In re Fox Corporation Derivative Litigation

• Court: Court of Chancery of Delaware
• Decided: April 28, 2025
• Docket: C.A. No. 2023-0418-BWD
• Status: Published

Opinion

COURT OF CHANCERY OF THE STATE OF DELAWARE BONNIE W. DAVID COURT OF CHANCERY COURTHOUSE VICE CHANCELLOR 34 THE CIRCLE GEORGETOWN, DE 19947

Date Submitted: April 25, 2025 Date Decided: April 28, 2025

Joel Friedlander, Esquire Blake Rohrbacher, Esquire Jeffrey M. Gorris, Esquire Kevin M. Gallagher, Esquire Christopher M. Foulds, Esquire Kyle H. Lachmund, Esquire Friedlander & Gorris, P.A. Sandy Xu, Esquire 1201 N. Market Street, Suite 2200 Elizabeth Freud, Esquire Wilmington, DE 19801 Benjamin O. Allen, Esquire Richards, Layton & Finger, P.A. A. Thompson Bayliss, Esquire 920 North King Street John M. Seaman, Esquire Wilmington, DE 19801 Christopher Fitzpatrick Cannataro, Esquire Nicholas F. Mastria, Esquire Abrams & Bayliss LLP 20 Montchanin Road, Suite 200 Wilmington, DE 19807

RE: In re Fox Corporation Derivative Litigation, C.A. No. 2023-0418-BWD

Dear Counsel:

This letter resolves Defendants’ Motion for Leave to Move for Summary

Judgment (the “Motion”). Defs.’ Mot. for Leave to Move for Summ. J. [hereinafter

Mot.], Dkt. 108. The Motion is granted.

As you know, Defendants previously moved to dismiss the complaint in this

derivative action under Court of Chancery Rule 23.1. “A cardinal precept” of In re Fox Corporation Derivative Litigation, C.A. No. 2023-0418-BWD April 28, 2025 Page 2 of 6

Delaware law is “that directors, rather than shareholders, manage the business and

affairs of the corporation.” Aronson v. Lewis, 473 A.2d 805, 811 (Del. 1984) (citing

8 Del. C. § 141(a)), overruled on other grounds by Brehm v. Eisner, 746 A.2d 244

(Del. 2000). “The board’s authority to govern corporate affairs extends to decisions

about what actions the corporation should take after being harmed, including

whether the corporation should sue its present or former fiduciaries.” In re Fox

Corp. Deriv. Litig., 2024 WL 5233229, at *7 (Del. Ch. Dec. 27, 2024) [hereinafter

Mem. Op.]. “In order for a stockholder to divest the directors of their authority to

control the litigation asset and bring a derivative action on behalf of the corporation,

the stockholder must” (1) make a demand on the company’s board of directors or

(2) show that demand would be futile. Lenois v. Lawal, 2017 WL 5289611, at *9

(Del. Ch. Nov. 7, 2017) (first citing Ct. Ch. R. 23.1(a); and then citing Kaplan v.

Peat, Marwick, Mitchell & Co., 540 A.2d 726, 730 (Del. 1988)).

When evaluating allegations of demand futility, our Court considers, on a

director-by-director basis,

(i) whether the director received a material personal benefit from the alleged misconduct that is the subject of the litigation demand; (ii) whether the director faces a substantial likelihood of liability on any of the claims that would be the subject of the litigation demand; and (iii) whether the director lacks independence from someone who received a material personal benefit from the alleged misconduct that would be the subject of the litigation demand or who would face a In re Fox Corporation Derivative Litigation, C.A. No. 2023-0418-BWD April 28, 2025 Page 3 of 6

substantial likelihood of liability on any of the claims that are the subject of the litigation demand. United Food & Com. Workers Union & Participating Food Indus. Emps. Tri-State

Pension Fund v. Zuckerberg, 262 A.3d 1034, 1059 (Del. 2021). “If the answer to

any of the questions is ‘yes’ for at least half of the members of the demand board,

then demand is excused as futile.” Id.

