In re MetLife Inc. Derivative Litigation

• Court: Court of Chancery of Delaware
• Decided: August 17, 2020
• Docket: CA No. 2019-0452-SG
• Status: Published

Opinion

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

) IN RE METLIFE INC. DERIVATIVE ) Consol. C.A. No. 2019-0452- LITIGATION ) SG )

MEMORANDUM OPINION

Date Submitted: May 11, 2020 Date Decided: August 17, 2020

Kurt M. Heyman and Gillian L. Andrews, of HEYMAN ENERIO GATTUSO & HIRZEL LLP, Wilmington, Delaware; OF COUNSEL: Gustavo F. Bruckner and Samuel J. Adams, of POMERANTZ LLP, New York, New York, Attorneys for Lead Plaintiffs.

Blake A. Bennett, of COOCH AND TAYLOR, P.A., Wilmington, Delaware; OF COUNSEL: Lee Squitieri, of SQUITIERI & FEARON, LLP, New York, New York, and James S. Notis and Jennifer Sarnelli, of GARDY & NOTIS, LLP, New York, New York, Attorneys for Plaintiffs.

Raymond J. DiCamillo and Brian S. Yu, of RICHARDS, LAYTON & FINGER, P.A., Wilmington, Delaware; OF COUNSEL: Maeve O’Connor, Elliot Greenfield, Michael W. Gramer, and Catherine Walsh, of DEBEVOISE & PLIMPTON LLP, New York, New York, Attorneys for Defendants and Nominal Defendant.

GLASSCOCK, Vice Chancellor In this matter, the Plaintiffs seek derivatively to hold several corporate

fiduciaries liable to the corporation, for failure to adequately oversee the operation

of the business. That business is MetLife, Inc. (“MetLife” or the “Company”), the

prominent insurance and financial services corporation. The Defendant fiduciaries

have moved to dismiss the derivative action for failure to make a demand on the

directors under Delaware Chancery Rule 23.1, as well as under Rule 12(b)(6). Rule

23.1 protects the functioning of the corporate directors as decision-makers for the

entity; under this model, it is the board’s prerogative to bring a cause of action in the

corporate behalf. Only where a plaintiff is able to plead with particularity

circumstances raising a reasonable doubt that the board is able to exercise its

business judgment to consider the proposed legal action is demand excused, and the

plaintiff empowered to proceed derivatively on behalf of the corporation.

Here, the only reason advanced by the Plaintiffs that demand should be

excused is that a majority of the demand board would themselves be liable in this

action alleging a failure to oversee the business, and therefore the board could not

fairly consider a demand. A corporate oversight claim under the Caremark rationale,

however, is notoriously difficult for plaintiffs. I find that the Plaintiffs have failed

to plead facts sufficient to imply director liability or otherwise to excuse demand

under Rule 23.1. The complaint alleges that a long-standing part of MetLife’s business is to

undertake other businesses’ fixed-benefit pension obligations to employees, by

agreeing to pay an annuity to the employee once the employee retires and benefits

become payable. This business operation, which MetLife calls the Pension Risk

Transfer Business, has been a part of the MetLife operation since 1921. Historically,

MetLife has given notice to employee/annuitants of entitlement to benefits at the

address provided to them by the employer, by letters sent when each employee

turned 65 and again when the employee reached 70 years and six months of age (the

“two-letter” policy). If the employee thereafter responded to the notice, the annuity

payments would commence; if not, the Company would presume the employee was

dead and ineligible for benefits.

This system was hardly foolproof—some employees were alive but not at the

address provided. As technology has improved, better tools to identify and locate

annuitants developed, including a computerized list of deceased American

employees maintained by the U.S. Social Security Administration and called the

Death Master File. That list enumerated those who had died, not those who remained

alive; nonetheless, it enabled a cross-check against MetLife’s assumptions of

annuitant demise. According to the complaint, MetLife was slow to adopt this and

other new technology, allowing the Company, wrongfully, to avoid payments to

annuitants and, because of the erroneous assumptions of annuitant death, release

2 reserves associated with that annuitant into Company earnings. In fact, MetLife used

the Death Master File to inform itself, in some cases, of annuitant death in order to

stop making payments, but not in the Pension Risk Transfer Business to potentially

refute assumptions of death, which allowed the Company to avoid commencing

payments. Ultimately, in December 2017, MetLife revealed in a Form 8-K that it

had discovered the weaknesses inherent in the two-letter policy, and that it would

enhance identification of annuitants in the Pension Risk Transfer Business and

“strengthen” reserves, and warned that the changes could be material to operations.

Class action securities litigation followed, as well as regulatory actions by the states

of New York and Massachusetts, which have resulted in many millions of dollars of

fines and restitution payments imposed upon the Company. The complaint alleges

that the Defendants failed to adopt these procedures in a timely way, and should be

held liable for breach of duty.

The Defendant Directors here are protected by an exculpatory clause in the

corporate charter. In order for me to find it sufficiently likely that they are liable so

that demand is excused, therefore, the complaint must contain specific allegations of

fact from which I may infer that the Director Defendants’ actions or inaction were

in bad faith; that is, in conscious disregard of their duties. I find, however, that the

allegations that the Defendant Directors failed to ensure that the Company

3 supplemented or superseded the two-letter policy falls short of a specific pleading

of bad faith. Demand is not excused, therefore, and this matter is dismissed.

I. BACKGROUND1

A. The Parties

Nominal Defendant MetLife is a Delaware corporation with its headquarters

in New York.2

The Plaintiffs in this consolidated class action were, at all relevant times,

owners of MetLife common stock.3

The Consolidated Verified Stockholder Derivative Complaint (the

“Complaint”) names nine currently serving directors on the MetLife board of

directors (the “Board”) as Defendants. Defendant Cheryl W. Grisé has been a

director since 2004.4 Defendant Carlos M. Gutierrez has been a director since 2013.5

Defendant David L. Herzog has been a director since 2016.6 Defendant R. Glenn

1 I draw all facts from the Plaintiffs’ Consolidated Verified Stockholder Derivative Complaint, Docket Item (“D.I.”) 24 (the “Complaint” or “Compl.”) and documents incorporated therein. See in re Morton’s Rest. Grp., Inc. S’holder Litig., 74 A.3d 656, 658–59 (Del. Ch. 2013) (permitting consideration of documents incorporated into complaint in motion to dismiss). As discussed further below, all well-pled facts are considered true for the sake of this motion. 2 Compl., ¶ 48. 3 Id. ¶ 23. 4 Id. ¶ 24. Grisé serves on the Audit Committee and the Compensation Committee. Id. 5 Id. ¶ 25. Gutierrez serves on the Governance & Corporate Responsibility and Investment Committees. Id. 6 Id. ¶ 26. Herzog serves as the chairman of the Audit Committee and as a member of the Finance & Risk, Executive, and Compensation Committees. Id.

4 Hubbard has been a director since 2007.7 Defendant Edward J. Kelly, III has been

a director since 2015.8 Defendant William E. Kennard has been a director since

2013.9 Defendant James M. Kilts has been a director since 2005.10 Defendant

Catherine R. Kinney has been a director since 2009.11 Defendant Denise M.

Morrison has been a director since 2014.12 The Plaintiffs did not name three other

current directors as defendants because those directors joined after the events at

issue: Gerald L. Hassell, Diana McKenzie, and Michael A. Khalaf.13 I refer to the

nine current director Defendants and the three non-defendant directors together as

the “Demand Board.”

In addition to the nine current directors, the Complaint names five former

directors. Defendant Hugh B. Price was a director from 2003 through 2014.14

7 Id. ¶ 27. Hubbard serves on the Executive, Governance & Corporate Responsibility, Investment, and Finance & Risk Committees. Id. 8 Id. ¶ 28. Kelly III serves as the chair of the Finance & Risk Committee and as a member of the Audit, Compensation and Executive Committees. Id. 9 Id. ¶ 29. Kennard is the chair of the Investment Committee, and a member of the Executive and Finance & Risk Committees. Id. 10 Id. ¶ 30. Kilts serves as the chair of the Compensation Committee, and serves as a member of the Executive, Governance & Corporate Responsibility and Investment Committees. Id. 11 Id. ¶ 31. Kinney is a member of the Audit and Finance & Risk Committees. Id. 12 Id. ¶ 32. Morrison is a member of the Compensation and Governance & Corporate Responsibility Committees. Id. 13 Id. ¶ 32 n.10. 14 Id. ¶ 33. During his Board tenure, Price served on the Audit and Compensation Committees. Id.

5 Defendant Alfred J. Kelly, Jr., was a director from 2009 through 2018.15 Defendant

Kenton J. Sicchitano was a director from 2003 through 2016.16 Defendant Lulu C.

Wang was a director from 2008 through 2016.17 Defendant John M. Keane was a

director from 2003 through 2014.18 MetLife’s certificate of incorporation contains

a 102(b)(7) clause exculpating MetLife Directors from breaches of the duty of care.19

Defendant Steven A. Kandarian started with the Company in 2005 and

became CEO in 2011 and Chairman of the Board in 2012.20 Kandarian retired on

April 30, 2019.21

In addition to Kandarian, the Complaint names six current and former officers

of MetLife as defendants. Defendant William J. Wheeler was President, U.S.

