IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
)
IN RE METLIFE INC. DERIVATIVE ) Consol. C.A. No. 2019-0452-
LITIGATION ) SG
)
MEMORANDUM OPINION
Date Submitted: May 11, 2020
Date Decided: August 17, 2020
Kurt M. Heyman and Gillian L. Andrews, of HEYMAN ENERIO GATTUSO &
HIRZEL LLP, Wilmington, Delaware; OF COUNSEL: Gustavo F. Bruckner and
Samuel J. Adams, of POMERANTZ LLP, New York, New York, Attorneys for Lead
Plaintiffs.
Blake A. Bennett, of COOCH AND TAYLOR, P.A., Wilmington, Delaware; OF
COUNSEL: Lee Squitieri, of SQUITIERI & FEARON, LLP, New York, New York,
and James S. Notis and Jennifer Sarnelli, of GARDY & NOTIS, LLP, New York,
New York, Attorneys for Plaintiffs.
Raymond J. DiCamillo and Brian S. Yu, of RICHARDS, LAYTON & FINGER,
P.A., Wilmington, Delaware; OF COUNSEL: Maeve O’Connor, Elliot Greenfield,
Michael W. Gramer, and Catherine Walsh, of DEBEVOISE & PLIMPTON LLP,
New York, New York, Attorneys for Defendants and Nominal Defendant.
GLASSCOCK, Vice Chancellor
In this matter, the Plaintiffs seek derivatively to hold several corporate
fiduciaries liable to the corporation, for failure to adequately oversee the operation
of the business. That business is MetLife, Inc. (“MetLife” or the “Company”), the
prominent insurance and financial services corporation. The Defendant fiduciaries
have moved to dismiss the derivative action for failure to make a demand on the
directors under Delaware Chancery Rule 23.1, as well as under Rule 12(b)(6). Rule
23.1 protects the functioning of the corporate directors as decision-makers for the
entity; under this model, it is the board’s prerogative to bring a cause of action in the
corporate behalf. Only where a plaintiff is able to plead with particularity
circumstances raising a reasonable doubt that the board is able to exercise its
business judgment to consider the proposed legal action is demand excused, and the
plaintiff empowered to proceed derivatively on behalf of the corporation.
Here, the only reason advanced by the Plaintiffs that demand should be
excused is that a majority of the demand board would themselves be liable in this
action alleging a failure to oversee the business, and therefore the board could not
fairly consider a demand. A corporate oversight claim under the Caremark rationale,
however, is notoriously difficult for plaintiffs. I find that the Plaintiffs have failed
to plead facts sufficient to imply director liability or otherwise to excuse demand
under Rule 23.1.
The complaint alleges that a long-standing part of MetLife’s business is to
undertake other businesses’ fixed-benefit pension obligations to employees, by
agreeing to pay an annuity to the employee once the employee retires and benefits
become payable. This business operation, which MetLife calls the Pension Risk
Transfer Business, has been a part of the MetLife operation since 1921. Historically,
MetLife has given notice to employee/annuitants of entitlement to benefits at the
address provided to them by the employer, by letters sent when each employee
turned 65 and again when the employee reached 70 years and six months of age (the
“two-letter” policy). If the employee thereafter responded to the notice, the annuity
payments would commence; if not, the Company would presume the employee was
dead and ineligible for benefits.
This system was hardly foolproof—some employees were alive but not at the
address provided. As technology has improved, better tools to identify and locate
annuitants developed, including a computerized list of deceased American
employees maintained by the U.S. Social Security Administration and called the
Death Master File. That list enumerated those who had died, not those who remained
alive; nonetheless, it enabled a cross-check against MetLife’s assumptions of
annuitant demise. According to the complaint, MetLife was slow to adopt this and
other new technology, allowing the Company, wrongfully, to avoid payments to
annuitants and, because of the erroneous assumptions of annuitant death, release
2
reserves associated with that annuitant into Company earnings. In fact, MetLife used
the Death Master File to inform itself, in some cases, of annuitant death in order to
stop making payments, but not in the Pension Risk Transfer Business to potentially
refute assumptions of death, which allowed the Company to avoid commencing
payments. Ultimately, in December 2017, MetLife revealed in a Form 8-K that it
had discovered the weaknesses inherent in the two-letter policy, and that it would
enhance identification of annuitants in the Pension Risk Transfer Business and
“strengthen” reserves, and warned that the changes could be material to operations.
