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At bottom, the complaint attempts to challenge the wisdom of an independent

board’s strategy to grow by acquiring, for stock, third-parties in the same industry, with

the approval of its public stockholders. Other than identifying that the $100 million in

excess coverage was not enough, the complaint rests solely on the reality that the larger

entity that resulted ultimately filed for bankruptcy nearly three years after the final

acquisition and reorganization were completed.

But business failure is an ever-present risk. The business judgment rule exists

precisely to ensure that directors and managers acting in good faith may pursue risky

strategies that seem to promise great profit. If the mere fact that a strategy turned out

poorly is in itself sufficient to create an inference that the directors who approved it

breached their fiduciary duties, the business judgment rule will have been denuded of

much of its utility.70

Precisely because the business judgment rule serves an important purpose, our law

requires that a plaintiff plead facts supporting an inference that directors committed a

cognizable breach of duty. To state a claim for gross negligence, a complaint might

allege, by way of example, that a board undertook a major acquisition without conducting

due diligence, without retaining experienced advisors, and after holding a single meeting



, 2003 WL 1794724, at *10 (Del. Ch. Mar. 28, 2003) (“The exercise of

business judgment cannot be evaluated, as the Plaintiff seems to suggest, merely by looking at the results of that business judgment. While challenges are seldom, if ever, made to business judgments that turn out well, the simple fact that the business decision caused significant loss

does not dictate how that decision should be classified or evaluated.”);

, 683 A.2d at

1052 (“The business outcome of an investment project that is unaffected by director self-interest or bad faith, cannot itself be an occasion for director liability. That is the hard core of the

business judgment doctrine.”);

, 547 A.2d at 972 (noting that without factual allegations

that support that a board’s decision was uninformed or grossly negligent, mere dissatisfaction about how directors exercised their business judgment does not state a claim).


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