Plaintiff brought this derivative action for damages allegedly suffered by nominal defendant Toll Brothers, Inc. as a result of alleged insider trading by the individual defendants. Defendants moved to dismiss the action and the Court denied the motion. Plaintiff’s claims were brought as breach of fiduciary claims and a claim for contribution and indemnification. Defendants based their motion to dismiss on the grounds that the complaint did not comply with Court of Chancery Rule 23.1 (alleging demand futility) and statute of limitations regarding the stock sales and, with respect to the outside director defendants, adequately plead a breach of fiduciary duty claim. Since all of the individual defendants were named in a federal securities action which had survived a motion to dismiss, the Court found that the complaint here satisfied Rule 23.1. The Court also found that the complaint adequately pled a tolling of the three-year statute of limitations and adequately pled a breach of fiduciary claim against the outside directors. Finally, the Court rejected defendants’ argument that Brophy v. Cities Service Co., which recognizes a claim for breach of fiduciary duty for insider trading, is no longer good law.