Class action securities litigation followed, as well as regulatory actions by the states
of New York and Massachusetts, which have resulted in many millions of dollars of
fines and restitution payments imposed upon the Company. The complaint alleges
that the Defendants failed to adopt these procedures in a timely way, and should be
held liable for breach of duty.
The Defendant Directors here are protected by an exculpatory clause in the
corporate charter. In order for me to find it sufficiently likely that they are liable so
that demand is excused, therefore, the complaint must contain specific allegations of
fact from which I may infer that the Director Defendants’ actions or inaction were
in bad faith; that is, in conscious disregard of their duties. I find, however, that the
allegations that the Defendant Directors failed to ensure that the Company
3
supplemented or superseded the two-letter policy falls short of a specific pleading
of bad faith. Demand is not excused, therefore, and this matter is dismissed.
I. BACKGROUND1
A. The Parties
Nominal Defendant MetLife is a Delaware corporation with its headquarters
in New York.2
The Plaintiffs in this consolidated class action were, at all relevant times,
owners of MetLife common stock.3
The Consolidated Verified Stockholder Derivative Complaint (the
“Complaint”) names nine currently serving directors on the MetLife board of
directors (the “Board”) as Defendants. Defendant Cheryl W. Grisé has been a
director since 2004.4 Defendant Carlos M. Gutierrez has been a director since 2013.5
Defendant David L. Herzog has been a director since 2016.6 Defendant R. Glenn
1
I draw all facts from the Plaintiffs’ Consolidated Verified Stockholder Derivative Complaint,
Docket Item (“D.I.”) 24 (the “Complaint” or “Compl.”) and documents incorporated therein. See
in re Morton’s Rest. Grp., Inc. S’holder Litig., 74 A.3d 656, 658–59 (Del. Ch. 2013) (permitting
consideration of documents incorporated into complaint in motion to dismiss). As discussed
further below, all well-pled facts are considered true for the sake of this motion.
2
Compl., ¶ 48.
3
Id. ¶ 23.
4
Id. ¶ 24. Grisé serves on the Audit Committee and the Compensation Committee. Id.
5
Id. ¶ 25. Gutierrez serves on the Governance & Corporate Responsibility and Investment
Committees. Id.
6
Id. ¶ 26. Herzog serves as the chairman of the Audit Committee and as a member of the Finance
& Risk, Executive, and Compensation Committees. Id.
4
Hubbard has been a director since 2007.7 Defendant Edward J. Kelly, III has been
a director since 2015.8 Defendant William E. Kennard has been a director since
2013.9 Defendant James M. Kilts has been a director since 2005.10 Defendant
Catherine R. Kinney has been a director since 2009.11 Defendant Denise M.
Morrison has been a director since 2014.12 The Plaintiffs did not name three other
current directors as defendants because those directors joined after the events at
issue: Gerald L. Hassell, Diana McKenzie, and Michael A. Khalaf.13 I refer to the
nine current director Defendants and the three non-defendant directors together as
the “Demand Board.”
In addition to the nine current directors, the Complaint names five former
directors. Defendant Hugh B. Price was a director from 2003 through 2014.14
7
Id. ¶ 27. Hubbard serves on the Executive, Governance & Corporate Responsibility, Investment,
and Finance & Risk Committees. Id.
8
Id. ¶ 28. Kelly III serves as the chair of the Finance & Risk Committee and as a member of the
Audit, Compensation and Executive Committees. Id.
9
Id. ¶ 29. Kennard is the chair of the Investment Committee, and a member of the Executive and
Finance & Risk Committees. Id.
10
Id. ¶ 30. Kilts serves as the chair of the Compensation Committee, and serves as a member of
the Executive, Governance & Corporate Responsibility and Investment Committees. Id.
11
Id. ¶ 31. Kinney is a member of the Audit and Finance & Risk Committees. Id.
12
Id. ¶ 32. Morrison is a member of the Compensation and Governance & Corporate
Responsibility Committees. Id.
13
Id. ¶ 32 n.10.
14
Id. ¶ 33. During his Board tenure, Price served on the Audit and Compensation Committees.
Id.
5
Defendant Alfred J. Kelly, Jr., was a director from 2009 through 2018.15 Defendant
Kenton J. Sicchitano was a director from 2003 through 2016.16 Defendant Lulu C.
