gp., Inc. S’holder Appraisal Litig, 2018 WL 1008439, at *9 (Del. Ch. Feb.
21, 2018).
98 In re M & F Worldwide Corp. S’holders Litig., 799 A.2d 1164, 1174 n.31 (Del. Ch.

2002) (quoting MAXXAM, Inc./Federated Dev. S’holders Litig., 698 A.2d 949, 956
(Del. Ch. 1996)).
99 In re Oracle Corp. Deriv. Litig., 824 A.2d 917, 939–40 (Del. Ch. 2003).

16
An SLC has the power to recommend any manner of outcome for a derivative

suit—that it proceed in full or part, that it settles, or that the court terminate it.

Zapata sets the standard applied when evaluating a motion to terminate.100

Zapata calls for a two-step analysis. As the first step, the court must “review[] the

independence of SLC members and consider[] whether the SLC conducted a good

faith investigation of reasonable scope that yielded reasonable bases supporting its

conclusions.”101 If the SLC meets that burden, then the court “determines, in its own

business judgment, whether the suit should be dismissed.”102 This second step is

“wholly within the discretion of the court.”103

Under Zapata, the court reviews an SLC’s motion to terminate subject to what

is in essence a summary judgment standard.104 “[T]he movant has the burden of

demonstrating the absence of any material issue of fact, and any doubt as to the

existence of such an issue will be resolved against him.”105 For the purposes of a

motion subject to Zapata, the SLC is not entitled to any favorable presumptions.106

100 See Zapata Corp. v. Maldonado, 430 A.2d 779, 788–89 (Del. 1981).

101 London v. Tyrrell, 2010 WL 877528, at *11 (Del. Ch. Mar. 11, 2010).

102 Diep ex rel. El Pollo Loco Hldgs., Inc. v. Trimaran Pollo P’rs, L.L.C., 280 A.3d 133,

158 (Del. 2022).
103 Id. (cleaned up).

104 Id. at 149.

105 Lewis v. Fuqua, 502 A.2d 962, 966 (Del. Ch. 1985).

106 Kaplan v. Wyatt, 484 A.2d 501, 507 (Del. Ch. 1984), aff’d 499 A.2d 1184 (Del. 1985).

17
Rather, the SLC bears the “burden to show the absence of a material issue of fact” as

to its independence, good faith, and a reasonable investigation.107

1. First Step

To prevail on the first step of Zapata, the SLC must persuade the court that

there is no material question of fact as to whether: “(1) its members were

independent; (2) . . . they acted in good faith; and (3) . . . they had reasonable bases

for their recommendations.”108 “If the Court determines that a material fact is in

dispute on any of these issues it must deny the SLC’s motion.”109 Of these three

factors, Plaintiff advances arguments concerning the SLC’s independence and the

reasonableness of the SLC’s investigation.110 This analysis focuses on Plaintiff’s

challenges to the SLC’s independence.

“In examining whether the SLC has met its burden to demonstrate that there

is no material dispute of fact regarding its independence, the court must bear in mind

the function of special litigation committees under our jurisprudence.” 111 As then-

Vice Chancellor Strine explained in Oracle, “the independence inquiry is critically

important if the special committee process is to retain its integrity, a quality that is,

in turn, essential to the utility of that process.”112

107 El Pollo Loco, 280 A.3d at 154; see Zapata, 430 A.2d at 788–89.

108 Oracle, 824 A.2d at 928 (citing Zapata, 430 A.2d at 788–89); London, 2010 WL

877528, at *13 (stating the nature of the SLC’s burden).
109 London, 2010 WL 877528, at *12 (emphasis added).

