New demand futility test expected to streamline litigation in derivative lawsuits

Delaware Business Court Insider

The Delaware Supreme Court’s decision last week to do away with a two-test system will likely lighten litigators’ workload across the board in derivative cases, experts say.

The opinion Justice Tamika Montgomery-Reeves wrote in a Facebook shareholders case replacing the separate but long-muddled Aronson and Rales tests with a single three-step test that combines the two is expected not to change the results of testing for demand futility, but to drastically simplify and make consistent the path to those results.

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