IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
KATHERINE RICHARDS ) BREWER, derivatively on behalf of ) REGIONS FINANCIAL ) CORPORATION and REGIONS ) BANK, )
)
Plaintiff, )
)
v. ) C.A. No. 2023-1284-KSJM )
JOHN M. TURNER, JR., MARK A. ) CROSSWHITE, NOOPUR DAVIS, ) SAMUEL A. DI PIAZZA, JR., ) ZHANNA GOLODRYGA, J. ) THOMAS HILL, JOHN D. JOHNS, ) JOIA M. JOHNSON, RUTH ANN ) MARSHALL, CHARLES D. ) MCCRARY, JAMES T. ) PROKOPANKO, LEE J. ) STYSLINGER, III, JOSÉ S. ) SUQUET, TIMOTHY VINES, ) ALISON RAND, CAROLYN H. ) BYRD, DAVID J. COOPER, SR., ) DON DEFOSSET, ERIC C. FAST, ) O.B. GRAYSON HALL, JR., SUSAN ) W. MATLOCK, JOHN E. MAUPIN ) JR., DAVID J. TURNER, JR., C. ) MATTHEW LUSCO, JOHN B. ) OWEN, and TARA A. PLIMPTON, )
)
Defendants, and )
)
REGIONS FINANCIAL ) CORPORATION and REGIONS ) BANK, )
)
Nominal Defendants. )
ORDER DENYING APPLICATION TO CERTIFY INTERLOCUTORY APPEAL
1. The complaint in this derivative suit pleads an unusual Caremark claim
involving a lawyer/whistleblower and a regulatory finding reached after a multi-year
investigation. Regions Financial Corporation operates Regions Bank, a mid-sized
regional bank. As alleged, in early 2019, a whistleblower—Regions’ then-deputy
general counsel—alerted management that Regions was employing illegal and
manipulative processing methodologies to increase consumer overdraft fees. In
November 2019, the whistleblower sent a draft complaint reviewed by the Regions’
Board of Directors claiming that he was let go in part for “blowing the whistle” on the
illegal overdraft fees. The complaint detailed the regulatory regime governing
Regions’ overdraft practices and stated that the whistleblower had raised the issue
with management previously. This was a red flag. Regions’ Board hired an attorney
to investigate the claims but did not change its overdraft practices until July 2021.
2. The Consumer Financial Protection Bureau (the “CFPB”) found that
Regions chose not to change its overdraft practices in 2019, although it could have, to
avoid losing the fee revenue generated by the illegal practice. The CFPB began
investigating Regions’ overdraft practices in 2020. In 2022, the CFPB issued findings
that Regions had employed manipulative processing methodologies to increase
overdraft fees over three years beginning in August 2018. The CFPB found that
Regions “was aware” that its overdraft fee practice was illegal, and management
“could have stopped charging these fees” as early as 2019, but it “instead . . . continued
to charge them for years while it pursued changes to generate alternative fee revenue
that would fully offset its expected revenue loss from . . . eliminating the [overdraft
3
fees].”1 The findings were set out in a Consent Order, under which Regions paid $191
million. Regions denied the findings when entering the Consent Order.
3. Plaintiff2 owns Regions stock. Plaintiff brought this derivative action,
asserting claims under Caremark3 and Massey,4 to recover the $191 million from
fiduciaries who caused the bank to adopt and continue illegal overdraft practices.
4. Defendants moved to dismiss the complaint under Court of Chancery
Rules 23.1 and 12(b)(6). In a Memorandum Opinion dated September 29, 2025 (the
“Opinion”), the court denied the Rule 23.1 motion and granted the Rule 12(b)(6)
motion in part.5 The court held that Plaintiff had adequately alleged particularized
facts showing that a majority of the Demand Board faced a substantial likelihood of
liability under Plaintiff’s red-flags theory.6 Thus demand was futile. The critical red
flag was the whistleblower complaint, but other information known to the Board
inferably made the whistleblower complaint more salient. The key allegation
1 C.A. No. 2023-1284-KSJM, Docket (“Dkt.”) 1 (“Compl.”), Ex. 2 ¶ 2 (2022 Consent
Order) (emphasis added); see also id. ¶ 28 (“The Bank made this decision to wait despite being informed by its compliance staff that eliminating Authorized-Positive Overdraft Fees before making the other changes presented less compliance risk ‘by implementing corrective action of a known issue with timeliness and urgency,’ since ‘[r]egulators have opined on the UDA(A)P risk associated with charging’ Authorized- Positive Overdraft Fees.”). 2 Terms not defined in this Order have the same meaning as in Brewer ex rel. Regions
Fin. Corp. v. Turner, 2025 WL 2769895 (Del. Ch. Sep. 29, 2025) [“Opinion”]. 3 In re Caremark Int’l Inc. Deriv. Litig., 698 A.2d 959 (Del. Ch. 1996).
4 In re Massey Energy Co. Deriv. & Class Action Litig., 2011 WL 2176479 (Del. Ch.
May 31, 2011). 5 See Opinion.
6 Opinion at *14.
4
supporting an inference of bad faith was that, after a multi-year investigation, the
CFPB found that Regions could have ceased the illegal practice in 2019 but
intentionally delayed compliance.