15 Id. ¶ 34. During his Board tenure, Kelly, Jr. served on the Audit, Compensation, and Finance & Risk Committees. Id. 16 Id. ¶ 35. During his Board tenure, Defendant Sicchitano served on the Audit and Finance & Risk Committees. Id. 17 Id. ¶ 36. During her Board tenure, Wang served on the Finance & Risk Committee. Id. 18 Id. ¶ 37. During his Board tenure, Defendant Keane served on the Audit Committee. Id. 19 See Opening Br. In Support of Defs.’ Mot. To Dismiss Consolidated Verified Stockholder Derivative Compl., D.I. 33 (“Defs.’ Opening Br.”), at 13 n.7 (“Director Defendants are exculpated from personal liability for [a breach of the duty of care] claim under MetLife’s Certificate of Incorporation to the full extent authorized by Section 102(b)(7) of the Delaware General Corporation Law.”). The Defendants did not attach a copy of the certificate of incorporation to their papers, but the Plaintiffs do not dispute in the Complaint or in briefing that the charter contains a 102(b)(7) clause. See Pls.’ Answering Br. in Opp’n to Defs.’ Mot. to Dismiss, D.I. 35 (“Pls.’ Answering Br.”), at 52 (“Unlike the Director Defendants, however, the Officer Defendants are not exculpated by 8 Del. C. § 102(b)(7). . .”). 20 Compl., ¶ 39. 21 Id. ¶¶ 7, 39.

6 Business, from 2011 through approximately 2015.22 Defendant John C.R. Hele was

MetLife’s Executive Vice President and Chief Financial Officer from 2013 through

2017.23 Defendant Steven J. Goulart is MetLife’s Executive Vice President and

Chief Investment Officer.24 Defendant Maria Morris replaced Wheeler as head of

MetLife’s U.S. Business from April 2015 through June 2017.25 Defendant Robin F.

Lenna was the Executive Vice President of MetLife’s Retirement and Income

Solutions business and its previous unit known as the “CBF” business.26 Defendant

Wayne Daniel was MetLife’s Vice President of U.S. Pensions.27 Daniel was

appointed in March 2014 and served in that position through December 2017 and

reported to Defendant Lenna throughout that period.28

I refer to Defendants Kandarian, Grisé, Gutierrez, Herzog, Hubbard, Kelly III,

Kennard, Kilts, Kinney, Morrison, Price, Kelly, Jr., Sicchitano, Wang, and Keane as

the “Director Defendants.” I refer to Defendants Wheeler, Hele, Goulart, Morris,

Lenna and Daniel as the “Officer Defendants.”

22 Id. ¶ 40. Wheeler retired in 2015. Id. 23 Id. ¶ 41. Hele retired in May 2018. Id. 24 Id. ¶ 42. 25 Id. ¶ 43. 26 Id. ¶ 44. Lenna retired in March 2018. Id. 27 Id. ¶ 45. 28 Id.

7 B. Factual Background

1. MetLife’s Pension Risk Transfer Business

MetLife is a global financial services company. 29 Approximately thirty-five

percent of MetLife’s earnings come from its business in the United States.30 Its

operations in the United States fall into three businesses: Group Benefits, Retirement

and Income Solutions (“RIS”), and Property and Casualty.31 The RIS division

includes the “Pension Risk Transfer Business.”32 The Pension Risk Transfer

Business has been a part of MetLife’s U.S. business since 1921.33 In this line of

business, MetLife “acquire[s] the assets of defined benefit pension plans and

convert[s] them into group annuity contracts.”34 Through this transaction,

employers eliminate risks associated with carrying pension plans, and MetLife takes

on primary responsibility for paying funds to the beneficiaries of those plans, or

“annuitants,” as they reach retirement age.35 When payment obligations transfer to

29 Id. ¶ 75. 30 Id. ¶ 76. 31 Id. 32 Id. ¶¶ 75–77. 33 Id. ¶ 76. 34 Id. ¶ 75. 35 Id. ¶¶ 75, 77, 79. Under the Internal Revenue Code Section 401, to close out a defined benefit plan such as a pension, the sponsor must either make a one-time lump sum payment to participants or provide an annuity purchased from an insurer through a plan such as MetLife’s Pension Risk Transfer Business. Id. ¶ 78.

8 MetLife, the employer makes a per-annuitant up-front payment to cover the

minimum group annuity reserve.36

Having assumed the obligation to pay annuitants, MetLife relies on

information provided by the employer to administer the group annuity contract and

to make payments under it.37 Because the group annuity contracts are transactions

between the employer and MetLife, the annuitants themselves are often unaware that

their pension obligations have transferred.38

According to the Complaint, the Pension Risk Transfer Business is an

important line of business for MetLife. In 2014, Defendant Daniel, then Head of

U.S. Pensions, called the Pension Risk Transfer Business “a core element of

MetLife’s business . . . for over 90 years.”39 He noted that the Pension Risk Transfer

Business has a forty-five percent market share of this financial service in the United

States.40 As of June 2016, MetLife was managing approximately $38 billion in

transferred pension liabilities.41 Several other Defendants acknowledged the market

36 Id. ¶ 82. 37 Id. ¶ 80. 38 Id. ¶ 81. 39 Id. ¶ 83. 40 Id. 41 Id.

9 share enjoyed by MetLife and indicated that the $1.5 to $2 billion annual sales from

the Pension Risk Transfer Business made it an attractive line of business.42

One of MetLife’s responsibilities in operating its group annuity contracts in

the Pension Risk Transfer Business is to identify when annuitants are entitled to

begin receiving payments and when those annuitants die.43 This process is important

because MetLife is legally and contractually obligated to maintain adequate funds

in pension reserve accounts to pay all future claims and liabilities arising from the

group annuity contracts.44 Once an annuitant is deemed deceased, however, MetLife

may release the benefits related to that annuitant into earnings.45

For many years, MetLife maintained the following process for identifying

when it owed annuitants benefits. First, MetLife acquired the addresses of the

annuitants from the employer at the time it acquired the pension obligations.46 It

generally did not attempt to maintain contact with the annuitants, seek updated

contact information, or verify that the addresses on file were current.47 MetLife sent

two letters to the annuitants at the address it had on file from the employer.48 It sent

42 Id. ¶ 84. 43 See id. ¶ 86. 44 See id. 45 Id. ¶ 90. 46 Id. ¶ 88. 47 Id. ¶¶ 87–88. 48 Id. ¶ 87.

10 the first letter when the annuitant reached age 65, and the second letter when the

annuitant reached age 70½.49 If it received no response to the first letter, it presumed

the annuitant had deferred retirement benefits beyond the normal retirement date.50

If it received no response to the second letter, it labeled the annuitant “Presumed

Dead” and released funds associated with that annuitant from the reserve accounts.51

MetLife made no follow-up efforts to confirm these presumptions, even if the letters

were returned undeliverable.52 As will be described in more detail below, the two-

letter notification procedure used to locate annuitants in the Pension Risk Transfer

Business led to repercussions and financial consequences for the Company.

2. Plaintiffs’ “Red Flags” of Inadequate Contact Procedures in the Pension Risk Transfer Business

In the Complaint, the Plaintiffs identify seven items they contend should

have been “red flags” to the Board regarding the inadequacy of the two-letter

notification procedure in the Pension Risk Transfer Business.

49 Id. 50 Id. ¶ 89. 51 Id. ¶ 90. 52 Id. ¶ 87.

11 a. Item 1: Regulatory Guidance from the New York State Department of Financial Services

The New York State Department of Financial Services (the “NYDFS”) is

MetLife’s primary government regulator.53 Allegations of unfair trade practices in

the life insurance industry spurred the NYDFS to undertake an inquiry regarding life

insurance benefits.54 In December 2011, the NYDFS issued a report finding that

some insurers, including MetLife, had retained money that ought to have been paid

to life insurance beneficiaries or policy holders.55 This report found that “life

insurers should regularly match life insurance policies against a reliable death list,

rather than just waiting for claims to be filed.”56 The insurers that undertook this

matching process discovered significant numbers of payees for whom claims had

not been filed, resulting in large additional payouts of benefits.57 In other words, per

the NYDFS report, insurers whose benefits pay on death—as opposed to the annuity

payments at issue here, that terminate upon death—should employ a reliable death

list.

Based on Section 308 of the New York Insurance Law, the NYDFS advised

that:

53 Id. ¶ 96. 54 Id. ¶ 94. 55 Id. 56 Id. 57 Id.

12 a cross-check of all life insurance policies, annuity contracts, and retained asset accounts on [insurers’] administration data files, including group policies for which an insurer maintains detailed insured records, should be performed with the latest updated version of the U.S. Social Security Administration’s Death Master File (“SSA-DMF”) . . . to identify any death benefit payments that may be due under life insurance policies, annuity contracts, or retained asset accounts as a result of the death of an insured or contract or account holder. . .58

The SSA-DMF referenced above is the federal government’s master list of the

deceased.59 While the Complaint does not state whether the SSA-DMF is

comprehensive, it describes it as “a computer database file made available since

1980 that contains information on over 83 million deaths dating back to 1962 . . .

organized by name, birthdate and Social Security number. . .”60 The report also

found that some insurers utilized the SSA-DMF but only in conjunction with

stopping annuity payments and not to determine if death benefit payments were

due.61 In 2011, MetLife responded to a request from the NYDFS to match its

administrative records to the SSA-DMF and as a result “discovered $112 million in

unpaid benefits on the Company’s books that were owed to annuitants, beneficiaries,

or state unclaimed property divisions.”62

58 Id. 59 Id. ¶ 93. 60 Id. 61 Id. ¶ 94. 62 Id. ¶ 95.

13 b. Item 2: Investigative Hearing Testimony Before State Insurance Commissioners