Wang was a director from 2008 through 2016.17 Defendant John M. Keane was a
director from 2003 through 2014.18 MetLife’s certificate of incorporation contains
a 102(b)(7) clause exculpating MetLife Directors from breaches of the duty of care.19
Defendant Steven A. Kandarian started with the Company in 2005 and
became CEO in 2011 and Chairman of the Board in 2012.20 Kandarian retired on
April 30, 2019.21
In addition to Kandarian, the Complaint names six current and former officers
of MetLife as defendants. Defendant William J. Wheeler was President, U.S.
15
Id. ¶ 34. During his Board tenure, Kelly, Jr. served on the Audit, Compensation, and Finance
& Risk Committees. Id.
16
Id. ¶ 35. During his Board tenure, Defendant Sicchitano served on the Audit and Finance &
Risk Committees. Id.
17
Id. ¶ 36. During her Board tenure, Wang served on the Finance & Risk Committee. Id.
18
Id. ¶ 37. During his Board tenure, Defendant Keane served on the Audit Committee. Id.
19
See Opening Br. In Support of Defs.’ Mot. To Dismiss Consolidated Verified Stockholder
Derivative Compl., D.I. 33 (“Defs.’ Opening Br.”), at 13 n.7 (“Director Defendants are exculpated
from personal liability for [a breach of the duty of care] claim under MetLife’s Certificate of
Incorporation to the full extent authorized by Section 102(b)(7) of the Delaware General
Corporation Law.”). The Defendants did not attach a copy of the certificate of incorporation to
their papers, but the Plaintiffs do not dispute in the Complaint or in briefing that the charter
contains a 102(b)(7) clause. See Pls.’ Answering Br. in Opp’n to Defs.’ Mot. to Dismiss, D.I. 35
(“Pls.’ Answering Br.”), at 52 (“Unlike the Director Defendants, however, the Officer Defendants
are not exculpated by 8 Del. C. § 102(b)(7). . .”).
20
Compl., ¶ 39.
21
Id. ¶¶ 7, 39.
6
Business, from 2011 through approximately 2015.22 Defendant John C.R. Hele was
MetLife’s Executive Vice President and Chief Financial Officer from 2013 through
2017.23 Defendant Steven J. Goulart is MetLife’s Executive Vice President and
Chief Investment Officer.24 Defendant Maria Morris replaced Wheeler as head of
MetLife’s U.S. Business from April 2015 through June 2017.25 Defendant Robin F.
Lenna was the Executive Vice President of MetLife’s Retirement and Income
Solutions business and its previous unit known as the “CBF” business.26 Defendant
Wayne Daniel was MetLife’s Vice President of U.S. Pensions.27 Daniel was
appointed in March 2014 and served in that position through December 2017 and
reported to Defendant Lenna throughout that period.28
I refer to Defendants Kandarian, Grisé, Gutierrez, Herzog, Hubbard, Kelly III,
Kennard, Kilts, Kinney, Morrison, Price, Kelly, Jr., Sicchitano, Wang, and Keane as
the “Director Defendants.” I refer to Defendants Wheeler, Hele, Goulart, Morris,
Lenna and Daniel as the “Officer Defendants.”
22
Id. ¶ 40. Wheeler retired in 2015. Id.
23
Id. ¶ 41. Hele retired in May 2018. Id.
24
Id. ¶ 42.
25
Id. ¶ 43.
26
Id. ¶ 44. Lenna retired in March 2018. Id.
27
Id. ¶ 45.
28
Id.
7
B. Factual Background
1. MetLife’s Pension Risk Transfer Business
MetLife is a global financial services company. 29 Approximately thirty-five
percent of MetLife’s earnings come from its business in the United States.30 Its
operations in the United States fall into three businesses: Group Benefits, Retirement
and Income Solutions (“RIS”), and Property and Casualty.31 The RIS division
includes the “Pension Risk Transfer Business.”32 The Pension Risk Transfer
Business has been a part of MetLife’s U.S. business since 1921.33 In this line of
business, MetLife “acquire[s] the assets of defined benefit pension plans and
convert[s] them into group annuity contracts.”34 Through this transaction,
employers eliminate risks associated with carrying pension plans, and MetLife takes
on primary responsibility for paying funds to the beneficiaries of those plans, or
“annuitants,” as they reach retirement age.35 When payment obligations transfer to
29
Id. ¶ 75.