5. Defendants applied for certification of interlocutory appeal of the
Opinion. Supreme Court Rule 42 permits certification of interlocutory appeal when
“the order of the trial court decides a substantial issue of material importance that
merits appellate review before a final judgment.”7 If the “substantial issue”
requirement is met, this court will then analyze eight factors concerning whether
“there are substantial benefits that will outweigh the certain costs that accompany
an interlocutory appeal.”8 Rule 42 cautions that “[i]nterlocutory appeals should be
exceptional, not routine, because they disrupt the normal procession of litigation,
cause delay, and can threaten to exhaust scarce party and judicial resources.”9 This
language of Rule 42 serves as an interpretive principle, requiring that the court
interpret the factors such that interlocutory appeals are the exception and not
routine.10
7 Supr. Ct. R. 42(b)(i).
8 Supr. Ct. R. 42(b)(ii), (iii)(A)–(H).
9 Supr. Ct. R. 42(b)(ii).
10 Supr. Ct. R. 42(b)(iii) (stating that “[i]f the balance is uncertain, the trial court
should refuse to certify the interlocutory appeal”); Donald J. Wolfe, Jr. & Michael A. Pittenger, Corporate and Commercial Practice in the Delaware Court of Chancery § 18.04[c] (2d ed. 2024).
5
Substantial Issue
6. “The ‘substantial issue’ requirement is met when an interlocutory order
decides a main question of law which relates to the merits of the case[.]”11 The
Opinion resolved a substantial issue in two respects. The Opinion resolved a Rule
12(b)(6) motion, which is a merits-based motion and is substantial in that way.12 The
Opinion also resolved a Rule 23.1 motion, which raises a standing issue,13 and thus
qualifies as a substantial issue of material importance.14
Multi-Factor Analysis
7. Because the substantial-issue requirement is satisfied, the analysis
turns to a multi-factor evaluation of whether a substantial benefit outweighs the costs
of an interlocutory appeal.15 Rule 42 identifies eight factors to consider when
conducting this balancing analysis.16 Defendants rely on only three of the Rule 42
11 Riskin v. Burns, 2021 WL 303999, at *1 (Del. Ch. Jan. 29, 2021) (quoting Sprint
Nextel Corp. v. iPCS, Inc., 2008 WL 2861717, at *1 (Del. Ch. July 22, 2008)). 12 Id.
13 IBEW Local Union 481 Defined Contribution Plan & Tr. ex rel. GoDaddy, Inc. v.
Winborne, 301 A.3d 596, 617 (Del. Ch. 2023) (“Rule 23.1 imposes a pleading requirement so that demand principles can be applied at the outset of a case to determine whether the plaintiff has standing to sue.” (citing United Food & Com. Workers Union & Participating Food Indus. Empls. Tri-State Pension Fund, 262 A.3d 1034, 1048 (Del. 2021) [“Zuckerberg II”])). 14 See WMI Liquid. Tr. v. XL Specialty Ins. Co., 2013 WL 4520982, at *1 (Del. Super.
Aug. 23, 2013) (holding that “[w]hether a plaintiff has standing” is a classic “determination of a substantial issue . . . under Rule 42(b)”); see also Gentile v. Rossette, 2005 WL 3272361, at *2 (Del. Ch. Nov. 21, 2005) (noting that “whether the Plaintiffs have standing to pursue their share dilution claim” constituted a substantial issue under Rule 42(b)). 15 See Supr. Ct. R. 42(b)(ii), (iii)(A)–(H).
16 Id. 42(b)(iii).
6
factors—(B), (G), and (H). Defendants concede that the other five factors do not weigh
in favor off certifying interlocutory appeal by failing to advance arguments to that
effect in the Application.
8. Factor (B) asks whether “[t]he decisions of the trial courts are
conflicting upon the question of law.”17 Defendants argue that the Opinion departs
from settled law in two respects.18 First, they say that the court erroneously applied
the “reasonably conceivable” standard when assessing whether the Demand Board
members faced a “substantial likelihood of liability” resulting from the Caremark
claim.19 Second, they contend that the court failed to apply the presumption of good
faith when finding that Plaintiff adequately alleged bad faith sufficient to support a
Caremark claim.20
9. Defendants’ first Factor (B) argument centers on two aspects of the
court’s demand futility analysis—the “plead with particularity” requirement21 and
the “substantial likelihood of liability” standard.22
17 Id. 42(b)(iii)(B).
18 Dkt. 35 (“Application”) ¶ 2.
19 Id. ¶ 15.
20 Id. ¶ 18.
21 Ct. Ch. R. 23.1 (“The complaint in a derivative action must: (1) state with particularity: (A) any effort by the derivative plaintiff to obtain the desired action from the entity; and (B) the reasons for not obtaining the action or not making the effort[.]” (emphasis added)). 22 Zuckerberg II, 262 A.3d at 1059 (“[C]ourts should ask . . . on a director-by-director
basis when evaluating allegations of demand futility: . . . whether the director faces a substantial likelihood of liability on any of the claims that would be the subject of the litigation demand[.]” (emphasis added)).