In 2008, the California Insurance Commissioner’s Office began investigating

whether insurers had adequate controls in place to monitor their accounts to comply

with unclaimed property laws.63 A number of MetLife executives testified at

investigative hearings in California and Florida in 2011 “on topics including life

insurance and individual and group annuities.”64 Todd Katz, MetLife’s Executive

Vice President of U.S. Business Insurance Products, testified that MetLife utilized

the SSA-DMF in the RIS division and in the Pension Risk Transfer Business.65

However, the RIS division used the SSA-DMF only to determine whether annuitants

had died for the purposes of stopping retirement payments; the RIS division did not

use the SSA-DMF to check whether annuitants presumed dead were in fact dead.66

Katz testified that MetLife had been using the SSA-DMF in this manner since the

late 1980’s and that it conducted a matching process once a month.67

Further testimony in these investigations showed that MetLife had a

formalized process to use the SSA-DMF in its group annuity line of business, and

that when the SSA-DMF showed that someone was deceased, MetLife passed that

63 Id. ¶¶ 99–100. 64 Id. ¶ 101. 65 Id. ¶ 102. 66 Id. 67 Id.

14 information along to its other lines of business.68 In other words, MetLife used the

SSA-DMF to find deceased annuitants so that it could stop payments, but it did not

use the SSA-DMF as a check on the presumption that an annuitant was actually

deceased after it sent the two notice letters, without reply, described above.69

c. Item 3: The 2012 Regulatory Settlement Agreement

The investigations by state insurance commissioners and the regulatory

guidance described above culminated in a Regulatory Settlement Agreement (the

“RSA”) between MetLife and several states’ insurance regulators.70 The RSA stated

that the investigations had uncovered issues with funds being timely paid to

beneficiaries in accordance with state insurance and unclaimed property laws.71 The

report identified “life insurance and endowment policies, annuities, [and] ‘Retained

Asset Accounts’” as areas with payment issues.72 The RSA focused on “the

Regulators’ findings that [led] to concerns about MetLife’s death benefit

practices.”73

68 Id. ¶ 103. 69 Id. ¶ 104. 70 Id. ¶ 107. 71 Id. 72 Id. 73 Id. ¶ 110.

15 The RSA specifically identified MetLife’s practice of using the SSA-DMF to

terminate benefits but not to verify whether death benefits should be paid.74 The

RSA noted the $112 million of unpaid death benefits that MetLife discovered as a

result of the NYDFS regulatory guidance.75 Ultimately, according to the Complaint,

under the RSA, “MetLife agreed to pay $438 million over the span of 17 years and

pay an additional $40 million for the costs of the investigation by the various

states.”76 MetLife agreed, as a part of the RSA, to implement internal policies to

help identify beneficiaries.77 It committed to conduct a “Thorough Search,” a

defined term that meant it would now utilize a variety of available methods to

discover and contact potential beneficiaries.78 The Thorough Search required

MetLife to use “any methodology believed likely to locate a Beneficiary,” including

“best efforts to identify . . . a current address for the Beneficiary based upon the

Company’s records,” a duty to “update the address using online search or locator

tools,” contact attempts by telephone and email, and a final certified mailing.79

74 Id. 75 Id. 76 Id. ¶ 111. The Defendants disagree that MetLife agreed to pay $438 million in payments in connection with the RSA. For the purposes of this motion, however, I consider the Plaintiffs’ allegations as true. 77 Id. 78 Id. ¶ 112. 79 Id.

16 MetLife denied in the RSA that it had violated any insurance or unclaimed property

laws.80

Notably, the RSA specifically excluded MetLife’s Pension Risk Transfer

Business.81 It did so by defining “annuity contract” as “a fixed or variable annuity

contract other than a fixed or variable annuity contract issued to fund an

employment-based retirement plan where MetLife is not committed by the terms of

the annuity contract to pay death benefits to the beneficiaries of specific plan

participants.”82 Thus, the “Thorough Search” MetLife agreed to conduct under the

RSA applied to its life insurance and death benefits practices, but it did not apply to

the Pension Risk Transfer Business.83 The Plaintiffs allege that “[i]t is highly likely

that such exclusion was specifically approved by MetLife’s then-Board.”84 The

80 Id., Ex. C, Regulatory Settlement Agreement (“RSA”), Recitals (“[MetLife] denies any wrongdoing or any violation of the Unclaimed Property Laws or the Insurance Laws of any of the Signatory States or any other applicable law, but in view of the complex issues raised and the probability that long term litigation and/or administrative proceedings would be required to resolve the disputes among the Parties hereto, [MetLife] and the Signatory States desire to resolve differences between the Parties as to the interpretation and enforcement of the Insurance Laws and the Unclaimed Property Laws and all claims that the Departments have asserted or may assert with respect to [MetLife’s] claim settlement practices based on the use, or lack of the use, of the [SSA- DMF] or any other source or record maintained by or located in [MetLife’s] records regarding the death of an Insured, Accountholder, Annuity Contract Holder, or annuitant[.]”). 81 Id. ¶ 113. 82 Id. (emphasis added). The double negative notwithstanding, the Complaint avers that the RSA excluded the Pension Risk Transfer Business. Id. (“MetLife specifically negotiated with Regulators to exclude pension risk transfer annuitants from the 2012 RSA. . .” (emphasis in Complaint)). 83 See id. 84 Id.

17 Pension Risk Transfer Business continued using the two-letter contact procedure.85

Testimony from MetLife executives in the investigations suggests that MetLife’s

management considered adopting enhanced contact practices for the Pension Risk

Transfer Business, but decided not to do so.86 Although the RSA ultimately

concerned MetLife’s death benefit practices in its life insurance business, the

Plaintiffs allege that the regulatory actions ought to have revealed the need for

change in the Pension Risk Transfer Business because the regulators had

“specifically admonished [MetLife] for near identical administrative procedures in

an analogous line of business.”87

Of the ten Director Defendants on the Board at the time of the RSA in 2012,

four are members of the Demand Board.88 According to the Complaint, three more

Demand Board directors joined in 2013 and 2014, after the RSA but while the RSA’s

“implementation period” remained ongoing.89

85 Id. ¶ 114. The Plaintiffs point out that MetLife improved its procedures for annuitants who entered contracts directly with MetLife and thus knew MetLife was responsible for benefits, but left procedures unchanged for the Pension Risk Transfer Business contracts, in which annuitants might not know MetLife was responsible for their plans. Id. ¶ 115. 86 Id. ¶ 116 (Katz testifying to insurance regulators that “[g]enerally in a similar way, we talked about using it in the annuity business”; and “we do have a variety of systems and procedures across our business that have been developed over some period of time that do inform other product areas.”). 87 Id. ¶ 118. 88 Id. ¶ 117. 89 Id. ¶ 213. I note that the Plaintiffs include Kandarian in this group of seven, though they do not allege that Kandarian was on the Demand Board.

18 d. Item 4: The New York Class Action

Later in 2012, MetLife, Kandarian, and four members of the Demand Board

were named defendants in a New York class action lawsuit, involving the issues

addressed in the RSA.90 In the answer filed in that lawsuit, they affirmed, “MetLife

has accessed the SSA-DMF for specific purposes since the 1980s.”91

e. Item 5: The Department of Labor Investigation and MetLife’s Pilot Program

In 2015, the U.S. Department of Labor (“DOL”) opened an investigation in

response to pensioners asking why they were not receiving pension payments.92

Spurred by the DOL investigation, in December 2017 MetLife launched a discrete

internal program (the “Pilot Program”) that searched for its Pension Risk Transfer

Business annuitants using methods beyond the Company’s traditional two-letter

notice procedure.93 The Pilot Program’s goals were to maintain contact with

annuitants prior to their expected retirement dates as well as to “utilize more robust

procedures to locate and establish contact with deferred participants who have not

yet claimed a pension benefit.”94 The Pilot Program revealed that using additional

contact methods resulted in the discovery of a great number of living annuitants

90 Id. ¶ 120. 91 Id. 92 Id. ¶ 121. 93 Id. 94 Id. ¶ 123.

19 owed benefits.95 The Board discussed the findings from the Pilot Program at a

meeting in January 2018.96

f. Item 6: The Toland Litigation

In 1994, a former Martindale-Hubbell employee retired.97 MetLife owed him

retirement benefits, but it did not notify him he was eligible until 2012.98 He died in

2013.99 In 2016, his estate brought a FINRA arbitration against MetLife.100 MetLife

stated that it did not possess a current address prior to 2012.101

g. Item 7: The Internal Auditor’s Report

In September 2016, MetLife’s Executive Vice President & Chief Auditor

presented the Audit Committee with an “Internal Auditor’s Report.”102 According

to the report, the internal audit department had reviewed the “Corporate Benefits

95 Id. ¶ 122. The Plaintiff alleges that, “the pilot program determined that 42% of the 750 annuitants [i.e. the sample size] in the pilot were alive, underscoring the gross inadequacy of MetLife’s policies and procedures.” Id. 96 Id. According to the Complaint, all Director Defendants attended except for Morrison. Id. 97 Id. ¶ 124. 98 Id. 99 Id. 100 Id. 101 Id. ¶ 125. Id. ¶ 128. “Defendants Sicchitano, Grisé, Kinney, Kelly, Jr., and Kelly, III all served on the 102

Audit Committee and attended the September 26, 2016 meeting where this Internal Auditor’s Report was presented.” Id. ¶ 131.

