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Matters extrinsic to a complaint generally may not be considered in a ruling on a motion to dismiss. Documents outside the pleadings may be considered only in particular instances and for carefully limited purposes. Such "particular instances" include consideration of documents attached to or incorporated by reference in the complaint, matters "integral" to the complaint, and facts of which a court may take judicial notice (e.g., a certificate of incorporation). Furthermore, under Del. Ch. Ct. R. 15(aaa), when a plaintiff is confronted with a motion to dismiss under Del. Ch. Ct. R. 12(b)(6) or 23.1, he or she must either seek leave to amend the complaint or stand on the complaint and answer the motion to dismiss. The plaintiff cannot supplement the complaint through his or her brief.
A derivative action was brought on behalf of Hewlett-Packard Company ("HP" or the "Company") accusing certain HP directors of committing waste and breaching the duty of care in connection with the August 2010 termination of then-CEO, Mark Hurd. Specifically, Lawrence Zucker, a stockholder, contended that Hurd was not entitled to, and did not deserve, any severance upon his termination from the Company. Nevertheless, the defendant directors granted Hurd a severance package estimated to be worth $40 million or more. Additionally, Zucker challenged the Company's lack of a long term CEO succession plan as a breach of the directors' duty of care. In that regard, Zucker claimed that Hurd's unexpected termination harmed the Company by effectively leaving HP leaderless, a harm that would not have occurred if the defendants had anticipated that risk and adopted a formal succession plan in advance. The Company filed a motion to dismiss under Court of Chancery Rule 23.1 (the "Motion").
Did the Amended Verified Shareholder Derivative Complaint (the "Complaint") allege a basis to excuse presuit demand?
In resolving the dismissal motion under Rule 23.1, the court noted that it was undisputed that the SH decided not to make a presuit demand. Upon review of the complaint, the court declined to consider a committee report that had not been amended thereto pursuant to Del. Ch. Ct. R. 15(aaa). There were no allegations of particularized facts in the complaint to support a factual determination that the board intended to concede demand for purposes of waiver. As to the waste claim, the directors were independent and reasonable doubt that the severance was the product of a valid exercise of business judgment was not raised. Lack of a long-term succession plan was not bad faith, and an exculpatory provision under Del. Code Ann. tit. 8, § 102(b)(7) in the certificate of incorporation eliminated the threat of personal liability for breaches of care.