7
10. “It is generally understood that for a fact to be pled ‘with particularity,’
it must have some indicia of specificity.”23 A court need not accept as true “conclusory
allegations.”24 A plaintiff must do more than provide notice pleading permitted under
Rule 8.25 The Rule 23.1 particularity requirement, however, is not as strict as the
Rule 9 particularity requirement because Rule 23.1 does not call for “newspaper
facts.”26 “[E]ven with Section 220 documents in hand, derivative plaintiffs would be
23 Elburn ex rel. Invs. Bancorp. Inc. v. Albanese, 2020 WL 1929169, at *7 (Del. Ch.
Apr. 21, 2020) [“Invs. Bancorp. I”], appeal denied sub nom. Albanese v. Elburn ex rel. Invs. Bancorp, Inc., 237 A.3d 820 (Del. 2020) (TABLE) (citation modified); see also United Food & Com. Workers Union v. Zuckerberg, 250 A.3d 862, 876–77 (Del. Ch. 2020) [“Zuckerberg I”] (“Rule 23.1 requires that a plaintiff allege specific facts[.]”); Hughes, 2020 WL 1987029, at *12 (same); In re GoPro, Inc., 2020 WL 2036602, at *8 (Del. Ch. Apr. 28, 2020) (“The plaintiff pleading demand futility must inform the defendants of the precise transactions at issue by describing with particularity the specific misconduct in which each defendant is alleged to have participated.” (citation modified) (emphasis added)). 24 Glean Tech Fund II LP v. McIntosh, 2025 WL 2505049, at *5 (Del. Ch. Sep. 2, 2025)
(“The plaintiff is entitled to all reasonable factual inferences that logically flow from the particularized facts alleged, but conclusory allegations are not considered as expressly pleaded facts or factual inferences.”) (internal quotation marks omitted) (quoting White v. Panic, 782 A.2d 543, 549 (Del. 2001)); Sciannella v. AstraZeneca UK Ltd., 2024 WL 3327765, at *15 (Del. Ch. July 8, 2024) (same); Khanna v. McMinn, 2006 WL 1388744, at *12 (Del. Ch. May 9, 2006) (same); see also Wood v. Baum, 953 A.2d 136, 140 (Del. 2008) (“Conclusory allegations are not considered as expressly pleaded facts or factual inferences.” (internal quotation marks omitted) (quoting Beam ex rel. Martha Stewart Living Omnimedia, Inc. v. Stewart, 845 A.2d 1040, 1048 (Del.2004))); Hughes v. Xiaoming Hu, 2020 WL 1987029, at *12 (Del. Ch. Apr. 27, 2020) (“Under the heightened pleading requirements of Rule 23.1, “[conclusory] allegations of fact or law not supported by the allegations of specific fact may not be taken as true.” (quoting Grobow v. Perot, 539 A.2d 180, 187 (Del. 1988), overruled on other grounds by Brehm v. Eisner, 746 A.2d 244 (Del. 2000))). 25 Invs. Bancorp I, 2020 WL 1929169, at *7–9.
26 Elburn ex rel. Invs. Bancorp. Inc. v. Albanese, 2020 WL 4194865, at *4–5 (Del. Ch.
July 21, 2020) [“Invs. Bancorp. II”] (denying application to certify interlocutory appeal), appeal denied sub nom. Albanese v. Elburn ex rel. Invs. Bancorp, Inc., 237 A.3d 820 (Del. 2020) (TABLE).
8
hard pressed to plead . . . ‘who, what, when, where and how’ facts about fiduciary
wrongdoing” as derivative plaintiffs typically do not have the means to know those
“newspaper” facts like fraud claimants do.27 Still, the particularity requirement of
Rule 9 remains a “useful guidepost.”28 Rule 9 requires, “with respect to the subjects
it treats, some greater degree of specificity in pleading. The rule gives to defendants
a right to insist that the circumstances constituting the alleged fraud be specified.”29
Rule 23.1 is still a pleading-stage requirement. “While Rule 23.1 requires that a
plaintiff allege specific facts, ‘he need not plead evidence.’”30
11. Moreover, “once a plaintiff pleads particularized allegations, then the
plaintiff is entitled to all ‘reasonable inferences that logically flow from particularized
facts alleged by the plaintiff.”31 As the high court explained in Marchand, “[t]he
27 Invs. Bancorp II, 2020 WL 4194865, at *5; Invs. Bancorp I, 2020 WL 1929169, at
*8 (observing that derivative plaintiffs asserting fiduciary breaches “were not in the board room, and, unlike fraud, were not the direct targets of the wrongful behavior.”). 28 See Invs. Bancorp I, 2020 WL 1929169, at *9 (describing this court’s “articulation
of Rule 9(b)’s pleading requirements” in Kahn Brothers & Co., Inc. Profit Sharing Plan and Tr. v. Fischbach Corp., 1989 WL 109406, at *4 (Del. Ch. Sept. 19, 1989), as “a useful guidepost for Rule 23.1”). 29 Kahn, 1989 WL 109406, at *4.