20 Funding’s … [Annuity Customer Experience] Platform Closeout Implementation

and Administration processes.”103 The Internal Auditor’s Report stated:

[C]ontrol weaknesses were identified over several areas, including contract accuracy, manual certificate mailings, and retirement letter mailings (e.g. age 65 and 70.5). Opportunities exist to enhance existing controls to ensure timely processing of held and suspended payments as well as retirements. Additionally, management should enhance procedures to clearly identify when transaction processing for a contract transfers to the Closeout Administration team.104

The Internal Auditor’s Report set a target date of December 31, 2016 to address the

problem.105 The Audit Committee took no further action regarding the report and

did not follow-up on the identified control weaknesses to see if they had been

remedied.106

According to the Complaint, two other internal MetLife activities indicate that

the Company had the opportunity to address the two-letter notification procedure.

A “valuation system upgrade,” complete by September 2015, revisited policies

regarding “reserve treatment of lives that are deferred past their normal retirement

age (i.e. age 65-70).”107 MetLife did not upgrade the policies for the Pension Risk

103 Id. ¶ 129 (alteration in Complaint). 104 Id. ¶ 130. 105 Id. ¶ 133. 106 Id. 107 Id. ¶ 136.

21 Transfer Business.108 Additionally, no procedure ensured that annuitants “presumed

dead” were sent a proof-of-life request, regardless of whether the annuity contract

required such a request.109

3. MetLife’s Board Committees and Codes of Conduct

Several Board committees were involved in overseeing operations and

making risk evaluations for the Company, including the Audit Committee, the

Compensation Committee, and the Finance & Risk Committee. 110 Each committee

possessed internal formalized codes of conduct that outlined its duties and

responsibilities.111 According to the Plaintiffs, abiding by these codes would have

led the committees to uncover and evaluate the shortcomings in the Pension Risk

Transfer Business.

The Audit Committee “oversees the Company’s compliance with legal and

regulatory requirements.”112 It “reviews with management, the internal auditor and

the independent auditor, the Company’s system of internal control over financial

reporting. . .”113 The Audit Committee’s charter reiterates these directives.114 The

108 Id. 109 Id. ¶ 137. 110 Id. ¶ 58. 111 Id. ¶ 59. 112 Id. ¶ 60. 113 Id. 114 Id. ¶ 61 (according to its charter, the Audit Committee evaluates “the adequacy and effectiveness of the Company’s internal control over financial reporting, including any significant 22 Audit Committee also receives updates from management and the auditors about the

“status of any remediation plans for any material weaknesses and significant

deficiencies in the design and operation of internal control over financial

reporting.”115 It is responsible for discussing internal controls, financial reporting,

and any discrepancies in these areas with both management and the auditors.116

Additionally, the Audit Committee will discuss risk assessment and address material

communications from regulators and government agencies that relate to the

Company’s financial statements.117

The Compensation Committee approves the CEO’s compensation and

evaluates the CEO’s performance in light of compensation objectives.118 It also

approves compensation of other executive officers.119 This involves evaluating

compensation programs to ensure they do not encourage excessive risk-taking.120

deficiencies or material weaknesses in the design or operation of internal control over financial reporting that could adversely affect the Company’s ability to record, process, summarize and report financial information.”). 115 Id. 116 Id. 117 Id. 118 Id. ¶ 63. 119 Id. 120 Id. ¶ 64.

23 The Compensation Committee may seek recoupment of earnings if the employee

engages in misconduct.121

The Finance & Risk Committee oversees risk in all areas of MetLife’s

business.122 This includes financial matters, capital structure, plans, policies, and

strategic actions.123

Several internal codes of conduct at MetLife also govern the Defendants’

behavior. The Director Defendants were under the Director’s Code of Business

Conduct and Ethics, which required reporting “any violations of law or

governmental rule or regulation. . .”124 The Officer Defendants were under

MetLife’s Code of Conduct, which required, among other things, that officers “[b]e

aware of . . . legal and regulatory requirements” and “[d]isclose or raise concerns

about any potential violations of law or policy. . .” 125 Finally, MetLife’s Financial

Management Code of Professional Conduct, which applied to Defendants Kandarian

and Hele, required that they “take personal responsibility for conducting the business

endeavors of MetLife fairly, [and] promote a culture of honesty and accountability.

121 Id. ¶ 65. 122 Id. ¶ 67. 123 Id. 124 Id. ¶¶ 69–70. 125 Id. ¶¶ 71–72.

24 . .”126 This included the responsibility to “provide appropriate disclosures to

stakeholders,” “[c]omply with applicable laws, rules and regulations,” “monitor and

improve, MetLife’s processes to maintain effective internal control over financial

reporting,” and to “seek at all times to present all reasonably available material

information on a timely basis to management and others. . .”127

4. Repercussions from the Pension Risk Transfer Business

The effect of the two-letter notice procedure in the Pension Risk Transfer

Business meant that the letters sometimes failed to reach annuitants, with the result

that MetLife would erroneously mark those annuitants Presumed Dead and release

the funds associated with their retirement into income instead of holding those funds

in reserve assets.128 In short, some funds properly marked as liabilities transformed,

due to the inadequate notice procedures, into assets.129 In December 2017, MetLife

first disclosed these shortcomings in an 8-K, announcing that it would be

implementing new notice procedures that would require strengthening its reserve

assets.130 According to the 8-K, these new procedures could be “material to

[MetLife’s] results of operations.”131 The Company followed up with an investor

126 Id. ¶ 73. 127 Id. 128 Id. ¶ 152. 129 Id. ¶ 153. 130 Id. ¶ 154. 131 Id.

25 conference call, at which Defendant Hele reiterated that the updated outreach

procedures could lead to “material” changes in “results of operations.”132 The Wall

Street Journal published an article addressing the announcement, and it calculated,

based on the information provided in the notice, that the changes could result in

overdue benefits of up to $540 million.133

Litigation ensued. MetLife was the subject of a securities class action in

February 2018 in the Eastern District of New York.134 Also in February 2018, the

NYDFS examined MetLife’s Pension Risk Transfer Business, and in January 2019,

MetLife entered into a “settlement requir[ing] MetLife to pay a $19.75 million fine

to the state and $189 million in restitution to affected retirees.”135 This 2019

settlement agreement listed a paragraph of New York statutory and administrative

laws that the NYDFS asserted MetLife had violated.136 Additionally, in June 2018,

the Enforcement Section of the Massachusetts Securities Division sued MetLife, in

part regarding its Pension Risk Transfer Business procedures, resulting in a payment

132 Id. ¶ 155. 133 Id. ¶ 156. 134 Id. ¶ 141. 135 Id. ¶ 146–47. 136 Id., Ex. A., In re Metropolitan Life Ins. Co., No. 2019-0002-S, Consent Order, ¶ 5, Violations.

26 of $1 million in fines for violation of Massachusetts state laws.137 An SEC inquiry

is ongoing.138

On January 29, 2018, MetLife issued a press release announcing it would

revise previous financials to strengthen its reserves in an amount between $525

million and $575 million, including a $165 million to $195 million impact on its

2017 net income.139 In this press release, MetLife also disclosed the NYDFS

examination and the SEC inquiry.140

In an earnings call—disclosed in a February 2018 8-K—MetLife outlined

steps to remediate the inadequate annuitant contact procedures, which it labeled a

“material weakness.”141 In communications with the public, MetLife expressed that

the Company was “deeply disappointed that we fell short of our own high

standards.”142 On a conference call in February 2018, Kandarian called the

procedures in the Pension Risk Transfer Business an “operational failure that never

should have happened,” and “deeply embarrassing.”143 Kandarian noted on this call

that the “operational failure” had been ongoing for approximately twenty-five

137 Id. ¶¶ 143–45. 138 Id. ¶ 148. 139 Id. ¶ 157. 140 Id. 141 Id. ¶ 159. 142 Id. ¶ 161. 143 Id. ¶ 164.

27 years.144 The superintendent of the NYDFS noted that MetLife’s ongoing failure

was a failure “to adapt its protocols for paying claims in the modern era of worker

mobility: ‘What used to be standard protocol for finding retirees who are owed

benefits is no longer sufficient.’”145

CFO Hele retired in May 2018—according to the Plaintiffs, his retirement was

in response to these events.146 Internal documents show the Company estimates

paying around $50 million in legal and consulting fees for legal and corrective

measures.147 In its 2017 10-K, released in March 2018, MetLife reiterated that it had

“identified material weaknesses in MetLife, Inc.’s internal control over financial

reporting related to the administrative and accounting practices of certain [RIS]

group annuity reserves,” and, as a result, “MetLife, Inc. has not maintained effective

internal control over financial reporting as of December 31, 2017[.]” 148 These

material weaknesses implied that MetLife’s previous statements, dating back for

years, that its reserve funds were sufficient and its financials accurately stated, were

in fact inaccurate.149

144 Id. ¶ 165. 145 Id. ¶ 170. 146 Id. ¶ 173. 147 Id. ¶ 174. 148 Id. ¶ 176. This included overstating the Company’s revenue and income. Id. ¶ 177. 149 Id. ¶¶ 181–87.

28 In total, the inadequate procedures in the Pension Risk Transfer Business led

to the nonpayment of retirement benefits for 13,500 living retirees, or around 2.25%

of the 600,000 retirees whose pensions MetLife managed.150 MetLife presumed

these 13,500 annuitants dead and released reserve funds associated with their

pension benefits into income, resulting in “an approximately $510 million

overstatement of MetLife’s profits.”151

The Plaintiffs allege that these events constituted a breach of the Defendants’

fiduciary duties, resulting in both reputational and monetary damages to the

Company.152 The Plaintiffs also plead demand futility, arguing that a majority of the

Demand Board are “interested” in the litigation solely, as I read the Complaint,

“because they face a substantial likelihood of liability for their role in MetLife’s

improper misconduct.”153 In addition to claims of breach of fiduciary duty, the

Plaintiffs allege unjust enrichment against all Defendants and corporate waste

against the Director Defendants.154

150 Id. ¶ 179. 151 Id. 152 Id. ¶¶ 195–211. 153 See id. ¶¶ 212–30. 154 Id. ¶¶ 249–74.

29 C. Procedural History

Prior to consolidation, individual plaintiff groups filed separate books and

records actions under 8 Del. C. § 220 in the first half of 2018.155 The resulting

fiduciary actions were consolidated on August 16, 2019.156 The Plaintiffs filed the

consolidated Complaint on September 9, 2019.157 The Defendants filed their Motion

to Dismiss on October 11, 2019.158 After briefing completed, I heard argument on

May 5, 2020, after which I received supplemental submissions from the parties on

May 11, 2020.159 I considered the matter fully submitted at that time.