110 See Pl.’s Opp. Br. at 36–52.

111 Oracle, 824 A.2d at 939.

112 Id.; see also El Pollo Loco, 280 A.3d at 152.

18
“The composition and conduct of a special litigation committee therefore must

be such as to instill confidence in the judiciary and, as important, the stockholders of

the company that the committee can act with integrity and objectivity.”113

Nonindependence of one SLC member of a two-member SLC is sufficient alone to

require denial of the SLC’s motion.114

Whether an SLC member is independent is necessarily a “fact-specific

determination made in the context of a particular case.”115 “Unlike the demand-

excusal context, where the board is presumed to be independent, the SLC has the

burden of establishing its own independence.”116 “SLC members are not given the

benefit of the doubt as to their impartiality and objectivity.”117

When assessing an SLC’s independence, “the court must confront the personal

and professional relationships between those who judge and those being judged.”118

The court examines whether the SLC members’ connections to defendants “generate

a reasonable doubt about the SLC’s impartiality because they suggest that material

113 Oracle, 824 A.2d at 940; see also London, 2010 WL 877528, at *16 (“SLC members

should be selected with the utmost care to ensure that they can, in both fact and
appearance, carry out the extraordinary responsibility placed on them to determine
the merits of the suit and the best interests of the corporation, acting as proxy for a
disabled board.”).
114 See Oracle, 824 A.2d at 944.

115 El Pollo Loco, 280 A.3d at 152 (quoting Beam v. Stewart, 845 A.2d 1040, 1049 (Del.

2004)); see also Oracle, 824 A.2d at 941 (same).
116 Beam, 845 A.2d at 1055.

117 In re Baker Hughes, a GE Co., Deriv. Litig., 2023 WL 2967780, at *11 (Del. Ch.

Apr. 17, 2023) (quoting London, 2010 WL 877528, at *11).
118 El Pollo Loco, 280 A.3d at 151.

19
considerations other than the best interests of [the Company] could have influenced

the SLC’s inquiry and judgments.”119 This court looks “beyond determining whether

SLC members are under the ‘domination and control’ of an interested director,” and

asks instead whether any “lesser affiliations . . . are substantial enough to present a

material question of fact as to whether the SLC member can make a totally unbiased

decision.”120 The court must be persuaded that each SLC member “is in a position to

base his decision on the merits of the issue rather than being governed by extraneous

consideration or influences.”121

“At bottom, the question of independence turns on whether a director is, for

any substantial reason, incapable of making a decision with only the best interests of

the corporation in mind,” and the analysis therefore focuses on “impartiality and

objectivity.”122 The analysis is contextually “tailored”—because the court may

presume that “special litigation committee members are persons of typical

professional sensibilities,” the key inquiry is whether “an unacceptable risk of bias”

is present.123

To show its independence, an SLC generally must establish that it retained

independent advisors. Delaware law recognizes that counsel for an SLC often leads

119 Oracle, 824 A.2d at 947; see also London, 2010 WL 877528, at *14.

120 London, 2010 WL 877528, at *12 (quoting Oracle, 824 A.2d at 937).

121 El Pollo Loco, 280 A.3d at 152 (quoting Kaplan, 499 A.2d at 1189).

122 Oracle, 824 A.2d at 938 (emphasis in original) (quoting Parfi Hldg. AB v. Mirror

Image Internet, Inc., 794 A.2d 1211, 1232 (Del. Ch. 2001) rev’d in part on other
grounds, 817 A.2d 149 (Del. 2002)).
123 Oracle, 824 A.2d at 941–42, 947.

20
the investigation.124 And encouraging the involvement of experienced and

knowledgeable advisors in this way bolsters the integrity of the SLC process where

the SLC members remain actively engaged in the investigation.125 But it means that

the advisors, too, must adhere to the rigorous standard of independence imposed on

their clients.

Plaintiff argues that there are factual disputes concerning both Rajaram’s and

Wilson Sonsini’s independence from Andreessen and Andreessen Horowitz.

Aspects of the record support Plaintiff’s argument as to Rajaram. Andreessen

has been instrumental or present in most of Rajaram’s major career milestones.