30 Hughes, 2020 WL 1987029, at *10 (quoting Aronson, 473 A.2d at 816); see also
IBEW, 301 A.3d at 617 (same); Ontario Provincial Council of Carpenters’ Pension Tr. Fund v. Walton, 2023 WL 3093500, at *29 (Del. Ch. Apr. 26, 2023) (same); Zuckerberg I, 250 A.3d at 877 (same); In re Ezcorp Inc. Consulting Agreement Deriv. Litig., 2016 WL 301245, at *33 (Del. Ch. Jan. 25, 2016) (same). 31 Hughes, 2020 WL 1987029, at *10 (quoting Beam, 845 A.2d at 1048) (citation
modified); see also Marchand v. Barnhill, 212 A.3d 805, 818 (Del. 2019); Melbourne Mun. Firefighters’ Pension Tr. Fund ex rel. Qualcomm, Inc. v. Jacobs, 2016 WL 4076369, at *1 n.1 (Del. Ch. Aug. 1, 2016) (“When considering a motion to dismiss under Rule 23.1, this Court affords plaintiffs all reasonable inferences that logically flow from the particularized facts alleged in the complaint.” (quoting Postorivo v. AG Paintball Hldgs., Inc., 2008 WL 553205, at *4 (Del. Ch. Feb. 29, 2008))); Teamsters
9
standard for conducting this inquiry at the demand futility stage is well balanced,
requiring that the plaintiff plead facts with particularity, but also requiring that this
Court draw all reasonable inferences in the plaintiff’s favor.”32
12. The Opinion correctly identified and applied the Rule 23.1 “plead with
particularity”33 standard. It also drew reasonable inferences from particularized
facts—the whistleblower complaint, the July 2018 Bulletin, and the CFPB findings,
for example.34 Defendants do not argue that the Opinion failed to identify the
Union 25 Health Servs. & Ins. Plan v. Baiera, 119 A.3d 44, 56 (Del. Ch. 2015) (“I accept as true Plaintiff’s particularized allegations of fact and draw all reasonable inferences that logically flow from those allegations in Plaintiff’s favor.” (citing White, 782 A.2d at 549)). 32 Marchand, 212 A.3d at 818.
33 The Opinion used a variant of “particular” when describing or applying the standard eight times. See Opinion at *7 (“Under Rule 23.1, a derivative complaint must ‘state with particularity: . . . any effort by the derivative plaintiff to obtain the desired action from the entity; and . . . the reasons for not obtaining the action or not making the effort[.]’” (emphasis added) (quoting Ct. Ch. R. 23.1(a)(1))); id. at *8 (“To plead demand futility, the complaint must allege ‘particularized factual statements that are essential to the claim.’ Although the requirement of factual particularity is a heightened pleading requirement, it ‘does not entitle a court to discredit or weigh the persuasiveness of well-pled allegations.’ If a plaintiff pleads particularized facts, those factual allegations ‘are accepted as true’ and ‘[p]laintiffs are entitled to all reasonable factual inferences that logically flow from the particularized facts alleged[.]’” (emphases added) (first quoting Brehm, 746 A.2d at 254; and then quoting Zuckerberg I, 250 A.3d at 877)); id. at *8 (“To adequately allege demand futility, Plaintiff must plead particularized facts creating reason to doubt that at least seven of the fourteen Demand Board members were incapable of impartially considering a demand.” (emphasis added)); id. at *10 (“To state a Caremark claim, a plaintiff must allege particularized facts . . . .”) (emphasis added)); id. at *10 (“To adequately allege a red-flags theory, a plaintiff must plead ‘particularized facts that the board knew of red flags but consciously disregarded them in bad faith.’” (emphasis added) (quoting Teamsters Loc. 443 Health Servs. & Ins. Plan v. Chou, 2020 WL 5028065, at *17 (Del. Ch. Aug. 24, 2020)). 34 Opinion at *26–31 (“In sum, nine of the fourteen Demand Board members face a
substantial likelihood of liability under Caremark.” Id. at *14.).
10
particularity requirement or that the red flags were not pled with sufficient
particularity.
13. Defendants’ primary criticism concerns how the Opinion interpreted the
“substantial likelihood of liability” standard. The standard derives from Aronson.35
Before Aronson, Delaware law suggested that a plaintiff could show that demand was
futile by naming a director as a defendant in the complaint or by alleging that the
director was involved in the challenged decision.36 Aronson dispelled that notion by
introducing the “substantial likelihood of liability” standard.
14. Although Aronson uses the phrase “substantial likelihood,” “[t]o plead
that a director faces a substantial risk of liability, a plaintiff does not have to
35 Aronson v. Lewis, 473 A.2d 805, 815 (Del. 1984) (“[T]he mere threat of personal
liability for approving a questioned transaction, standing alone, is insufficient to challenge either the independence or disinterestedness of directors, although in rare cases a transaction may be so egregious on its face that board approval cannot meet the test of business judgment, and a substantial likelihood of director liability therefore exists.”). 36 See, e.g., Kaufman v. Beal, 1983 WL 20295, at *4 (Del. Ch. Feb. 25, 1983) (holding
that failure to make pre-suit demand is excused where the derivative plaintiff pleads facts “which, if true, would show that the business judgment rule would not protect the transaction from judicial scrutiny”); Miller v. Loft , Inc., 153 A. 861, 862 (Del. Ch. 1931) (“The rule is well settled in this State that if by reason of hostile interest or guilty participation in the wrongs complained of, the directors cannot be expected to institute suit[.]”); Baker v. Bankers’ Mortg. Co., 129 A. 775, 776 (Del. Ch. 1925) (holding that demand is not required “for obvious reasons” where the corporate managers were “guilty [of] participation in the wrongs complained of”); Fleer v. Frank H. Fleer Corp., 125 A. 411, 414 (Del. Ch. 1924) (“Where the demand if made would be directed to the particular individuals who themselves are the alleged wrongdoers and who therefore would be invited to sue themselves, the rule is settled that a demand and refusal is not requisite.”). More recent cases preceding Aronson acknowledged the problem with allowing derivative plaintiffs to evade the demand requirement by merely adding the corporate directors to its complaint, and therefore held that merely adding directors and making conclusory allegations of alleged wrongdoing were insufficient to excuse demand. See, e.g., Kaufman, 1983 WL 20295, at *4.
