Delaware Supreme Court
634 A.2d 927 (Del. 1993)
Stephen and Mitchell Rales (defendants) were directors, officers, and majority shareholders of Easco Hand Tools, Inc. (Easco). Easco made an offering of senior subordinated notes. Part of proceeds was to be invested in government securities. Instead, the Raleses allegedly invested in junk bonds to help an investment bank with which they had a business relationship. Blasband (plaintiff) was a shareholder in Easco. Easco later became a wholly owned subsidiary of Danaher Corp. (Danaher), and Blasband became a Danaher stockholder. Blasband filed a derivative lawsuit about the Easco board’s misuse of funds. Blasband did not make demand to sue on either Easco or Danaher’s board. The Raleses are 44 percent shareholders and directors of Danaher. The third circuit held that Blasband’s complaint cast reasonable doubt on whether the Easco board exercised its business judgment. The district court certified the question to the Delaware Supreme Court to determine the demand requirements for a double derivative lawsuit under Delaware law.
Rule of Law
Holding and Reasoning (Veasey, J.)
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