Document: In re Goldman Sachs Grp., Inc. S’holder Litig., C.A. No. 5215-VCG (Del. Ch. Oct. 12, 2011)
The Court of Chancery held that plaintiffs had failed to plead sufficient particularized facts to establish that making a demand on the board of directors of Goldman Sachs Group, Inc. (“Goldman”) to investigate Goldman compensation practices would be futile. Therefore, the Court dismissed plaintiffs’ derivative claims with prejudice. Plaintiffs, stockholders of Goldman, alleged excessive compensation at Goldman and brought a derivative claim against Goldman directors for alleged breaches of fiduciary duties and corporate waste. Defendants moved to dismiss the claims for failure to make a pre-suit demand. The Court held that plaintiffs had failed to raise a reasonable doubt as to whether Goldman’s directors were disinterested and independent, and whether the board was well informed and acted in good faith. In addition, the Court dismissed plaintiffs’ claims that any compensation payments constituted corporate waste. Plaintiffs also brought a Caremark claim alleging that Goldman failed to monitor risky business strategies, which the Court rejected because the plaintiffs failed to demonstrate Goldman’s willful ignorance of “red flags,” as required by the Caremark decision.