11
demonstrate a reasonable probability of success on the claim” sufficient to support a
preliminary injunction.37 In Rales, the Delaware Supreme Court rejected that
requirement as “unduly onerous,” clarifying that the plaintiff need only “make a
threshold showing, through the allegation of particularized facts, that [its] claims
have some merit.”38 Aronson and Rales remains good law.39
15. The Opinion interpreted the “have some merit” language of Rales to
require application of the Rule 12(b)(6) standard, albeit based on particularized
facts.40 Many cases of this court have taken the same approach.41 Corbat cited by
37 Hughes, 2020 WL 1987029, at *12.
38 Rales v. Blasband, 634 A.2d 927, 934 (Del. 1993) (citing Aronson, 473 A.2d at 811–
12). 39 Zuckerberg II, 262 A.3d at 1059 (“Finally, because the three-part test is consistent
with and enhances Aronson, Rales, and their progeny, . . . cases properly construing Aronson, Rales, and their progeny remain good law.”). Defendants do not cite Aronson or Rales in the Application. 40 Opinion at *9.
41 I have done so many times based on my reading of Rales. See, e.g., In re Plug Power Inc. S’holder Litig., 2025 WL 1277166, at *9 (Del. Ch. May 2, 2025); Hanna v. Paradise, 2025 WL 1836642, at *8 (Del. Ch. July 3, 2025); Grabski ex rel. Coinbase Glob., Inc. v. Andreessen, 2024 WL 390890, at *7 (Del. Ch. Feb. 1, 2024); City of Detroit Police & Fire Ret. Sys. ex rel. NiSource, Inc. v. Hamrock, 2022 WL 2387653, at *11 (Del. Ch. June 30, 2022). Others have taken a similar approach. See, e.g., Lipman v. GPB Cap. Hldgs. LLC, 2020 WL 6778781, at *1 (Del. Ch. Nov. 18, 2020) (“I find that the allegations of the Complaint . . . make the threat of liability to the general partner, and its controller, such that it is reasonably conceivable that the general partner could not bring its business judgment to bear on any demand involving these allegations.” (emphasis added)); Chou, 2020 WL 5028065, at *25 (finding that the “Plaintiffs have demonstrated that a majority of [the board] faces a substantial likelihood of liability by pleading particularized facts from which it is reasonably conceivable that a majority of the Board knew of evidence of corporate misconduct—the proverbial red flag—yet acted in bad faith by consciously disregarding its duty to address that misconduct” (emphasis added) (internal quotation marks omitted)); In re Fitbit, Inc. S’holder Derivative Litig., 2018 WL 6587159, at *12–13 (Del. Ch. Dec. 14, 2018) (“In this case, the demand futility question as to Count II turns on whether a majority of
12
Defendants is a good example.42 Defendants rely on Corbat for the proposition that
“[s]tating a claim is necessary to plead a substantial likelihood of liability, but it is
not sufficient” and “reasonably conceivable is not the same thing as being
substantially likely.”43 But Corbat does not stand for this proposition at all. The
portion of Corbat that the Application quotes is as follows:
The Complaint makes it reasonably conceivable that the directors, despite these red flags, failed to take actions that
the Demand Board faces a substantial likelihood of liability on the Brophy claim . . . . I find that the causal connection is pled with particularity and is reasonably conceivable. Plaintiffs have adequately pled that the information at issue was material and nonpublic.” (emphasis added)); Pettry ex rel. FedEx Corp. v. Smith, 2021 WL 2644475, at *12–13 (Del. Ch. June 28, 2021), aff’d, 273 A.3d 750 (Del. 2022) (“It is not reasonably conceivable that the Board acted in bad faith in consciously disregarding its duty to oversee the affairs of the Company. . . . Plaintiff has failed to plead particularized facts that make it reasonably conceivable a majority of the [defendants] face a substantial likelihood of liability for ignoring red flags in a manner demonstrating a conscious failure to monitor or oversee corporate operations.” (emphasis added)); Oklahoma Firefighters Pension & Ret. Sys. v. Corbat, 2017 WL 6452240, at *2 (Del. Ch. Dec. 18, 2017) (“To my mind, the allegations of the Complaint, if true, fail to demonstrate scienter. The Complaint does not make it reasonably conceivable that the directors acted in bad faith.” (emphasis added)); Silverberg ex rel. Dendreon Corp. v. Gold, 2013 WL 6859282, at *13 (Del. Ch. Dec. 31, 2013) (“I conclude that [the plaintiff] has pled particularized facts sufficient to show that it is reasonably conceivable that he will be able to satisfy the first factor of a Brophy claim.” (emphasis added)); Cent. Laborers’ Pension Fund v. Karp, 2025 WL 1213104, at *19 & n.204 (Del. Ch. Apr. 25, 2025) (stating that the court “must view well-pleaded facts holistically in assessing demand futility” and that “the test is whether the complaint alleges a constellation of particularized facts which, when viewed holistically, support a reasonably conceivable inference that an improper purpose sufficiently infected a director’s decision to such a degree that the director could be found to have acted in bad faith” (emphasis added) (internal quotation marks omitted) (quoting IBEW, 301 A.3d at 623)). 42 Corbat, 2017 WL 6452240.
