July 23, 2018 Articles

Limits on Delaware’s Tooley Standard—A Brief Survey

An understanding of how recent decisions have cabined this analysis to specific scenarios can help guide both pleading and defense strategies.

By Jason C. Cyrulnik and Marc Ayala

Practitioners experienced in the oft-litigated issue of whether a stockholder plaintiff’s claims are derivative or direct are no doubt familiar with the standard set out by the Delaware Supreme Court in Tooley v. Donaldson, Lufkin & Jenrette, Inc., 845 A.2d 1031 (Del. 2004). In more recent decisions, however, that court has recognized meaningful limits on the applicability of the Tooley standard. This article surveys those limits, an understanding of which can help guide both pleading and defense strategies.

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