Andreessen first invested in Rajaram’s startup, Chai Labs, in 2007. He served on its

three-person advisory board after. Rajaram testified that Chai Labs used

Andreessen’s name and reputation to attract talent and other investors.126

Andreessen was on the board of Facebook when Facebook acquired Chai Labs. The

sale of Chai Labs approximately doubled Rajaram’s net worth at the time. And after

124 Baker Hughes, 2023 WL 2967780, *18 (noting that reliance on counsel is “is not

only allowed but is ‘evidence [of] good faith and the overall fairness of the process.”
(quoting In re W. Nat’l Corp. S’holders Litig., 2000 WL 710192, at *23 n.67 (Del. Ch.
May 22, 2000)); In re Carvana Co. S’holders Litig., 2024 WL 1300199, *11 (Del. Ch.
Mar. 27, 2024) (noting that the level of delegation to counsel was “in line with
precedent”); Carlton Invs. v. TLC Beatrice Int’l Hldgs., Inc., 1997 WL 305829, at *12
(Del. Ch. May 30, 1997) (“[G]ood faith reliance by the SLC on independent, competent
counsel to assist the SLC in investigating claims is legally acceptable, practical, and
often necessary.”).
125See, e.g., Carlton, 1997 WL 305829, at *12 (“Where there is no evidence of
overreaching by counsel or neglect by the SLC, the court ought not second guess the
SLC’s decisions regarding the role which counsel played in assisting them in their
task.”).
126 Rajaram Dep. Tr. at 99:4–6, 101:21–102:4.

21
the acquisition, Andreessen served on the boards of Chai Labs and Facebook, boards

to which Rajaram reported.

Rajaram also has thick ties with Andreessen Horowitz, the entity that made

$118.7 million off the Challenged Trades. To recap, Rajaram’s venture capital firm,

Firebolt, lists Andreessen and another Andreessen Horowitz executive as two of

eleven “Strategic LPs For Deal Flow.”127 As described by Rajaram, large leader-type

funds like Andreessen Horowitz often “solicit people, smaller funds, angels, et cetera,

to fill [funding] round[s].”128 And Firebolt invested alongside Andreessen Horowitz

at least 50 times in the last six years.129 Andreessen Horowitz was the lead investor

of the funding round in all but one of Firebolt’s 50 co-investments.130 Rajaram

exchanged hundreds of emails with the Andreessen Horowitz team over the course of

the SLC investigation. Those emails included dozens of cross-referrals.131 In one of

the emails, the Andreessen Horowitz team described Rajaram as their “MVP.”132

Still, aspects of the record support Rajaram’s independence. In his deposition,

Rajaram denied that he lacked independence. Rajaram testified that his financial

dealings with Andreessen Horowitz “didn’t really matter,” because the investments

he made alongside Andreessen Horowitz had yet to generate profit and had no impact

127 Pl.’s Opp. Br., Ex. 26.

128 Rajaram Dep. Tr. at 266:4–15.

129 Pl.’s Opp. Br., Exs. 3–7; see Rajaram Dep. Tr. at 127:20–129:3.

130 Pl.’s Opp. Br., Exs. 3–7.

131 See id., Exs. 28–31, 34, 37–39, 41–45, 47.

132 Id., Ex. 44.

22
on his net worth.133 He went further to say that: “[M]y dealings with the defendants

occupy no space in mind. It’s not something that I even think about. . . . [I]t’s not

something that affects my life or my personal situation[.]”134 Rajaram stated that he

would sue Defendants, without hesitation, if the SLC’s investigation so required.135

In briefing, the SLC argued that Rajaram’s relationships with Andreessen and

Andreessen Horowitz are immaterial to Rajaram.136 According to the SLC, Rajaram

is a highly successful investor with a net worth of approximately $400 million,

making it “unreasonable” to suggest that cross-referrals are material to Rajaram or

that he would forsake his reputation for such an “immaterial” relationship.137 The

SLC also sought to distance Rajaram from his investments made through Firebolt.138

