## Facts

- Stockholders filed a consolidated derivative action on behalf of Tyson Foods, Inc., challenging nearly a decade of executive-compensation and related-party transactions.
- The complaint alleged improper grants of “spring-loaded” stock options—options granted shortly before the release of material positive information—thus benefiting recipients when the stock price rose after disclosure.
- Tyson operated under a shareholder-approved stock incentive plan administered through board compensation committees that could issue various types of options.
- Plaintiffs alleged executives received excessive or improper perquisites (including personal aircraft use and other benefits) that were not properly authorized, classified, or disclosed.
- An SEC investigation into Tyson’s reporting of executive perquisites prompted shareholder scrutiny and contributed to plaintiffs’ pursuit of derivative claims.
- Plaintiffs named numerous current and former directors and a controlling-stockholder-related partnership, while Tyson was a nominal defendant.
- Defendants moved to dismiss under Rule 23.1 (demand futility) and Rule 12(b)(6), and argued that many claims were barred by laches/limitations.

## Issues

1. Whether plaintiffs pleaded particularized facts excusing a presuit demand on the board under Court of Chancery Rule 23.1.
2. Whether any claims were barred by laches, guided by the analogous three-year limitations period, and whether tolling doctrines were plausibly pleaded.
3. Whether the complaint stated nonconclusory claims for breach of fiduciary duty, waste, unjust enrichment, and oversight failures based on option-granting, perquisites, and related-party dealings.
4. Whether the business judgment presumption applied because directors were disinterested and independent, or instead faced a substantial likelihood of liability based on the pleaded facts.

## Decision

- The court granted the motion to dismiss in part and denied it in part.
- The court dismissed claims (or defendants) where demand was not excused, allegations were not pleaded with required particularity, or claims targeted directors not plausibly connected to the challenged conduct.
- The court dismissed portions of the case challenging conduct outside the relevant time period where tolling was not plausibly alleged.
- The court allowed certain claims to proceed, including claims that the timing and circumstances of option grants could constitute spring-loading and breach of fiduciary duty in limited circumstances.
- The court permitted certain perquisite-related and oversight-related allegations to proceed where the pleadings supported an inference of knowing inaction or improper approval/monitoring tied to specific decisionmakers.

## Legal Principles

- On a motion to dismiss, the court accepts well-pleaded facts as true, draws reasonable inferences for the plaintiff, and dismisses only when recovery is not reasonably conceivable on the pleaded facts.
- In derivative litigation, demand is excused only if particularized allegations create reason to doubt that a majority of the board could impartially consider a demand, including because they face a substantial likelihood of liability or lack independence.
- Laches in equity is generally measured by the analogous statutory limitations period; older claims may proceed only if a tolling doctrine is plausibly alleged (including fraudulent concealment, inherently unknowable injury, or equitable tolling).
- “Spring-loaded” option grants may, in limited circumstances, support a fiduciary-duty claim when directors time grants while possessing material nonpublic positive information and intend to defeat shareholder-approved plan restrictions.
- Oversight and disclosure-related compensation claims may proceed at the pleading stage where allegations support an inference of conscious failure to address known compliance or reporting problems tied to executive benefits.

## Conclusion

The Court of Chancery narrowed a sprawling derivative complaint by dismissing stale and inadequately connected allegations, while allowing a core set of claims—particularly those alleging spring-loaded options and certain perquisite and oversight failures—to proceed based on particularized pleadings supporting demand excusal, timely pursuit (or plausible tolling), and a reasonably conceivable breach of fiduciary duty.


In re Tyson Foods, Inc. Consol. S’holder Litig., 919 A.2d 563 (Del. Ch. 2007)