30
Id. ¶ 76.
31
Id.
32
Id. ¶¶ 75–77.
33
Id. ¶ 76.
34
Id. ¶ 75.
35
Id. ¶¶ 75, 77, 79. Under the Internal Revenue Code Section 401, to close out a defined benefit
plan such as a pension, the sponsor must either make a one-time lump sum payment to participants
or provide an annuity purchased from an insurer through a plan such as MetLife’s Pension Risk
Transfer Business. Id. ¶ 78.
8
MetLife, the employer makes a per-annuitant up-front payment to cover the
minimum group annuity reserve.36
Having assumed the obligation to pay annuitants, MetLife relies on
information provided by the employer to administer the group annuity contract and
to make payments under it.37 Because the group annuity contracts are transactions
between the employer and MetLife, the annuitants themselves are often unaware that
their pension obligations have transferred.38
According to the Complaint, the Pension Risk Transfer Business is an
important line of business for MetLife. In 2014, Defendant Daniel, then Head of
U.S. Pensions, called the Pension Risk Transfer Business “a core element of
MetLife’s business . . . for over 90 years.”39 He noted that the Pension Risk Transfer
Business has a forty-five percent market share of this financial service in the United
States.40 As of June 2016, MetLife was managing approximately $38 billion in
transferred pension liabilities.41 Several other Defendants acknowledged the market
36
Id. ¶ 82.
37
Id. ¶ 80.
38
Id. ¶ 81.
39
Id. ¶ 83.
40
Id.
41
Id.
9
share enjoyed by MetLife and indicated that the $1.5 to $2 billion annual sales from
the Pension Risk Transfer Business made it an attractive line of business.42
One of MetLife’s responsibilities in operating its group annuity contracts in
the Pension Risk Transfer Business is to identify when annuitants are entitled to
begin receiving payments and when those annuitants die.43 This process is important
because MetLife is legally and contractually obligated to maintain adequate funds
in pension reserve accounts to pay all future claims and liabilities arising from the
group annuity contracts.44 Once an annuitant is deemed deceased, however, MetLife
may release the benefits related to that annuitant into earnings.45
For many years, MetLife maintained the following process for identifying
when it owed annuitants benefits. First, MetLife acquired the addresses of the
annuitants from the employer at the time it acquired the pension obligations.46 It
generally did not attempt to maintain contact with the annuitants, seek updated
contact information, or verify that the addresses on file were current.47 MetLife sent
two letters to the annuitants at the address it had on file from the employer.48 It sent
42
Id. ¶ 84.
43
See id. ¶ 86.
44
See id.
45
Id. ¶ 90.
46
Id. ¶ 88.
47
Id. ¶¶ 87–88.
48
Id. ¶ 87.
10
the first letter when the annuitant reached age 65, and the second letter when the
annuitant reached age 70½.49 If it received no response to the first letter, it presumed
the annuitant had deferred retirement benefits beyond the normal retirement date.50
If it received no response to the second letter, it labeled the annuitant “Presumed
Dead” and released funds associated with that annuitant from the reserve accounts.51
MetLife made no follow-up efforts to confirm these presumptions, even if the letters
were returned undeliverable.52 As will be described in more detail below, the two-
letter notification procedure used to locate annuitants in the Pension Risk Transfer
Business led to repercussions and financial consequences for the Company.
2. Plaintiffs’ “Red Flags” of Inadequate Contact Procedures in the
Pension Risk Transfer Business
In the Complaint, the Plaintiffs identify seven items they contend should
have been “red flags” to the Board regarding the inadequacy of the two-letter
notification procedure in the Pension Risk Transfer Business.
49
Id.
50
Id. ¶ 89.
51
Id. ¶ 90.
52
Id. ¶ 87.
11
a. Item 1: Regulatory Guidance from the New York State
Department of Financial Services
The New York State Department of Financial Services (the “NYDFS”) is
MetLife’s primary government regulator.53 Allegations of unfair trade practices in
the life insurance industry spurred the NYDFS to undertake an inquiry regarding life
insurance benefits.54 In December 2011, the NYDFS issued a report finding that
some insurers, including MetLife, had retained money that ought to have been paid
to life insurance beneficiaries or policy holders.55 This report found that “life
insurers should regularly match life insurance policies against a reliable death list,
rather than just waiting for claims to be filed.”56 The insurers that undertook this
matching process discovered significant numbers of payees for whom claims had
not been filed, resulting in large additional payouts of benefits.57 In other words, per
the NYDFS report, insurers whose benefits pay on death—as opposed to the annuity
payments at issue here, that terminate upon death—should employ a reliable death
list.
