Rales Test Applied to Allegation of Board Inaction

In re Intel Corp. Derivative Litig., C.A. No. 08-93-JJF (D. Del. June 4, 2009)

This opinion discusses when a court will apply the Rales test rather than the Aronson test in deciding whether a derivative plaintiff has pled particularized facts establishing demand futility.  Here, the district court applied the Rales test requiring that allegations establish a reason to doubt that the board could have properly exercised its independent and disinterested business judgment in responding to a demand.  The complaint alleged that the directors made a decision not to act which was not made in good faith and was contrary to the best interests of the company.  Despite plaintiff’s contention that Aronson should apply, the district court noted that Delaware courts have found that they cannot address the business judgment of an action not taken and, therefore, should apply what is now known as the Rales test.

Trackbacks (0) Links to blogs that reference this article Trackback URL
Comments (0) Read through and enter the discussion with the form at the end
Post A Comment / Question Use this form to add a comment to this entry.

Remember personal info?
Send To A Friend Use this form to send this entry to a friend via email.