Aronson v. Lewis

Demand futility, derivative litigation, and judicial deference to board decisions.

A shareholder of Meyers Parking System challenged employment and compensation arrangements involving the company's controlling figure, Harry Fink, without first making a litigation demand on the board.

The Delaware Supreme Court articulated a two-pronged demand-futility test and dismissed the complaint for failure to plead demand futility with particularity.

The court linked derivative litigation to board authority over corporate claims. Demand is excused only when particularized facts create reasonable doubt that directors are disinterested and independent or that the challenged transaction was otherwise a valid exercise of business judgment.

1. Which corporate actor gains authority or bears monitoring responsibility under the rule?
2. How does the rule affect agency costs without unduly impairing informed business judgment?