Atallah v. Malone, et al

Del. Ch. Ct. (July 19, 2023)

Application of the Zuckerberg standard in response to a 23.1 Motion to Dismiss requires the court to go through a "head counting" exercise in order to determine whether a majority of the board could have properly considered a demand. If the answer is yes, then the litigation will be dismissed for failure to make demand. If the answer to that question is no, then the stockholders will be permitted to pursue the litigation and temporarily stand in the shoes of the corporation to vindicate the corporation's rights.

Notice that as a pleading matter, the board of directors brings both a Rule 23.1 Motion as well as Rule 12(b)(6) motion in the same pleading. The board is asking that the court decide, first, that the plaintiff does not have standing and that the complaint should have been brought by the corporation instead of the stockholder plaintiff. If the court agrees, then, second, the board - speaking for the corporation - asks the court to dismiss the complaint for failure to state a claim.

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