And the SLC argued that Rajaram’s profits from investing alongside Andreessen

Horowitz in its funding rounds should be ignored because Andreessen (the person),

and not Andreessen Horowitz (the fund), was the target of the investigation.139

Each of the SLC’s arguments misses the mark. Just as “it would be naïve to

say, as a matter of law, that $3.3 million is immaterial,” it would be hard to conclude

133 Rajaram Dep. Tr. at 384:9–16.

134 Id. at 49:25–50:4; see also id., at 49:21–25.

135 Id. at 48:20–22, 385:25–386:11.

136 SLC Opening Br. at 53–54.

137 Id. at 53–54, 56.

138 Id. at 52–53.

139 Id. at 53.

23
that $2 to $4 million in investments were immaterial to Rajaram.140 Rajaram

testified that Firebolt was his primary investment vehicle during the relevant period;

there is no factual basis to distance Rajaram from his entity.141 Similarly, it was

Andreessen Horowitz that made and benefited from the Challenged Trades, allegedly

based on Andreessen’s MNPI. The SLC provides no legal basis for ignoring that fact;

logic demands that the court consider it.

In the end, the question is not whether Rajaram believes that he is

independent or even whether he stated so under oath. The question is whether

Rajaram’s relationships with Andreessen and Andreessen Horowitz create material

disputed facts giving rise to an unacceptable risk of bias in a process where

independence is paramount. They do.

Oracle is instructive.142 There, members of the Oracle board sold between 2%

and 17% of their stock shortly before the company announced that it missed growth

projections by a substantial margin. The company’s stock price plummeted, and

market analysts ridiculed the board for its positive outlook just weeks before.

Stockholder plaintiffs asserted Brophy claims in this court. The defendants did not

move to dismiss the action. Instead, they formed a special litigation committee to

140 Orman v. Cullman, 794 A.2d 5, 31 (Del. Ch. 2002); see also, e.g., 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,” even if “the
defendants may ‘ultimately be correct . . . that it was not material[.]’” (quoting Frank
v. Elgamal, 2012 WL 1096090, at *11 (Del. Ch. Mar. 30, 2012)).
141 Rajaram Dep. Tr. at 125:9–19 (“From 2018 to 2024, almost all my investments

happened through Firebolt, not personally.”).
142 824 A.2d 917 (Del. Ch. 2003).

24
investigate the claims. The committee concluded that the defendants did not possess

MNPI at the time of the trades and that there was no evidence of scienter. The

committee moved to terminate the litigation.

The stockholder plaintiffs challenged the independence of the two committee

members, both of whom were professors at Stanford University. The committee’s

report disclosed that one of the Brophy defendants was a Stanford professor. And

another Brophy defendant had donated $50,000 worth of stock to Stanford Law

School to thank one of the committee members for delivering a speech at his son’s

venture capital firm.143 Zapata discovery revealed the following additional

relationships, which suggested the existence of thicker ties between the committee

members and defendants than disclosed in the report:

• One of the Brophy defendants, then-CEO of Oracle Larry Ellison, was
“a major figure” in the Silicon Valley “community” and in “the nation’s
increasingly important information technology industry.”144 While
Ellison was CEO, Oracle had donated over $300,000 to Stanford and had
established an education non-profit where Stanford had substantial
governance authority. He had been in talks with Stanford and its
Institute for Economic Policy Research to establish a $170 million
scholarship program in his name; one of the committee members was
asked to be involved in the initiative. Ellison had also made public
statements expressing his intent to leave his $100 million home to
Stanford upon his death.145

• Another of the Brophy defendants (the “Professor”) taught a committee
member during a critical milestone in the committee member’s career—
when the committee member was a Ph.D. candidate. The two
maintained continued affiliations, as both were involved in the Stanford

