Law School Case Brief
Espinoza v. Zuckerberg - 124 A.3d 47 (Del. Ch. 2015)
Under Del. Ch. Ct. R. 56, the court shall grant summary judgment when there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law. Rule 56(c). The court must assess whether the evidence, when viewed in the light most favorable to the nonmoving party, presents any dispute of material fact. If a rational trier of fact could find any material fact that would favor the non-moving party in a determinative way, summary judgment is inappropriate.
A stockholder of Facebook, Inc., Ernesto Espinoza, challenged the decision of Facebook's board of directors in 2013 to approve compensation for its outside, non-management directors. This comprised six of the eight directors on Facebook's board at the time. Espinoza asserted claims against the defendant directors, Zuckerberg et al., for breach of their fiduciary duties, unjust enrichment, and waste of corporate assets. Defendants sought for summary judgment in their favor
Should the motion for summary judgment be granted?
The Court held that Espinoza’s derivative challenge survived a summary judgment motion because the disinterested controlling stockholder's ratification of the self-dealing transaction through informal assent was not sufficient under Del. Code Ann. tit. 8, § 228; rather, for the transaction to have been properly ratified under § 228, the corporate formalities, such as a formal vote at a meeting of stockholders or written consent, had to be complied with in order to shift the standard of review from entire fairness to the business judgment presumption. A claim for waste was dismissed because a reasonably conceivable claim was not stated, as allegations that compensation was excessive or even lavish were insufficient as a matter of law.
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