43 Application ¶ 15.
13
may have avoided loss to the company. That is not the standard, however.44
The next two sentences of the decision, which Defendants do not quote, state:
To my mind, the allegations of the Complaint, if true, fail to demonstrate scienter. The Complaint does not make it reasonably conceivable that the directors acted in bad faith.45
As the unquoted sentences reflect, the court’s statement, “[t]hat is not the standard,”
refers to the Caremark standard, which requires bad faith.46 As the unquoted
passage also reflects, when determining whether a complaint adequately alleges a
substantial likelihood of liability from a Caremark claim including bad faith, the court
applied the reasonably conceivable standard based on particularized facts.
16. Furthermore, as held in Marchand and elsewhere, derivative plaintiffs
are entitled to all reasonable inferences that logically flow from particularized
allegations.47 No meaningful distinction exists between what is reasonably
conceivable based on particularized allegations, on the one hand, and what is
reasonably inferable from particularized allegations, on the other. Indeed, decisions
of this court have used “reasonably conceivable” and “reasonable inference”
interchangeably when analyzing demand futility.48
44 Corbat, 2017 WL 6452240, at *2.
45 Id.
46 Id.
47 Marchand, 212 A.3d at 818; Invs. Bancorp I, 2020 WL 1929169, at *6; McIntosh,
2025 WL 2505049, at *5. 48 See, e.g., IBEW, 301 A.3d at 619, 623 (“Delaware decisions have read [Rule 9(b) and
Rule 23.1] together to require that a plaintiff plead particularized facts that can support a reasonable inference about the directors’ state of mind. . . . At the pleading
14
17. Defendants cite no case in conflict with the Opinion, and their
arguments under Factor (B) are misguided. Defendants say that, “[i]nstead of
scrutinizing the complaint for the required specific, factual allegations of bad faith,
the Opinion held that demand was futile based on inferences it found to be
‘reasonably conceivable’ from unproven allegations.”49 But a plaintiff “need not plead
evidence” nor prove anything at the pleading stage.50 And the standard requires the
court to accept the “unproven allegations” as true where—as here—they are pled with
specificity.51
18. Defendants’ second Factor (B) argument also does not work because the
Opinion applied the presumption of good faith correctly. Defendants argue that any
response to a red flag—even a delayed response—entitles a director to a presumption
of good faith. The instinct behind this argument is understandable. Boards enjoy
stage, the test is whether the complaint alleges a constellation of particularized facts which, when viewed holistically, support a reasonably conceivable inference that an improper purpose sufficiently infected a director's decision to such a degree that the director could be found to have acted in bad faith.” (emphasis added)); Chou, 2020 WL 5028065, at *1, *25 (“In order to survive a motion to dismiss under Rule 23.1, a plaintiff must raise an inference that demand on the board to undertake the action would have been futile. Typically, in the Caremark context, this requires a pleading of specific facts from which the Court may infer a substantial likelihood of liability on the part of a majority of the board on whom demand would have been made. . . . The Plaintiffs have demonstrated that a majority of ABC’s Board faces a substantial likelihood of liability by pleading particularized facts from which it is reasonably conceivable that a majority of the Board “knew of evidence of corporate misconduct— the proverbial ‘red flag’—yet acted in bad faith by consciously disregarding its duty to address that misconduct.”(emphasis added)). 49 Application ¶ 14.
50 Hughes, 2020 WL 1987029, at *10 (quoting Aronson, 473 A.2d at 816).
51 See Zuckerberg II, 262 A.3d at 1048; Lebanon Cnty. Empls.’ Ret. Fund v. Collis, 311
A.3d 773, 804–05 (Del. 2023); Armstrong, 2020 WL 756965, at *14.
15
great latitude and deference when formulating their compliance systems and
strategy. But the reality is that it is possible to draw a logical inference, based on
particularized allegation, that delay was in bad faith.
19. As the Opinion observed, “[c]onsciously delaying actions” to correct
practices “that a Board knows to be illegal supports an inference of bad faith.”52 For
sure, good-faith delay versus bad-faith delay is a difficult distinction to draw
generally. And Defendants cite to a line of cases where this court could not infer that
independent directors acted in bad faith where the plaintiff alleged that the board
ultimately responded to red flags.53 But this case involves a distinguishing factor,
one that Defendants essentially urge this court (and the high court) to ignore. Here,
Plaintiff alleges that a regulator found, after a multi-year investigation, that the
company could have corrected course at a far earlier time but intentionally delayed
compliance to generate greater profits based on the illegal activity. This unusual fact
supports an inference that the delay was bad faith.
20. Defendants also argue that the conclusion that the Board knew that the
overdraft fees were illegal conflicts with the the July 2018 Bulletin. According to
Defendants, the bulletin said only that the fees might be illegal, not that they were
in fact illegal. Of course, according to the complaint, Regions’ deputy general counsel
told the board that they fees were in fact illegal, and the CFPB fined Regions $191
million on that basis. From these facts, it is reasonable to infer that the fees were
52 Opinion at *13.
53 Application ¶ 16.
16
indeed illegal. Defendants can present expert testimony to the contrary in due
course.
21. Defendants further argue that inferring bad faith from the Board’s
conduct “turn[s] the presumption of good faith on its head.”54 But it is Defendants
who fall into this trap. In their ardent advocacy, they turn the pleading-stage,
plaintiff-friendly inferences into defense-friendly inferences, asking the court to use
the presumption of good faith to override particularized facts from which the court
can infer the opposite. That’s not how the presumption of good faith works.
