Levine v. Smith
Delaware Supreme Court
591 A.2d 194 (Del. 1991)
Ross Perot was a director of General Motors Corporation (GM) and its largest shareholder. Perot disagreed with GM’s senior managers about the way a GM subsidiary was being run. Perot vocally criticized GM about the subsidiary and its automobile business. A committee of outside directors negotiated a deal to buy back Perot’s shares, and those of a few other associates, for $743 million. The deal included Perot’s agreement that he would not compete with or publicly criticize GM. The board approved the deal. GM shareholders (plaintiffs) filed a derivative suit against Perot and the directors (defendants) to challenge the buyback, without first making a demand on the board. The shareholders initially asserted that the directors were interested or that the buyout constituted waste, but the restated claim rested on a theory that the directors lacked independence. The defendants moved to dismiss under Rule 23.1 of the Rules of the Court of Chancery of the State of Delaware for failure to make a demand that the board bring the lawsuit. The chancery court concluded that the shareholders had only shown that two of GM’s fourteen outside directors had misunderstandings about the buyout. Thus, the chancery court dismissed the complaint for failure the plead demand futility. The plaintiffs appealed to the Delaware Supreme Court.
Rule of Law
Holding and Reasoning (Horsey, J.)
What to do next…
Unlock this case brief with a free (no-commitment) trial membership of Quimbee.
You’ll be in good company: Quimbee is one of the most widely used and trusted sites for law students, serving more than 97,000 law students since 2011. Some law schools—such as Yale, Vanderbilt, Berkeley, and the University of Illinois—even subscribe directly to Quimbee for all their law students. Read our student testimonials.
Learn more about Quimbee’s unique (and proven) approach to achieving great grades at law school.
Quimbee is a company hell-bent on one thing: helping you get an “A” in every course you take in law school, so you can graduate at the top of your class and get a high-paying law job. We’re not just a study aid for law students; we’re the study aid for law students. Read more about Quimbee.
Here's why 166,000 law students have relied on our case briefs:
- Written by law professors and practitioners, not other law students. 13,800 briefs, keyed to 187 casebooks. Top-notch customer support.
- The right amount of information, includes the facts, issues, rule of law, holding and reasoning, and any concurrences and dissents.
- Access in your classes, works on your mobile and tablet. Massive library of related video lessons and high quality multiple-choice questions.
- Easy to use, uniform format for every case brief. Written in plain English, not in legalese. Our briefs summarize and simplify; they don’t just repeat the court’s language.