On December 27, 2024, the Court issued a Memorandum Opinion Denying

the Defendants’ Motion to Dismiss (the “Memorandum Opinion”). The

Memorandum Opinion explained that to adequately plead demand futility, “the

plaintiff must raise a reasonable doubt about the disinterestedness or independence

of at least four” of Fox Corporation’s (“Fox”) eight directors. Mem. Op. at *2. The

Memorandum Opinion concluded that the complaint alleges particularized facts

sufficient to support a reasonable inference that Fox director K. Rupert Murdoch

“faces a substantial risk of liability for breaching his duty of loyalty by deciding in

bad faith to have the Company violate the law.” Id. It further concluded that the

complaint alleges sufficient facts to support an inference that at least three other

directors—Lachlan K. Murdoch, Chase Carey, and Jacques Nasser—lack

independence from Murdoch, based on allegations of “close and longstanding

business and personal ties.” Id. The Memorandum Opinion therefore denied the

motion to dismiss under Rule 23.1. In re Fox Corporation Derivative Litigation, C.A. No. 2023-0418-BWD April 28, 2025 Page 4 of 6

Through the pending Motion, “Defendants seek leave to move for summary

judgment on a narrow and clear issue: whether there exists evidence to support the

conclusion that Jacques Nasser is not independent of Rupert Murdoch and so cannot

impartially evaluate the claims against him in this lawsuit.” Mot. ¶ 1. Defendants

hope “[t]he motion [for summary judgment], if granted, will dispose of the case and

save the parties millions of dollars in litigation expense.” Id. Plaintiffs oppose the

Motion, arguing that permitting targeted discovery in advance of a summary

judgment motion would be inefficient and inconsistent with the law of the case. Pls.’

Opp’n to Defs.’ Mot. “for Leave to Move for Summ. J.” [hereinafter Opp’n] ¶¶ 5,

18–21, Dkt. 115.

Whether to stage discovery and to permit briefing on summary judgment are

matters of judicial discretion.1 I am convinced that granting the Motion is the most

1 After a motion to dismiss under Rule 23.1 is denied, the Court retains the “discretion to entertain a motion for summary judgment on the demand futility issue.” In re McDonald’s Corp. S’holder Deriv. Litig., 291 A.3d 652, 700 (Del. Ch. 2023); see id. at 697 (“Nothing prevents a court from analyzing demand futility on a motion for summary judgment.”); In re BGC P’rs, Inc. Deriv. Litig., 2021 WL 4271788, at *5 (Del. Ch. Sept. 20, 2021) (considering demand futility on summary judgment). The Court likewise may stage discovery in its discretion. See, e.g., Anchorage Police & Fire Ret. Sys. v. Adolf, 2025 WL 1000153, at *2 (Del. Ch. Apr. 3, 2025) (explaining “it seems imprudent to allow the plaintiffs full-blown discovery into the sale process if the plaintiffs cannot prove the facts underlying their one viable disclosure theory”); McDonald’s, 291 A.3d at 700 (explaining that in connection with an early-stage motion for summary judgment on demand futility, “full merits discovery would not be warranted”); Caravias v. Interpath Commc’ns, Inc., 2008 WL 2268355, at *5 (Del. Ch. In re Fox Corporation Derivative Litigation, C.A. No. 2023-0418-BWD April 28, 2025 Page 5 of 6

efficient path forward here. Doing so will not encourage seriatim motions; the

parties should understand that the Court is disinclined to consider multiple

dispositive motions before trial. Nor does the Motion implicate the law of the case

doctrine. Defendants do not “ask[] this Court to re-adjudicate the sufficiency of the

particularized allegations respecting Nasser’s relationship with Rupert Murdoch[,]”

as Plaintiffs suggest. Opp’n ¶ 19. Allegations are not evidence, and the law of the

case doctrine does not foreclose a potential offramp if the theories pled in the

complaint do not hold up. 2

The Motion is granted. The parties are directed to meet and confer on the

scope of discovery into Nasser’s disinterestedness and independence and a briefing

May 28, 2008) (ordering limited discovery “in the interests of economy and efficiency” to permit “consideration of [timeliness defenses] under a summary judgment standard”). 2 See Kahn v. Tremont Corp., 1992 WL 205637, at *4 n.2 (Del. Ch. Aug. 21, 1992) (“[W]hen the pleading itself is sufficient to excuse pre-suit demand, defendants are, of course, still free to show on summary judgment by uncontradicted facts that the allegations made are untrue and there is therefore no proper standing.”); see also Heineman v. Datapoint Corp., 1990 WL 154149, at *3 (Del. Ch. Oct. 9, 1990) (“If a review of the actual facts would show that these two aspects of the complaint are in fact and should in law be treated as completely independent, then that may be shown in an application for summary judgment.”). In re Fox Corporation Derivative Litigation, C.A. No. 2023-0418-BWD April 28, 2025 Page 6 of 6

schedule to govern Defendants’ forthcoming motion for summary judgment.

Sincerely,

/s/ Bonnie W. David

Bonnie W. David Vice Chancellor

cc: All counsel of record (by File & ServeXpress)