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An Introduction to the Law of Corporations: Cases and Materials, Fall 2017

Steven M. Rales, Mitchell P. Rales, and John Doe 1-10, Defendants Below, Appellants, and Easco Hand Tools, Inc. and Danaher Corporation, Nominal Defendants Below, Appellants, v. Alfred Blasband, derivatively and on behalf of Easco Hand Tools, Inc. and Danaher Corporation, Plaintiff Below, Appellee.

Headnote

In Rales, the court announces a second, alternative, test for demand futility. The focus on the inquiry under the Aronson test is the challenged transaction and questions the interestedness and independence of directors with respect to the challenged transaction. In Rales the court's focus of analysis is different because Rales is applied in circumstances where there is no particular transaction to challenge. Rather, the focus of the analysis is on whether board would be able to fairly consider the stockholder's demand had it been made.

The claim here involves a “double derivative suit.” In a double derivative suit, stockholders of a parent corporation bring suit against the parent of a wholly-owned subsidiary on behalf of the subsidiary corporation. 

Notice that this case is presented as a certified question. The Delaware Supreme Court is one of the very few state supreme courts in the country that accepts certified questions. It often does so to resolve novel questions of the Delaware corporate law that arise before other courts. In Rales, the question presented to the Delaware Supreme Court was raised by a US federal district court.