II. LEGAL STANDARDS

The Plaintiffs have filed a derivative complaint on behalf of the Company.

Under Delaware law, “[t]he business and affairs of every corporation . . . shall be

managed by or under the direction of a board of directors. . .” 160 As such, it is

typically the board’s prerogative to determine whether the corporation initiates and

maintains a lawsuit.161 In order “to displace the board’s authority over a litigation

155 Id. ¶¶ 188–91. The Plaintiffs allege the books and records produced by the Company were inadequate. Id. ¶¶ 192–94. 156 Order for Consolidation of Cases, D.I. 21. The original cases were Lifschitz v. Kandarian, et al., C.A. No. 2019-0452-SG and Felt v. Daniel, et al., C.A. No. 2019-0594-SG. 157 Consolidated Verified Stockholder Derivative Compl., D.I. 24. 158 Defs.’ Mot. to Dismiss Consolidated Verified Stockholder Derivative Compl., D.I. 32. 159 D.I. 45. 160 8 Del. C. § 141(a). 161 Hughes v. Hu, 2020 WL 1987029, at *9 (Del. Ch. Apr. 27, 2020) (“Directors of Delaware corporations derive their managerial decision making power, which encompasses decisions 30 asset and assert the corporation’s claim,” a derivative plaintiff must do one of two

things.162 Either the plaintiff may make a pre-suit demand on the board, requesting

that it bring the action on behalf of the company, then demonstrate that the demand

was wrongfully refused by the board, or the plaintiff may plead that such a demand

would be futile because a majority of “the directors are incapable of making an

impartial decision regarding such litigation.”163

Where a plaintiff pleads demand futility, Court of Chancery Rule 23.1

requires the plaintiff to “allege with particularity . . . the reasons for the plaintiff’s

failure to obtain the action or for not making the effort [of placing a demand on the

board].”164 To plead demand futility, this Court requires “particularized factual

allegations” creating a “reasonable doubt that, as of the time the complaint is filed,

the board of directors could have properly exercised its independent and

disinterested business judgment in responding to a demand.”165 Thus, “the pleading

burden imposed by Rule 23.1 . . . is more onerous than that demanded by Rule

whether to initiate, or refrain from entering, litigation, from 8 Del. C. § 141(a).” (quoting Zapata Corp. v. Maldonado, 430 A.2d 779, 782 (Del. 1981))). 162 Id. at *10 (citing Aronson v. Lewis, 473 A.2d 805, 811 (Del. 1984)). 163 Rales v. Blasband, 634 A.2d 927, 932 (Del. 1993). 164 Ct. Ch. R. 23.1. 165 Rales, 634 A.2d at 934.

31 12(b)(6).”166 “Though a complaint may plead a ‘conceivable’ allegation that would

survive a motion to dismiss under Rule 12(b)(6), ‘vague allegations are . . .

insufficient to withstand a motion to dismiss pursuant to Rule 23.1.’”167 In sum,

while a derivative plaintiff “need not plead evidence,” she “must comply with

stringent requirements of factual particularity that differ substantially from . . .

permissive notice pleadings.”168 In meeting the pleading requirements under both

rules, however, the plaintiff is entitled to all reasonable inferences in her favor.

Here, the Plaintiffs plead demand futility, arguing that a majority of the

members of the Demand Board169 face a substantial likelihood of liability regarding

these matters and are therefore incapable of making the decision as to whether the

Company should pursue the litigation.170 The Plaintiffs’ underlying theory of

liability is a breach of fiduciary duty claim under In re Caremark Int’l Inc.,171 based

166 In re Goldman Sachs Grp., Inc. S’holder Litig., 2011 WL 4826104, at *6 (Del. Ch. Oct. 12, 2011) (internal alterations omitted) (quoting McPadden v. Sidhu, 964 A.2d 1262, 1269 (Del. Ch. 2008)). 167 Id. (quoting McPadden, 964 A.2d at 1269). As explained in In re Goldman Sachs Grp., Inc., “[t]his difference reflects the divergent reasons for the two rules: Rule 12(b)(6) is designed to ensure a decision on the merits of any potentially valid claim, excluding only clearly meritless claims; Rule 23.1 is designed to vindicate the authority of the corporate board, except in those cases where the board will not or (because of conflicts) cannot exercise its judgment in the interest of the corporation.” Id. 168 Hughes v. Hu, 2020 WL 1987029, at *10 (Del. Ch. Apr. 27, 2020) (citing Aronson v. Lewis, 473 A.2d 805, 816 (Del. 1984); Brehm v. Eisner, 746 A.2d 244, 254 (Del. 2000)). 169 Defined in the factual recitation as Defendants Grisé, Gutierrez, Herzog, Hubbard, Kelly III, Kennard, Kilts, Kinney, Morrison and non-parties Hassell, McKenzie, and Khalaf. 170 Compl., ¶¶ 212–30. 171 698 A.2d 959 (Del. Ch. 1996).

32 on the Board’s lack of oversight, as well as claims for unjust enrichment and

corporate waste secondary to a finding of a Caremark violation.172 Because the

Plaintiffs’ allegations center on the Board’s failure to act (rather than an affirmative

Board decision), the demand futility test in Rales v. Blasband, described above,

applies.173 Under the Rales test, to plead that directors are interested in the litigation

in a way that deprives them of independence, the Plaintiffs must allege facts showing

that a majority of directors on the Demand Board face a “substantial likelihood of

personal liability” in the action.174 Mere “potential directorial liability is insufficient

to excuse demand.”175 Of course, the fact that wrongdoing is alleged against the

directors themselves or that directors are named defendants in an action does not by

itself deprive them of independence;176 otherwise, compliance with Rule 23.1 in

derivative pleadings would be self-proving.

172 In other words, the Plaintiffs allege that where salaries or bonuses are paid to fiduciaries who fail to act in compliance with Caremark obligations, that remuneration constitutes unjust enrichment or waste. 173 See Hughes, 2020 WL 1987029, at *13 n.3 (collecting Delaware cases applying the Rales test when the underlying allegations against the board are based on lack of oversight). The parties agree that the Rales test applies, rather than the Aronson test, which deals with a subset of situations in which an act or decision by the demand board is at issue. Though not at issue here, Vice Chancellor Laster conducted a detailed examination of the interaction between the Rales and Aronson tests in Hughes, 2020 WL 1987029, at *9–13. 174 Rales v. Blasband, 634 A.2d 927, 936 (Del. 1993). 175 In re Goldman Sachs Grp., Inc. S’holder Litig., 2011 WL 4826104, at *18 (Del. Ch. Oct. 12, 2011). 176 See Hartsel v. Vanguard Grp., Inc., 2011 WL 2421003, at *27 (Del. Ch. June 15, 2011); Jacobs v. Yang, 2004 WL 1728521, at *6 n.31 (Del. Ch. Aug. 2, 2004).

33 III. ANALYSIS

The Defendants have moved to dismiss on two grounds: first, under Rule 23.1,

arguing that demand should have been made on the Board; and second, under Rule

12(b)(6), arguing that even if demand were excused, the Plaintiffs fail to state a claim

upon which relief can be granted. “Courts assess demand futility on a claim-by-

claim basis.”177 I examine the Rule 23.1 basis for each claim below. Finding that

analysis dispositive, I need not consider the Rule 12(b)(6) basis for dismissal.178

Below, I address, with respect to each Count, whether the Complaint contains

sufficient specific allegations from which I may infer a substantial likelihood of

liability on the part of a majority of the Demand Board, thus excusing demand.

A. Counts I and II: Breach of Fiduciary Duties

Under Caremark, “[t]he board of a Delaware corporation has a fiduciary

obligation to adopt internal information and reporting systems that are ‘reasonably

designed to provide to senior management and to the board itself timely, accurate

information sufficient to allow management and the board, each within its scope, to

reach informed judgments concerning both the corporation’s compliance with law

177 Kandell ex rel FXCM, Inc. v. Niv, 2017 WL 4334149, at *11 (Del. Ch. Sept. 29, 2017). 178 See In re Dow Chem. Co. Derivative Litig., 2010 WL 66769, at *1 n.1 (Del. Ch. Jan. 11, 2010) (“demand futility under Rule 23.1 is logically the first issue for all derivative claims and if plaintiffs cannot succeed under the heightened pleading requirements of Rule 23.1 ... there is no need to proceed to an analysis of the merits of the claim under Rule 12(b)(6).”) (internal citations and alterations omitted).

34 and its business performance.’”179 For Rule 23.1 purposes, Caremark liability is a

substantial likelihood for directors if the allegations of the complaint establish that

“(a) the directors utterly failed to implement any reporting or information system or

controls; or (b) having implemented such a system or controls, consciously failed to

monitor or oversee its operations thus disabling themselves from being informed of

risks or problems requiring their attention.”180 These are typically described as the

two “prongs” of a Caremark claim.

