City of Coral Springs Police Officers’ Pension Plan v. Jack Dorsey et al.

The City of Coral Springs Police Officers’ Pension Plan (the shareholder) (plaintiff) owned stock in Block, Inc. Block’s board of directors (the board) consisted of 11 members (defendants), including Jack Dorsey, the board’s chairman. Dorsey was friends with Shawn Carter, the rapper also known as Jay-Z, who had a stake in Tidal, a financially distressed music-streaming company. Dorsey and Carter discussed Block’s potential acquisition of Tidal. Dorsey proposed the acquisition to the board. The board instructed Block’s management to perform due diligence. A transaction committee comprising four board members (the committee) (defendants) was created to review the viability and risks associated with the deal. The committee held three meetings during which it asked questions about Tidal’s financial forecasts and the risks. The due diligence revealed that Tidal was less valuable that originally thought, risked losing affiliations with record labels, and faced potential criminal penalties abroad. Block’s management explained to the committee that expanding into the music industry was a worthwhile strategic goal. The committee approved the acquisition of Tidal. Block’s stock price fell after the deal was announced. The shareholder filed a derivative action against the board members, who moved to dismiss on the grounds that the shareholder failed to satisfy the demand requirement or demonstrate demand futility.