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Rales v. Blasband

Supreme Court of Delaware

October 4, 1993, Submitted ; December 22, 1993, Decided

No. 210, 1993

Opinion

 [*929]  Upon Certification of Question of Law from the United States District Court for the District of Delaware.

VEASEY, Chief Justice:

This certified question of law comes before the Court pursuant [**2]  to Article IV, Section 11(9) of the Delaware Constitution and Supreme Court Rule 41. The question of law was certified by the United States District Court for the District of Delaware (the "District Court"), and was accepted by this Court on June 16, 1993. See Rales v. Blasband, Del. Supr., 626 A.2d 1364 (1993). Briefing and oral argument in this Court followed. This is the decision of the Court on the certified question.

The underlying action pending in the District Court is a stockholder derivative action  [*930]  filed on March 25, 1991, by Alfred Blasband ("Blasband") on behalf of Danaher Corporation, a Delaware corporation ("Danaher"). Blasband's original complaint was dismissed by the District Court on August 15, 1992, based on Blasband's lack of standing, but the United States Court of Appeals for the Third Circuit (the "Third Circuit") vacated the District Court's order and permitted Blasband to amend his complaint. Blasband v. Rales, 971 F.2d 1034 (3d Cir. 1992) ("Blasband I"). Following Blasband's filing of an amended complaint (the "amended complaint"), the defendants filed a motion to dismiss and moved to certify [**3]  the following question of law to this Court:

In the context of this novel action, which is neither a simple derivative suit nor a double derivative suit, but which the United States Court of Appeals for the Third Circuit describes as a "first cousin to a double derivative suit," has plaintiff Alfred Blasband, in accordance with the substantive law of the State of Delaware, alleged facts to show that demand is excused on the board of directors of Danaher Corporation, a Delaware corporation?

After consideration of the allegations of the amended complaint, the briefs, and the oral argument of the parties in this Court, it is our conclusion that the certified question must be answered in the affirmative. Because the amended complaint does not challenge a decision of the board of directors of Danaher (the "Board"), the test enunciated in Aronson v. Lewis, Del. Supr., 473 A.2d 805 (1984) is not implicated. In the unusual context of this case, demand on the Board is excused because the amended complaint alleges particularized facts creating a reasonable doubt that a majority of the Board would be disinterested or independent in making a decision on a  [**4]  demand.

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634 A.2d 927 *; 1993 Del. LEXIS 454 **; Fed. Sec. L. Rep. (CCH) P98,821

STEVEN M. RALES, MITCHELL P. RALES, and JOHN DOE 1-10, Defendants Below, Appellants, and EASCO HAND TOOLS, INC. and DANAHER CORPORATION, Nominal Defendants Below, Appellants, v. ALFRED BLASBAND, derivatively and on behalf of EASCO HAND TOOLS, INC. and DANAHER CORPORATION, Plaintiff Below, Appellee.

Subsequent History: Revised December 23, 1993. Mandate January 7, 1994. Released for Publication January 14, 1994.

Prior History: Certification of Question of Law from United States District Court for the District of Delaware. C.A. No. 91-166-JLL

Disposition: THE CERTIFIED QUESTION IS ANSWERED IN THE AFFIRMATIVE.

CORE TERMS

derivative suit, stockholder, amended complaint, excused, allegations, reasonable doubt, challenged transaction, certified question, board of directors, derivative, particularized, wrongdoing, double, suits, business judgment, impartially, Offering, futility, certify, substantive law, disinterested, Merger, bonds

Civil Procedure, Class Actions, Derivative Actions, Demand Requirement, General Overview, Voluntary Dismissals, Appeals, Appellate Jurisdiction, Certified Questions, Preliminary Considerations, Justiciability, Business & Corporate Law, Shareholder Actions, Actions Against Corporations, Standing, Claim Presentation, Directors & Officers, Scope of Authority, Corporate Governance, Shareholders, Demands, Futility, Double Derivative Actions, Federal & State Interrelationships, Erie Doctrine, Prerequisites for Class Action, Securities Law, Investment Companies, Demand Requirements, Definitions, Management Duties & Liabilities, Mergers & Acquisitions Law, Mergers, Duties & Liabilities of Directors & Officers, Fiduciary Duties, Business Judgment Rule, Defenses