22. For these reasons, Defendants fails to show that the Opinion conflicts
with other decisions of this court. Factor (B) does not weigh in favor of grating the
Application.
23. Factor (G) asks whether interlocutory review could terminate the
litigation.55 This factor is rarely dispositive; were it so, then it would be appropriate
to certify all decisions denying motions to dismiss in whole or in part. This factor
does not weigh in favor of interlocutory appeal here in any event. Because the
decision declined to resolve the plaintiff’s Massey claim, even a successful appeal
would not terminate the litigation. Rather, it might result in a trial court judge’s
worst nightmare: remand. And because the red-flag claim credited the CFPB’s
finding that the Board intentionally collected illegal overdraft fees for a period after
54 Application ¶ 19.
55 Supr. Ct. R. 42(b)(iii)(G).
17
2019, this claim would warrant significant analysis.56 Factor (B) does not weigh in
favor of granting the Application.
24. Factor (H) asks whether “[r]eview of the interlocutory order may serve
considerations of justice.”57 For this point, Defendants advance a floodgates
argument, casting the Opinion as likely to “sow uncertainty” because it supposedly
departs so dramatically from Delaware law.58 Not so. As discussed above, the
Opinion is consistent with Delaware law. The approach of the Opinion has been
deployed repeatedly since Marchand. Yet Caremark claims remain “among the
hardest claims to plead and prove.”59 Indeed, despite the increased attention paid to
56 The Application states that “the Opinion disclaimed reliance” on the Massey theory.
Application ¶ 21 (emphasis in original). But that is not what the Opinion says. The court is not like a counterparty to a Merger Agreement, being forced to disclaim reliance on things like extra-contractual representation. Rather, the court favored judicial efficiency and conservatism over completeness. 57 Supr. Ct. R. 42(b)(iii)(H).
58 Application ¶ 22.
59 In re Clovis Oncology, Inc. Derivative Litig., 2019 WL 4850188, at *12 (Del. Ch. Oct.
1, 2019) (“[I]t is now indubitably understood, and oft-repeated, that a Caremark claim is among the hardest to plead and prove.”); see also City of Birmingham Ret. & Relief Sys. v. Good, 177 A.3d 47, 55 (Del. 2017) (“Because of the difficulties in proving bad faith director action, a Caremark claim is ‘possibly the most difficult theory in corporation law upon which a plaintiff might hope to win a judgment.’” (quoting Caremark, 698 A.2d at 967)); Morris v. Spectra Energy Partners (DE) GP, LP, 246 A.3d 121, 133 n.57 (Del. 2021) (same); McElrath v. Kalanick, 224 A.3d 982, 992 n.46 (Del. 2020) (same); In re MetLife Inc. Deriv. Litig., 2020 WL 4746635, at *1 (Del. Ch. Aug. 17, 2020) (“A corporate oversight claim under the Caremark rationale . . . is notoriously difficult for plaintiffs.”); Firemen’s Ret. Sys. of St. Louis on behalf of Marriott Int’l, Inc. v. Sorenson, 2021 WL 4593777, at *11 (Del. Ch. Oct. 5, 2021) (“As often stated, oversight liability under Caremark is ‘possibly the most difficult theory in corporation law upon which a plaintiff might hope to win a judgment.’” (quoting Caremark, 698 A.2d at 967)); Ritchie ex rel. Corcept Therapeutics, Inc. v. Baker, 2025 WL 2048014 (Del. Ch. July 22, 2025) (same).
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Caremark claims since Marchand, this court has dismissed nearly 80% of derivatively
pled Caremark claims (a statistic that includes the Opinion).60
60 See Opinion (denying dismissal); Ritchie, 2025 WL 2048014 (Del. Ch. July 22, 2025)
(granting dismissal); Salazar v. Quagliano, C.A. No. 2024-1004-JTL (Del. Ch. July 1, 2025) (TRANSCRIPT) (denying dismissal); Plug Power, 2025 WL 1277166 (granting dismissal); In re Fox Corp. Deriv. Litig., 2024 WL 5233229 (Del. Ch. Dec. 27, 2024) (denying dismissal); Seafarer’s Pension Plan derivatively ex rel. Bank of Am. Corp. v. Moynihan, C.A. No. 2023-0787-JTL (Del. Ch. Oct. 11, 2024) (TRANSCRIPT) (granting dismissal); In re Transunion Deriv. S’holder Litig., 2024 WL 4355571 (Del. Ch. Oct. 1, 2024) (granting dismissal); Schertz v. Garcia II, C.A. No. 2023-0600-KSJM (Del. Ch. Sept. 25, 2024) (TRANSCRIPT) (granting dismissal); In re Kraft Heinz Demand Refused Deriv. S’holder Litig., 2024 WL 3493957 (Del. Ch. July 19, 2024) (granting dismissal); Bricklayers Pension Fund of W. Pennsylvania ex rel. Centene Corp. v. Brinkley, 2024 WL 3384823 (Del. Ch. July 12, 2024) (granting dismissal); Harper ex rel. T-Mobile US, Inc. v. Sievert, 2024 WL 2796418 (Del. Ch. May 31, 2024) (granting dismissal); Ryniker Cons., LLC v. Cebula, C.A. No. 2023-0111-PAF (Del. Ch. May 9, 2024) (TRANSCRIPT) (granting dismissal); IMG Hldg. LLC ex rel. JPMorgan Chase & Co. v. Dimon, 2024 WL 1634878 (Del. Ch. Apr. 16, 