143 Id. at 929.

144 Id. at 932.

145 Id. at 932–35.

25
Institute for Economic Policy Research, which helped facilitate and
publicize their research.146

• Yet another of the Brophy defendants (the “Donor”) caused his
charitable foundation to donate $11.7 million and had personally
donated $4.1 million to Stanford, including $424,000 to the Stanford
Institute for Economic Policy Research and $149,000 to Stanford Law
School. He was also the chair of the Stanford Institute for Economic
Policy Research’s advisory board.147

The SLC argued that none of these relationships impugned the committee

members’ independence, largely because the committee members—both tenured

professors—faced zero threat of any negative consequences from Stanford for

deciding to pursue claims against the defendants. The court credited the factual

bases for the defendants’ arguments, finding that:

I am satisfied that neither of the SLC members is
compromised by a fear that support for the procession of
this suit would endanger his ability to make a nice living.
Both of the SLC members are distinguished in their fields
and highly respected. Both have tenure, which could not
have been stripped from them for making a determination
that this lawsuit should proceed.

Nor have the plaintiffs developed evidence that either [of
the SLC members] have fundraising responsibilities at
Stanford. . . . [T]he SLC members occupy positions within
the Stanford community different from that of the
University’s President, deans, and development
professionals, all of whom, it can be reasonably assumed,
are required to engage heavily in the pursuit of
contributions to the University.148

The court emphasized these conclusions elsewhere in the opinion:

146 Id. at 931.

147 Id. at 931–32.

148 Id. at 930.

26
[N]one of the [defendants] have the practical ability to
deprive [the committee members] of their current positions
at Stanford. Nor, given their tenure, does Stanford itself
have any practical ability to punish them for taking action
adverse to [a defendant]—each of whom . . . has contributed
(in one way or another) great value to Stanford as an
institution. As important, neither [committee member is]
part of the official fundraising apparatus at Stanford[.]149

Although the court credited the SLC’s arguments that the committee members

faced no economic consequences that would impugn their independence, the court

denied the motion to terminate based on concerns about the committee members’

independence. In reaching this conclusion, the court criticized the defendants’

arguments as inviting an overly “reductionist view of human nature that simplifies

human motivations on the lines of the least sophisticated notions of the law and

economics movement. Homo sapiens is not merely homo economicus.”150 Delaware

law, according to the court, recognizes that considerations beyond economic

consequences are just as capable of influencing human behavior.151

149 Id. at 935–36.

150 Id. at 938.

151 Id. (“Nor should our law ignore the social nature of humans. To be direct, corporate

directors are generally the sort of people deeply enmeshed in social institutions. Such
institutions have norms, expectations that, explicitly and implicitly, influence and
channel the behavior of those who participate in their operation. Some things are
‘just not done,’ or only at a cost, which might not be so severe as a loss of position, but
may involve a loss of standing in the institution. In being appropriately sensitive to
this factor, our law also cannot assume—absent some proof of the point—that
corporate directors are, as a general matter, persons of unusual social bravery, who
operate heedless to the inhibitions that social norms generate for ordinary folk.”
(citation omitted)).

27
The court further concluded that the committee members’ ties to the Professor

and Donor, standing alone, were enough to defeat the SLC’s independence. The court

questioned the committee members’ ability to impartially consider whether to “press

insider trading claims against a fellow professor at their university.”152 The court

was particularly skeptical of one of the committee members who had “mutual

affiliations” and historical connections with the Professor.153 The Professor was

present during a critical milestone in the committee member’s career and the two

maintained professional affiliations. The court also questioned the committee

members’ willingness to press insider trading claims against the Donor, an

“extremely generous and . . . influential Stanford alumnus,” given their positions at

Stanford.154 The court reached these conclusions even though the committee

members had no material financial ties to either the Professor or the Donor, were not

dominated or controlled by the Professor or the Donor, stated their indifference to

pressing claims against the Professor and the Donor,155 and no one questioned the

committee members’ good faith.156

152 Id. at 942; cf. id. at 945 (“The idea that faculty members would not be concerned

that action of that kind might offend a large contributor who a university
administrator or fellow faculty colleague . . . had taken the time to cultivate strikes
me as implausible and as resting on a narrow-minded understanding of the way that
collegiality works in institutional settings.”).
153 Id. at 943.