In Count I, the Plaintiffs allege the Director Defendants breached their

fiduciary duties by “knowingly or intentionally failing or refusing to implement

regulator-mandated remedial measures [prescribed for other business lines in the

2012 RSA] to MetLife’s pension risk transfer business and knowingly or

intentionally failing to put in place and/or monitor a reasonable system and controls

to ensure the identification of unresponsive and missing group annuity annuitants

and pension beneficiaries.”181 The Plaintiffs also allege that the Board had “actual

or constructive knowledge that MetLife’s internal controls were inadequate” and

“chose to do nothing about these deficiencies.”182 According to the Plaintiffs, the

179 In re China Agritech, Inc. S’holder Derivative Litig., 2013 WL 2181514, at *18 (Del. Ch. May 21, 2013) (quoting In re Caremark Int’l Inc. Derivative Litig., 698 A.2d 959, 970 (Del. Ch. 1996)). 180 Hughes v. Hu, 2020 WL 1987029, at *14 (Del. Ch. Apr. 27, 2020) (quoting Stone ex rel. AmSouth Bancorporation v. Ritter, 911 A.2d 362, 370 (Del. 2006)). 181 Compl., ¶ 233. 182 Id. ¶ 234.

35 Board “consciously and in bad faith chose not to cause the Company to act in

accordance with positive law.”183 The Plaintiffs allege that a majority of the Demand

Board—seven members—served at the time of the 2012 RSA (or joined shortly

thereafter during its implementation period) and so lack independence.184 The

Plaintiffs ultimately allege that a total of nine members of the Demand Board also

lack independence due to their service on the Audit or Finance and Risk Committees

at the relevant times.185

The language from the Complaint quoted above is phrased broadly and

appears aimed at capturing both prongs of a Caremark claim. Thus, the Plaintiffs

allege both that the Director Defendants failed to put a system of internal controls in

place, and that they consciously disregarded evidence of corporate violation of

positive law or consciously ignored the systematic inadequacies that kept such

evidence from reaching them. Briefing and argument helped clarify the Plaintiffs’

183 Id. ¶ 235. 184 Id. ¶ 213. These members are Kandarian, Grisé, Gutierrez, Hubbard, Kinney, Kennard, and Kilts. Id. The Plaintiffs allege that “[a]t the time Plaintiff Lifschitz’s complaint was filed, the Board was comprised of eleven directors: Grisé, Gutierrez, Hassell, Herzog, Hubbard, Kelly, III, Kennard, Khalaf (CEO), Kilts, Kinney, McKenzie and Morrison.” Id. By my count, this lists twelve directors, not eleven. The Plaintiffs then allege that “More than half of the Board (7 out of 12 members) were members of the MetLife Board at the time of the 2012 RSA or shortly thereafter,” and list Kandarian among that 7-member majority, even though they do not allege— because he retired in April 2019—that Kandarian was a member of the Demand Board. 185 Id. The Plaintiffs implicate Director Defendants Herzog and Kelly, III in addition to the seven (or six) Director Defendants serving on the Board at the time of the RSA or joining shortly thereafter. Id. ¶ 222.

36 position, as they wisely focused solely on the second prong of Caremark.186 To the

extent the Plaintiffs attempt to put forward a claim under Caremark’s first prong, I

find that attempt fails.187 It is clear from the Complaint that MetLife had an extensive

network of internal controls.188 The Plaintiffs claim here is really that the Board

consciously failed to oversee and implement controls they knew were necessary to

regulatory compliance, by failing to ensure that the Company applied the “Thorough

Search” standard, to which it had agreed in the 2012 RSA, to the Pension Risk

Transfer Business.189 This bad-faith failure to act, per the Plaintiffs, led the

186 See Pls.’ Answering Br., at 24 (“Under the second prong of Caremark, [the Directors’] conscious disregard of those red flags amounts to non-exculpated bad faith breach of their fiduciary duties of oversight and loyalty.”). Count II of the Complaint brings breach of fiduciary duty claims against the Officer Defendants. Compl., ¶¶ 240–48. I consider the Board’s ability to consider Count II subordinate to Count I. The Plaintiffs do not argue that any Board members were beholden to management in a way that would disable them from evaluating those claims, assuming that they are not themselves likely subject to liability. 187 In their briefing, the Plaintiffs sometimes blend the language of the two Caremark prongs, arguing that “[w]hen various matters of legal and regulatory importance arose, but no information was flowing to the Board or its Committees, the Director Defendants should have known that there were sustained and systematic failures of their oversight systems and controls.” Pls.’ Answering Br., at 44. But the standard for a Caremark claim through a systematic failure to implement controls is that the board “utterly failed to implement any reporting or information system or controls.” Stone ex rel. AmSouth Bancorporation v. Ritter, 911 A.2d 362, 370 (Del. 2006). 188 The Plaintiffs allege that MetLife has an Audit Committee, as well as a Finance and Risk Committee, and further alleges that these committees meet regularly (indeed, frequently), that they have internal codes of conduct, and that the Audit Committee receives reports from MetLife’s internal auditor. Compl., ¶¶ 60–62, 67–68, 128–33. Moreover, the Plaintiffs specifically allege that other “red flags” such as the Pilot Program’s results, reached the Board level through internal reporting systems. Compl., ¶ 122. Thus, to the extent the Plaintiffs allege the Board utterly failed to implement a reporting system, such an allegation is contradicted by other specific allegations in the Complaint. 189 The Plaintiffs chiefly allege an oversight claim. However, some language in the Complaint suggests the Plaintiffs are alleging the Director Defendants purposefully caused the Company to violate the law. “Where directors intentionally cause their corporation to violate positive law, they 37 Company to violate various regulatory provision via its conduct of the Pension Risk

Transfer Business.190

Director liability for an oversight claim under Caremark requires bad faith on

the part of the directors (where, as here, they are exculpated from liability for breach

of care).191 Inaction amounting to bad faith requires that “the directors knew that

they were not discharging their fiduciary obligations.”192 As is now “oft-repeated .

. . a Caremark claim is among the hardest to plead and prove.” 193 Regarding the

second Caremark prong—at issue here—a plaintiff can establish a board’s bad faith

by showing that it saw red flags related to compliance with law and consciously

disregarded those flags.194 This Court has noted that “red flags are only useful when

act in bad faith.” Kandell ex rel FXCM, Inc. v. Niv, 2017 WL 4334149 (Del. Ch. Sept. 29, 2017) (quoting In re Massey Energy Co., 2011 WL 2176479, at *20 (Del. Ch. May 31, 2011)). The Complaint alleges the “Board . . . turned a blind eye to management’s annuity nonpayment scheme.” Compl., ¶ 16. The Plaintiffs’ allegation that comes the closest to such a “scheme” is the allegation that I must infer that the Board specifically approved MetLife’s carving out the Pension Risk Transfer Business from the “Thorough Search” required for other lines of business by the 2012 RSA. Id. ¶ 113. If this is the Plaintiffs’ contention—that in 2012 the Board acted specifically to carve out the Pension Risk Transfer Business from a regulatory settlement so that MetLife could continue acting illegally in that line of business—there are no specific factual allegations supporting such a conclusion 190 As I understand the Complaint, the Plaintiffs charge the Defendant Directors with permitting the Company to violate regulatory strictures, that is, to violate positive law. The Plaintiffs do not appear to argue that Caremark can apply here to bad-faith failure to oversee business risk alone. 191 Stone ex rel. AmSouth Bancorporation v. Ritter, 911 A.2d 362, 370 (Del. 2006). 192 Id. (emphasis added). 193 In re Clovis Oncology, Inc. Derivative Litig., 2019 WL 4850188, at *12 (Del. Ch. Oct. 1, 2019). 194 Id. at *13 (citing South v. Baker, 62 A.3d 1, 16–17 (Del. Ch. 2012); In re Goldman Sachs Grp., Inc. S’holder Litig., 2011 WL 4826104, at *19 (Del. Ch. Oct. 12, 2011).

38 they are either waived in one’s face or displayed so that they are visible to the careful

observer,” keeping in mind that “the careful observer is one whose gaze is fixed on

the company’s mission critical regulatory issues.”195

The Plaintiffs run seven different “red flags” up the Caremark flagpole in the

Complaint and in briefing. At oral argument, however, they contained their

presentation to two of these red flags: the 2012 RSA and the 2016 Internal Auditor’s

Report.196 I agree with the Plaintiffs’ flag-parsing, and I focus chiefly on those two.