2024) (granting dismissal); In re Nikola Deriv. Litig., C.A. No. 2022-0023-KSJM (Del. Ch. Apr. 9, 2024) (TRANSCRIPT) (granting dismissal), Clem v. Skinner, 2024 WL 668523 (Del. Ch. Feb. 19, 2024) (granting dismissal); Conte ex rel. Skechers U.S.A., Inc. v. Greenberg, 2024 WL 413430 (Del. Ch. Feb. 2, 2024) (granting dismissal); Segway Inc. v. Cai, 2023 WL 8643017 (Del. Ch. Dec. 14, 2023) (granting dismissal); In re McDonald’s Corp. S’holder Deriv. Litig., 291 A.3d 652 (Del. Ch. 2023) (granting dismissal); In re ProAssurance Corp. S’holder Deriv. Litig., 2023 WL 6426294 (Del. Ch. Oct. 2, 2023) (granting dismissal); Newman v. KKR Phorm Invs., L.P., 2023 WL 5624167 (Del. Ch. Aug. 31, 2023) (granting dismissal); Collis, 2022 WL 17841215 (Del. Ch. Dec. 22, 2022) (granting dismissal); Constr. Indus. Laborers Pension Fund v. Bingle, 2022 WL 4102492 (Del. Ch. Sept. 6, 2022) (granting dismissal); NiSource, 2022 WL 2387653 (granting dismissal); In re Camping World Hldgs., Inc. S’holder Deriv. Litig., 2022 WL 288152 (Del. Ch. Jan. 31, 2022) (granting dismissal); Sorenson, 2021 WL 4593777 (granting dismissal); In re Boeing Co. Deriv. Litig., 2021 WL 4059934 (Del. Ch. Sept. 7, 2021) (denying dismissal); In re Zimmer Biomet Hldgs., Inc. Deriv. Litig., 2021 WL 3779155 (Del. Ch. Aug. 25, 2021 (granting dismissal); In re TrueCar, Inc. S’holder Deriv. Litig., 2020 WL 5816761 (Del. Ch. Sept. 30, 2020) (granting dismissal); Chou, 2020 WL 5028065 (denying dismissal); Metlife, 2020 WL 4746635 (granting dismissal); GoPro, 2020 WL 2036602 (granting dismissal); Hughes, 2020 WL 1987029 (denying dismissal); Owens v. Mayleben, 2020 WL 748023 (Del. Ch. Feb. 13, 2020) (granting dismissal); Fisher v. Sanborn, 2021 WL 1197577 (Del. Ch. Mar. 30, 2021) (granting dismissal); In re LendingClub Corp. Deriv. Litig., 2019 WL 5678578 (Del. Ch. Oct. 31, 2019) (granting dismissal); Clovis, 2019 WL
19
25. In the end, however, no Delaware Supreme Court case has expressly
stated the following: To show a substantial likelihood of liability, a plaintiff must
meet the Rule 12(b)(6) standard based on particularized facts. That would be a
helpful clarification of Delaware law. Thus, although the Opinion does not conflict
with other decisions of this court, placing this issue before the Supreme Court could
be viewed as serving the considerations of justice.
26. In sum, only one of the Rule 42 factors relied on by Defendants—Factor
(H)—weigh in favor of granting the Application. It is tempting to certify interlocutory
appeal on the basis of Factor (H) alone. The high court has only weighed in on
Caremark once since Marchand.61 And although the number of Caremark cases
remains a small percentage of the court’s docket, Marchand arguably breathed new
life into Caremark (at least in the eyes of the plaintiff’s bar), resulting in significantly
more Caremark claims (and, as noted above, a very high percentage of dismissals).
Defendants raise one of many aspects of the Caremark doctrine that could stand
clarification.62 But interlocutory appeals should be exceptional because they disrupt
4850188 (denying dismissal); Rojas v. Ellison, 2019 WL 3408812 (Del. Ch. July 29, 2019) (granting dismissal). This list intentionally omits Giuliano v. Grenfell- Gardner, 2025 WL 2502176 (Del. Ch. Sept. 2, 2025), which is not a derivative suit. Any other omissions are inadvertent—Rule 42 imposes a tight timeline and the court did its best. 61 Collis, 311 A.3d 773.
62 See, e.g., NiSource, 2022 WL 2387653, at *20 (“No Caremark case has yet gone to
trial, or proceeded meaningfully past the pleading stage, so many open issues remain. Those issues include what form of causation must be shown to hold a fiduciary liable under Caremark for their bad faith inaction, or who would bear the burden of proof on that issue. Even the elements for establishing liability are unsettled.”).
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the normal procession of litigation, cause delay, and can threaten to exhaust scarce
party and judicial resources. Thus on balance, in the judgment of this court, the soft
support of one of the eight factors does not warrant certification of interlocutory
appeal.
27. Defendants advance a spirited and compelling counternarrative to the
complaint. But that counternarrative is based mainly on defendant-friendly
inferences or facts outside the pleadings that the court cannot consider. If the
discovery record proves as favorable to Defendants as their counternarrative
promises, then this case could end early and cheaply, or Defendants will prevail at
trial. But it does not seem appropriate to pause these proceedings to allow the
exceptional course of an interlocutory appeal. The Application is denied.
/s/ Kathaleen St. J. McCormick Chancellor Kathaleen St. J. McCormick Dated: October 30, 2025