Based on Section 308 of the New York Insurance Law, the NYDFS advised
that:
53
Id. ¶ 96.
54
Id. ¶ 94.
55
Id.
56
Id.
57
Id.
12
a cross-check of all life insurance policies, annuity contracts, and
retained asset accounts on [insurers’] administration data files,
including group policies for which an insurer maintains detailed insured
records, should be performed with the latest updated version of the U.S.
Social Security Administration’s Death Master File (“SSA-DMF”) . . .
to identify any death benefit payments that may be due under life
insurance policies, annuity contracts, or retained asset accounts as a
result of the death of an insured or contract or account holder. . .58
The SSA-DMF referenced above is the federal government’s master list of the
deceased.59 While the Complaint does not state whether the SSA-DMF is
comprehensive, it describes it as “a computer database file made available since
1980 that contains information on over 83 million deaths dating back to 1962 . . .
organized by name, birthdate and Social Security number. . .”60 The report also
found that some insurers utilized the SSA-DMF but only in conjunction with
stopping annuity payments and not to determine if death benefit payments were
due.61 In 2011, MetLife responded to a request from the NYDFS to match its
administrative records to the SSA-DMF and as a result “discovered $112 million in
unpaid benefits on the Company’s books that were owed to annuitants, beneficiaries,
or state unclaimed property divisions.”62
58
Id.
59
Id. ¶ 93.
60
Id.
61
Id. ¶ 94.
62
Id. ¶ 95.
13
b. Item 2: Investigative Hearing Testimony Before State
Insurance Commissioners
In 2008, the California Insurance Commissioner’s Office began investigating
whether insurers had adequate controls in place to monitor their accounts to comply
with unclaimed property laws.63 A number of MetLife executives testified at
investigative hearings in California and Florida in 2011 “on topics including life
insurance and individual and group annuities.”64 Todd Katz, MetLife’s Executive
Vice President of U.S. Business Insurance Products, testified that MetLife utilized
the SSA-DMF in the RIS division and in the Pension Risk Transfer Business.65
However, the RIS division used the SSA-DMF only to determine whether annuitants
had died for the purposes of stopping retirement payments; the RIS division did not
use the SSA-DMF to check whether annuitants presumed dead were in fact dead.66
Katz testified that MetLife had been using the SSA-DMF in this manner since the
late 1980’s and that it conducted a matching process once a month.67
Further testimony in these investigations showed that MetLife had a
formalized process to use the SSA-DMF in its group annuity line of business, and
that when the SSA-DMF showed that someone was deceased, MetLife passed that
63
Id. ¶¶ 99–100.
64
Id. ¶ 101.
65
Id. ¶ 102.
66
Id.
67
Id.
14
information along to its other lines of business.68 In other words, MetLife used the
SSA-DMF to find deceased annuitants so that it could stop payments, but it did not
use the SSA-DMF as a check on the presumption that an annuitant was actually
deceased after it sent the two notice letters, without reply, described above.69
c. Item 3: The 2012 Regulatory Settlement Agreement
The investigations by state insurance commissioners and the regulatory
guidance described above culminated in a Regulatory Settlement Agreement (the
“RSA”) between MetLife and several states’ insurance regulators.70 The RSA stated
that the investigations had uncovered issues with funds being timely paid to
beneficiaries in accordance with state insurance and unclaimed property laws.71 The
report identified “life insurance and endowment policies, annuities, [and] ‘Retained
Asset Accounts’” as areas with payment issues.72 The RSA focused on “the
Regulators’ findings that [led] to concerns about MetLife’s death benefit
practices.”73
68
Id. ¶ 103.
69
Id. ¶ 104.
70
Id. ¶ 107.
71
Id.
72
Id.
73
Id. ¶ 110.