However, mindful of the potential that notice of wrongdoing or lack of control

communicated to the Board ought to be viewed cumulatively in order to assess

potential bad faith, I group six of the red flag incidents into two related groups, and

view them through a cumulative lens.197

195 Clovis, 2019 WL 4850188, at *13 (quoting Wood v. Baum, 953 A.2d 136, 143 (Del. 2008); In re Citigroup Inc. S’holders Litig., 2003 WL 21384599, at *2 (Del. Ch. June 5, 2003), aff’d sub nom. Rabinovitz v. Shapiro, 839 A.2d 666 (Del. 2003)). 196 See Tr. of 5.5.20 Telephonic Oral Argument on Defs.’ Mot. to Dismiss (“Oral Argument Tr.”), at 33:8–15 (“We’re going to focus on two of the red flags discussed in the complaint today.”). 197 The remaining purported “red flag” the Plaintiffs cite is an arbitration proceeding against the Company, the “Toland litigation.” The Plaintiffs allege that an annuitant, Mr. Toland, was entitled to pension payments for many years after he retired, but MetLife did not pay annuities until one year before his death, presumably because the two-letter notification system failed. Compl., ¶ 124. His estate brought FINRA arbitration against MetLife. Id. The Plaintiffs appear to offer this “red flag” more to put a human face on the problem than to suggest oversight liability. There is no allegation that the arbitration with this single annuitant’s estate reached the board level, nor is there reason to infer that it likely did so. The existence of this litigation does nothing to indicate director inaction in the face of a known duty. 39 1. “Red Flags” 1-4 (Regulatory Action and the 2012 RSA)

The Plaintiffs’ first four “red flags” relate to regulatory action and subsequent

securities litigation directed at MetLife in 2011 and 2012. These are fully described

above; I restate the events briefly here. In 2011, MetLife executives testified at

investigative hearings before state regulators related to life insurance and annuity

practices.198 That investigative action asked specific questions about MetLife’s use

of the Social Security “death list,” the SSA-DMF.199 In 2011, the NYDFS issued

guidance to MetLife and other insurers that they should use the SSA-DMF to

actively search for death benefit claims.200 At the request of the NYDFS, MetLife

conducted such a search and discovered $112 million in unpaid death benefits.201

These investigations and the regulatory guidance culminated in MetLife’s 2012 RSA

with multiple states’ insurance regulators, under which it agreed to pay $40 million

to the states, distribute $438 million over 17 years for unpaid benefits, and

implement policy changes in its death benefit notice procedures.202 Those policy

changes required a Thorough Search, under which MetLife “began using certified

mail, electronic mail, the telephone, SSA-DMF, and online databases to identify and

198 Id. ¶¶ 99–102. 199 Id. ¶¶ 102, 104. 200 Id. ¶ 94. 201 Id. ¶ 95. 202 Id. ¶¶ 107, 110–13.

40 contact annuitants.”203 In the RSA, MetLife denied any legal violations.204

Afterward, four members of the Demand Board were named in a class action

securities lawsuit, apparently based on the facts underlying the RSA.205

Nothing in the investigations or the RSA put those who became aware of them

on direct notice of deficiencies in the Pension Risk Transfer Business and its tracking

of annuitants. That business was an old line at MetLife, and the two-letter notice

system had been in place for years. Meanwhile, MetLife was also in the life

insurance business, and was allegedly paying death benefits only when informed (by

estate administrators or others) that an insured had died. Through the RSA, the

NYDFS ensured that MetLife would take an active role, by monitoring the SSA-

DMF and other means, in finding (and paying) decedent beneficiaries going forward.

The Plaintiffs consider—rightly, in my view—that life insurance and Pension

Risk annuities are “analogous” lines of business within MetLife. Their argument is

that anyone familiar with the RSA would conclude that it would also be prudent to

use the SSA-DMF and other enhanced methods of contact like email, telephone, and

online search tools as a negative check on the presumption that annuitants not

203 Id. ¶ 113. 204 See RSA, Recitals. 205 Compl., ¶¶ 120, 217–18.

41 responding to the two notice letters were dead.206 That it would occur to a prudent

person that the SSA-DMF and updated contact procedures would be useful in that

regard is plausible. As the Plaintiffs point out, the Superintendent of the NYDFS

stated that use of the tools at hand was important in light of enhanced technology

and increased residential mobility on the part of pensioners: “What used to be

standard protocol for finding retirees who are owed benefits is no longer

sufficient.”207 But the failure to recognize that use of the SSA-DMF in one way in

one line of business made it wise to use it differently in another, and the failure to

modernize other administrative contact procedures, even if those failures imply

unwise or imprudent management, does not thereby also imply bad faith. I cannot

assume the use of the SSA-DMF as a negative check on a death assumption for

pension annuities is so strongly suggested by its use to identify life insurance

beneficiaries that failure to make that logical leap is an indicator of bad faith.

Plaintiffs ask me to impute to the Defendant Directors the knowledge that the state

regulators believed that it was unlawful to avoid prompt payment of death benefits

by ignoring the SSA-DMF and other opportunities to contact beneficiaries. Even if

I do so, that would not imply that failure to use the SSA-DMF and those other

206 See Pls.’ Answering Br., at 12 (“While [the regulatory proceedings] focused on life insurance practices, these are the exact practices for which MetLife is now facing substantial liabilities in its RIS Unit”; therefore, MetLife should have “taken steps to ensure [it] was complying with that guidance across all of its insurance annuity and retained asset accounts, including the RIS Unit.”). 207 Id. ¶ 170.

42 modern contact methods as a check on assumptions of death in the Pension Risk

Transfer Business was so clearly unlawful that a failure to ensure its application

there amounts to bad faith.208

The other problem with relying on the RSA and the predicate investigations

to serve as red flags displayed before the Director Defendants is that, even if the

epistemological leap just referenced were appropriate, there are insufficient

allegations from which I may infer that knowledge of such was presented to the

Director Defendants themselves. The Complaint does not allege that the full Board

received notice of any of the regulatory actions at the time. The Plaintiffs here, to

their credit, made full use of Section 220 to inform their Complaint. In their briefing,

the Plaintiffs state that “the 220 Documents, including Board minutes, are silent”

about whether these regulatory actions “reached the Board’s attention.”209 In the

absence of specific facts indicating it was brought to the Board, the Plaintiffs rely on

a theory of “constructive knowledge,” alleging that it is “highly likely” the

regulatory actions made it to the Board given their significant legal nature.210 This

208 See Kandell ex rel FXCM, Inc. v. Niv, 2017 WL 4334149, at *17 (Del. Ch. Sept. 29, 2017) (finding that it would be “perverse to hold directors responsible for knowledge of every regulation or law that might impact their entity, or for every policy undertaken by corporate employees; that is the basis for the scienter requirement and the focus on purported red flags implying director knowledge.”). 209 Pls.’ Answering Br., at 39. Compl., ¶¶ 105, 113; see Pls.’ Answering Br., at 39–45 (describing theory of “Constructive 210

Knowledge of . . . Red Flags”).

43 Court has generally rejected constructive knowledge of unlawful conduct as a theory

in demand futility cases.211 Additionally, the Plaintiffs put great weight on the

Company’s codes of conduct and the Board committee charters to argue that various

directors should have had knowledge or should have reported to the full Board, based

on their tasked oversight. “As numerous Delaware decisions make clear, an

allegation that the underlying cause of a corporate trauma falls within the delegated

authority of a board committee does not support an inference that the directors on

that committee knew of and consciously disregarded the problem for purposes of

Rule 23.1.”212

In contrast to these constructive or “should-have” theories of knowledge, the

Plaintiffs also allege that four members of the Demand Board were named

defendants in a New York federal class action that concerned the same issues as the

regulatory actions.213 Being named a defendant in an analogous action would

211 See Horman v. Abney, 2017 WL 242571, at *7 (Del. Ch. Jan. 19, 2017) (“Delaware courts routinely reject the conclusory allegation that because illegal behavior occurred, internal controls must have been deficient, and the board must have known so.” (quoting Desimone v. Barrows, 924 A.2d 908, 940 (Del. Ch. 2007))). 212 South v. Baker, 62 A.3d 1, 17 (Del. Ch. 2012) (citing Wood v. Baum, 953 A.2d 136, 142 (Del. 2008); In re Goldman Sachs Grp., Inc. S’holder Litig., 2011 WL 4826104, at *22–23 (Del. Ch. Oct. 12, 2011); In re Citigroup Inc. S’holder Derivative Litig., 964 A.2d 106, 126–28 (Del. Ch. 2009); Rattner v. Bidzos, 2003 WL 22284323, at *12–13 (Del. Ch. Oct. 7, 2003); Desimone, 924 A.2d at 938). 213 Compl., ¶¶ 120, 217–18. This includes Director Defendants Kandarian, Grisé, Kilts, Hubbard, and Kinney, all of whom except Kandarian were on the Demand Board. Id. ¶ 216.

44 provide directors with notice.214 It is therefore reasonable to infer that four

directors—a minority—on the Demand Board had actual knowledge of the

underlying regulatory issues. The Plaintiffs specifically argue, however, that the

implicated directors never made a report of this to the full Board.215

In the absence of specific factual allegations, as required under Rule 23.1, the

Plaintiffs require too many attenuated inferences to traverse from regulatory

guidance and settlements on the part of the Company, to bad faith on the part of any

director with regard to the Pension Risk Transfer Business. First, I would have to

infer that a majority of the Board had actual notice of the regulatory actions, when

the alleged facts only indicate that four members of the Demand Board had notice.

Then, I would have to infer that the Board was aware of positive law violations, or

that inaction would permit such violations, despite the fact that the regulatory

guidance does not point to a positive law violation, and that MetLife specifically

denied such violations in the RSA. After this, I would have to make the inference

that the Board took this knowledge of regulatory action and positive law violation

and understood that the same infirmities could be present in “administrative

214 See In re Fitbit, Inc. S’holder Derivative Litig., 2018 WL 6587159, at *16 (Del. Ch. Dec. 14, 2018), aff’d sub nom. Fitbit, Inc. v. Agyapong, 202 A.3d 511 (Del. 2019) (“Defendants’ exposure in the federal Securities Action is also a relevant factor in the Rales analysis.”). 215 Pls.’ Answering Br., at 38–39 (“When they were named as defendants in that case in 2012 . . . they, or general counsel, should have alerted the rest of the Board that the Company and its directors and officers faced a substantial likelihood of personal liability for the unlawful RIS conduct that was afoot . . . [i]t does not appear that this happened.” (internal citations omitted)).

45 procedures in an analogous line of business.”216 Then, finally, I would have to infer

from the absence of reform to these procedures in the “analogous line of business”

that the Board in bad faith ignored the red flags.

