Sandys v. Pincus
Delaware Supreme Court
152 A.3d 124 (2016)
Shareholder Sandys (plaintiff) brought a derivative suit alleging Zynga's CEO Pincus and other directors (defendants) engaged in insider trading, without first making a pre-suit demand on the board. The trial court found two of nine directors financially interested but found the remaining five independent and dismissed the suit; Sandys argued those five directors also lacked true independence due to a web of relationships -- shared ownership of a private plane with Pincus, overlapping venture-capital investments tied to companies connected to Pincus and his wife, and one director's subsequent appointment as Zynga's CEO -- reinforced by Zynga's own admission that its board wasn't independent enough to list on NASDAQ.
Whether showing that a majority of directors lack impartiality excuses the pre-suit demand ordinarily required before bringing a derivative action.