## Facts

- infoUSA, Inc., a Delaware corporation, was led by Vinod Gupta, its CEO, chairman, and largest stockholder.
- Stockholders filed consolidated derivative actions alleging Gupta caused the company to fund extensive personal benefits and related-party transactions.
- Alleged expenditures included corporate leasing of aircraft and office space primarily for Gupta’s personal use, luxury perks (including a yacht and collectible cars), and payments for personal residences and unrelated travel.
- Plaintiffs alleged certain directors received material benefits or had relationships calling their independence into question, including substantial legal fees to a director’s law firm, a grant connected to Gupta’s business school, and rent-free office space for directors’ outside businesses.
- An earlier stockholder books-and-records action under 8 Del. C. § 220 preceded the derivative suits and informed the pleadings.
- After Gupta made a proposal to take the company private, the board formed a special committee that evaluated and rejected the proposal; one plaintiff attacked the committee’s process and the board’s response.

## Issues

1. Whether plaintiffs pleaded demand futility with particularized facts under Court of Chancery Rule 23.1 by creating reasonable doubt that a majority of the board was disinterested and independent or that the challenged conduct was a valid exercise of business judgment.
2. Whether the complaint stated non-exculpated claims for breach of fiduciary duty (loyalty/good faith) and corporate waste under Rule 12(b)(6).
3. Whether allegations attacking the special committee’s and board’s handling of the controller-led going-private proposal were pleaded with sufficient specificity to survive dismissal.

## Decision

- The court granted the motion to dismiss in part and denied it in part.
- Demand was excused as to core claims alleging self-dealing, director acquiescence, and waste where plaintiffs pleaded detailed facts suggesting director interest, lack of independence, or a substantial likelihood of liability.
- Claims were dismissed as to certain directors where allegations were conclusory or failed to plead director-specific facts showing material benefits, knowing participation, or conscious disregard.
- Challenges to the going-private process survived only to the extent supported by specific allegations of disloyalty, lack of independence, bad faith, or comparable pleading-stage infirmities; mere disagreement with the committee’s judgment was insufficient.

## Legal Principles

- A derivative plaintiff must plead demand futility with particularity under Rule 23.1 by alleging facts creating reasonable doubt that a board majority can properly consider a demand due to interest, lack of independence, or a substantial likelihood of personal liability.
- Demand-futility and pleading analyses require a director-by-director assessment; generalized assertions about “the board” do not substitute for individualized facts.
- Allegations of sustained related-party transactions and personal extraction of corporate assets may support a duty of loyalty and bad-faith theory against directors alleged to have approved, facilitated, or consciously ignored the conduct.
- Corporate waste is an exacting standard, but sufficiently detailed allegations of one-sided transfers lacking any rational corporate benefit may survive a motion to dismiss.
- In evaluating board and special committee conduct in a controller-led take-private context at the pleading stage, conclusory attacks on substantive judgment are inadequate; the complaint must allege particularized facts suggesting disloyalty, lack of independence, bad faith, or similarly actionable misconduct.

## Conclusion

The court allowed principal derivative claims for waste and loyalty-based misconduct to proceed where the complaint pleaded detailed facts of CEO self-dealing and specific director benefits or disabling ties, while dismissing claims resting on vague or non-particularized allegations and limiting process-based take-private challenges to well-pleaded assertions of disloyal or bad-faith conduct.


In re infoUSA, Inc. Shareholders Litigation, 953 A.2d 963 (Del. Ch. 2007)