Such a line of inferences cannot not hold up under the demanding Rule 23.1

analysis, which requires specific factual allegations in order to draw an inference of

bad faith on the part of directors. “Demand will be excused only where the facts

alleged, together with reasonable inferences therefrom, if true make it substantially

likely that any illegality on the part of the Company arose from the directors’ bad

faith.”217 Here, what the Plaintiffs have alleged supports an inference of failure of

prudence on the part of the Defendants; and a lack of imagination, perhaps, sufficient

to understand the need to reform outworn administrative practices in one line of

business given similar deficiencies in another line. I cannot, however, draw the

inference that the regulatory actions were red flags that any director, assuming she

had notice, consciously disregarded in bad faith. Therefore, the regulatory actions

cannot serve as a basis for a substantial likelihood of liability.

216 See Compl., ¶ 118. 217 Kandell ex rel FXCM, Inc. v. Niv, 2017 WL 4334149, at *2 (Del. Ch. Sept. 29, 2017).

46 2. “Red Flag” 7 (The Internal Auditor’s Report) and “Red Flag” 5 (The Department of Labor Investigation and MetLife’s Pilot Program)

The second group of purported “red flags” include the allegation that in

September 2016, MetLife’s Chief Auditor presented the Audit Committee with the

Internal Auditor’s Report.218 That report stated:

[C]ontrol weaknesses were identified over several areas, including contract accuracy, manual certificate mailings, and retirement letter mailings (e.g. age 65 and 70.5). Opportunities exist to enhance existing controls to ensure timely processing of held and suspended payments as well as retirements. Additionally, management should enhance procedures to clearly identify when transaction processing for a contract transfers to the Closeout Administration team. 219

The Internal Auditor’s Report set a year-end target date to address the “control

weaknesses.”220 The Audit Committee did not follow up, and there is no indication

that the Report was brought to the attention of the Board.221 Three members of the

Demand Board were present at the Audit Committee meeting and reviewed the

Internal Auditor’s Report.222

218 Compl., ¶ 128. 219 Id. ¶ 130. 220 Id. ¶ 132. 221 See id. ¶ 133 (“based on the minutes produced in response to the 220 Demands, the Audit Committee . . . took no further action regarding the identified deficiency.”); Pls.’ Answering Br., at 35 (“There is no evidence that the Audit Committee reported these control weakness findings to the full Board.”). 222 Id. ¶ 131. “Director Defendants Sicchitano, Grisé, Kinney, Kelly, Jr., and Kelly, III” were present. Id. Of these five, three—Grisé, Kinney, and Kelly, III—are on the Demand Board.

47 The Complaint also alleges that, around the same time period as the Internal

Auditor’s Report, the United States Department of Labor opened an investigation

into pensioners’ reporting that pensions were going unpaid, and that MetLife

responded to the investigation by creating a “Pilot Program” for the Pension Risk

Transfer Business.223 The Pilot Program eventually showed that the two-letter

notification system was inadequate, and proposed new methods to identify and pay

annuitants.224 The Board reviewed these findings in January 2018.225 By that point,

MetLife had publicly announced (a month before, in December 2017), the

shortcomings in its Pension Risk Transfer Business.226 Within a month of the

Board’s review of the Pilot Program, the Company announced it would revise

earnings, issued public apologies, and undertook remedial measures.227 Clearly, the

Board had notice of the DOL investigation and the Pilot Program in January 2018,

and MetLife identified, disclosed, and responded to the problem.

To recapitulate, several pertinent things occurred shortly before the time

MetLife filed the Form 8-K identifying weaknesses in its recognition of and payment

to Pension Risk Transfer annuitants, in late 2017. In September of the prior year,

223 Id. ¶¶ 121, 123. 224 Id. ¶ 122. 225 Id. 226 Id. ¶ 154. 227 Id. ¶¶ 154, 157, 161, 164.

48 the internal auditor informed the Audit Committee, with three members of the

MetLife Demand Board, about control weaknesses in the Pension Risk Transfer

Business, with a target to address the weaknesses by the end of 2016. The Audit

Committee failed to follow up thereafter. About this time, Company management

became aware of DOL’s investigation of pensioners’ complaints, and the Company

set up a “Pilot Program” to address ways of tracking and paying Pension Risk

Transfer annuitants. That Pilot Program demonstrated the insufficiency of the two-

letter notice system. The Board reviewed the Pilot Program’s finding in January,

2018, just after the Company filed the form 8-K identifying material weakness in the

Pension Risk Transfer Business. A few weeks later, the Company revised earnings

and addressed the problems. Then, in February 2018, the NYDFS brought a

regulatory action that resulted in the 2019 settlement.

The question before me is not whether the Director Defendants could have

saved the Company from embarrassment, fines and securities litigation had the

Board been informed of weaknesses at the time of the Internal Auditors’ Report, and

taken prompt action. I can infer that those things would have happened. My analysis

must be whether, given the scenario alleged in the Complaint and described above,

I may conclude a substantial likelihood of liability on the Directors’ part. That

likelihood, in turn, must depend on the Director Defendants acting in conscious

disregard of their duties. A failure to undertake immediate remediation of a reported

49 defect, even where immediate action would be wise, is not evidence of bad faith

unless it implies a need to act so clear that to ignore it implies a conscious disregard

of duty. Such a failure, obviously, can only occur with knowledge of the defect. In

the scenario described above, drawing all reasonable inference in favor of the

Plaintiffs, the implication of bad faith is absent.228

In sum, the Plaintiffs do not offer specific factual allegations from which I can

reasonably infer that the Board was aware of red flags and ignored them in bad faith.

As a result, the allegations do not support a reasonable inference of Caremark

liability. Given that the Board does not face a substantial likelihood of liability from

Counts I and II, it is capable of reviewing those claims on behalf of the Company.229

Thus, the Plaintiffs’ failure to make a demand on the Board is fatal to these claims,

and they must be dismissed.

228 The allegation closest to stating indifference in the face of a duty to act is that the Audit Committee failed to ensure that the remediation called for in the Internal Auditor’s Report was implemented, and its failure to bring the Internal Auditor’s Report to the attention of the full board. Only three members of the Demand Board were present at the delivery of the Internal Auditor’s Report to the Audit Committee, and so even to the extent that presentation of the Report implied a duty to act, failure to comply would taint only a minority of the Demand Board. 229 As noted previously, the Plaintiffs do not allege that any Director Defendant lacked independence from management, and so the Board could have brought its business judgment to bear in review of the allegations of bad faith brought against MetLife officers in Count II.

50 B. Counts III through V: Unjust Enrichment and Waste

In Counts III and IV of the Complaint, the Plaintiffs assert unjust enrichment

claims against the Director and Officer Defendants.230 Count V is related; it charges

the Director Defendants with waste in failing to claw back compensation paid

unjustly to the Officer Defendants. The Plaintiffs allegation in Count III (against the

Director Defendants) is that the Director Defendants, having failed in their oversight

duties, nonetheless “were awarded lavish compensation that did not account for their

roles in subjecting the Company” to penalties and lawsuits related to the Pension

Risk Transfer Business.231 In other words, the unjust enrichment claim against the

Director Defendants is premised on the unjustness of compensation in light of the

Director Defendants’ bad-faith failure of oversight. Since I have found that the

Plaintiffs have failed to establish the likelihood of the latter, I must conclude that the

former claim is likely to fail as well. In similar circumstances, this Court has found

that “[t]he unjust enrichment claim . . . is thus properly conceived as a form of

additional damages dependent on the plaintiff proving the oversight claim. . .”232 To

evaluate a demand to bring these unjust enrichment claims, the Board would have to

first evaluate the validity of the underlying oversight claims. A Rule 23.1 analysis

230 Compl., ¶¶ 249–63. 231 Id. ¶¶ 249–52. 232 Hughes v. Hu, 2020 WL 1987029, at *17 (Del. Ch. Apr. 27, 2020).

51 for the unjust enrichment claim “thus necessarily treads the same path as the demand

futility analysis . . . implicate[s] the same conduct,” and, therefore, obtains the same

result.233 Given my finding above that the Demand Board is capable of reviewing a

demand for the breach of fiduciary duty claims, it is also capable of reviewing the

unjust enrichment claims. In that case, obviously, the Board could evaluate the

unjust enrichment claims against management as well, thus demand is not excused

for the waste and Officer Defendant unjust enrichment claims.234

IV. CONCLUSION

The Defendants’ Motion to Dismiss under Rule 23.1 is granted based on the

Plaintiffs’ failure to make a demand on the MetLife Board prior to filing the

derivative Complaint. An appropriate order is attached.

233 Id. at *18. The Plaintiffs acknowledge this in their briefing. See Pls.’ Answering Br., at 58 (“These unjust enrichment claims spring entirely from the alleged breaches of fiduciary duty. . .”). 234 I confess to not fully understanding the waste claim. Corporate waste occurs when a company trades assets for consideration of no value, or so little value as to make the exchange beyond the range of reason. E.g. Weiss v. Swanson, 948 A.2d 433, 450 (Del. Ch. 2008). If the claim here is that the Director Defendants failed to bring an action to attempt to recoup salary and benefits paid to faithless officers of the Company, that does not state a claim of waste.

52 IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

) IN RE METLIFE INC. DERIVATIVE ) Consol. C.A. No. 2019-0452- LITIGATION ) SG )

ORDER

AND NOW, this 17th day of August, 2020, for the reasons set forth

contemporaneously in the attached Memorandum Opinion dated August 17, 2020,

IT IS HEREBY ORDERED that the Defendants’ Motion to Dismiss is GRANTED.

IT IS SO ORDERED.

/s/ Sam Glasscock III

Vice Chancellor