154 Id.

155 Id. at 930, 937.

156 Id. at 947.

28
The committee members’ relationship with the third relevant Brophy

defendant—Ellison—“reinforce[d]” the court’s conclusion.157 But the Oracle court’s

discussion on this point warrants pause and clarification, given the obvious

comparisons between Ellison and Andreessen. The Oracle court wrote that “[t]he

notion that anyone in Palo Alto can accuse Ellison of insider trading without

harboring some fear of social awkwardness seems a stretch.”158 And that is a fair

statement. But it is also dicta, and more a social observation than a statement of

law. Delaware law does not treat the “fear of social awkwardness” as a bias-producing

quality sufficient to disqualify a special committee member.159 Not even Oracle

proclaims it so. As the Oracle court also clarified, being “the key force behind a very

important social institution in Silicon Valley” does not “disqualif[y] all persons who

live there from being independent of” Ellison.160

Still, Oracle offers several lessons for SLC motions to terminate. At a high

level, Oracle appropriately warns against a reductionist view of human nature,

commends a nuanced and contextualized analysis of human relationships, and

emphasizes the paramount role that the independence inquiry plays in a Zapata

analysis. It likewise demonstrates that the independence inquiry is not always as

simple as searching for one “smoking gun” of financial reliance or the opposite.

157 Id. at 945.

158 Id.

159 Id.

160 Id.

29
Multiple financial and personal connections can accumulate to a significant concern

about independence.

Those lessons resonate here. It is not necessarily Andreessen’s status within

Silicon Valley that gives rise to a material dispute concerning Rajaram’s

independence. It is the fact of Andreessen’s influential presence during multiple

milestones of Rajaram’s career, including a critical wealth-building moment. It is

that Rajaram has invested alongside Andreessen Horowitz approximately 50 times

over the six years before the SLC investigation. It is the hundreds of emails between

Rajaram and the Andreessen Horowitz team exchanged during the SLC process,

including dozens of cross-referrals. It is the cumulative effect of all these things. No

one—not Plaintiff and thus not the court—questions Rajaram’s good faith. But the

thick ties between him and the subject of the SLC’s investigation are sufficient to

raise material disputes regarding his independence.

For this reason, the SLC has failed to meet its burden under the first step of

Zapata. This decision does not reach Plaintiff’s arguments as to Wilson Sonsini,

except to say what is undoubtedly uncontroversial—advising Andreessen Horowitz

on multiple transactions while advising the SLC on its investigation into Andreessen

Horowitz’s sizeable trades was suboptimal.

2. Second Step

Because the SLC failed to carry its burden under the first step of the Zapata

analysis, this analysis does not reach the second step.

30
III. CONCLUSION

Oracle offers one final lesson for purposes of this decision. After the court

denied the SLC’s motion to terminate in Oracle, the remaining defendants moved for

summary judgment on the Brophy claims, and the court granted the motion.161 The

court’s reasoning largely tracked the special litigation committee’s earlier report. 162

Here, the SLC Report paints a compelling narrative that favors Defendants and

appears to lay a path to summary judgment if the undisputed facts are as the report

suggests. As in Oracle, the work of the committee and the reasoning of its report

might ultimately carry the day. But for today’s purposes, the SLC has not carried its

burden.

The SLC’s motion to strike is granted. The SLC’s motion to terminate is

denied. IT IS SO ORDERED.

Sincerely,

/s/ Kathaleen St. J. McCormick

Chancellor

cc: All counsel of record (by File & ServeXpress)

161 In re Oracle Corp., 867 A.2d 904, 906 (Del. Ch. 2004), aff’d sub nom. In re Oracle

Corp. Deriv. Litig., 872 A.2d 960 (Del. 2005).
162 Compare id. at 906–07, 934–54, with Oracle, 824 A.2d 926–28.

31