15
The RSA specifically identified MetLife’s practice of using the SSA-DMF to
terminate benefits but not to verify whether death benefits should be paid.74 The
RSA noted the $112 million of unpaid death benefits that MetLife discovered as a
result of the NYDFS regulatory guidance.75 Ultimately, according to the Complaint,
under the RSA, “MetLife agreed to pay $438 million over the span of 17 years and
pay an additional $40 million for the costs of the investigation by the various
states.”76 MetLife agreed, as a part of the RSA, to implement internal policies to
help identify beneficiaries.77 It committed to conduct a “Thorough Search,” a
defined term that meant it would now utilize a variety of available methods to
discover and contact potential beneficiaries.78 The Thorough Search required
MetLife to use “any methodology believed likely to locate a Beneficiary,” including
“best efforts to identify . . . a current address for the Beneficiary based upon the
Company’s records,” a duty to “update the address using online search or locator
tools,” contact attempts by telephone and email, and a final certified mailing.79
74
Id.
75
Id.
76
Id. ¶ 111. The Defendants disagree that MetLife agreed to pay $438 million in payments in
connection with the RSA. For the purposes of this motion, however, I consider the Plaintiffs’
allegations as true.
77
Id.
78
Id. ¶ 112.
79
Id.
16
MetLife denied in the RSA that it had violated any insurance or unclaimed property
laws.80
Notably, the RSA specifically excluded MetLife’s Pension Risk Transfer
Business.81 It did so by defining “annuity contract” as “a fixed or variable annuity
contract other than a fixed or variable annuity contract issued to fund an
employment-based retirement plan where MetLife is not committed by the terms of
the annuity contract to pay death benefits to the beneficiaries of specific plan
participants.”82 Thus, the “Thorough Search” MetLife agreed to conduct under the
RSA applied to its life insurance and death benefits practices, but it did not apply to
the Pension Risk Transfer Business.83 The Plaintiffs allege that “[i]t is highly likely
that such exclusion was specifically approved by MetLife’s then-Board.”84 The
80
Id., Ex. C, Regulatory Settlement Agreement (“RSA”), Recitals (“[MetLife] denies any
wrongdoing or any violation of the Unclaimed Property Laws or the Insurance Laws of any of the
Signatory States or any other applicable law, but in view of the complex issues raised and the
probability that long term litigation and/or administrative proceedings would be required to resolve
the disputes among the Parties hereto, [MetLife] and the Signatory States desire to resolve
differences between the Parties as to the interpretation and enforcement of the Insurance Laws and
the Unclaimed Property Laws and all claims that the Departments have asserted or may assert with
respect to [MetLife’s] claim settlement practices based on the use, or lack of the use, of the [SSA-
DMF] or any other source or record maintained by or located in [MetLife’s] records regarding the
death of an Insured, Accountholder, Annuity Contract Holder, or annuitant[.]”).
81
Id. ¶ 113.
82
Id. (emphasis added). The double negative notwithstanding, the Complaint avers that the RSA
excluded the Pension Risk Transfer Business. Id. (“MetLife specifically negotiated with
Regulators to exclude pension risk transfer annuitants from the 2012 RSA. . .” (emphasis in
Complaint)).
83
See id.
84
Id.
17
Pension Risk Transfer Business continued using the two-letter contact procedure.85
Testimony from MetLife executives in the investigations suggests that MetLife’s
management considered adopting enhanced contact practices for the Pension Risk
Transfer Business, but decided not to do so.86 Although the RSA ultimately
concerned MetLife’s death benefit practices in its life insurance business, the
Plaintiffs allege that the regulatory actions ought to have revealed the need for
change in the Pension Risk Transfer Business because the regulators had
“specifically admonished [MetLife] for near identical administrative procedures in
an analogous line of business.”87
Of the ten Director Defendants on the Board at the time of the RSA in 2012,
four are members of the Demand Board.88 According to the Complaint, three more
Demand Board directors joined in 2013 and 2014, after the RSA but while the RSA’s
“implementation period” remained ongoing.89
85
Id. ¶ 114. The Plaintiffs point out that MetLife improved its procedures for annuitants who
entered contracts directly with MetLife and thus knew MetLife was responsible for benefits, but
left procedures unchanged for the Pension Risk Transfer Business contracts, in which annuitants
might not know MetLife was responsible for their plans. Id. ¶ 115.
86
Id. ¶ 116 (Katz testifying to insurance regulators that “[g]enerally in a similar way, we talked
about using it in the annuity business”; and “we do have a variety of systems and procedures across
our business that have been developed over some period of time that do inform other product
areas.”).
87
Id. ¶ 118.
88
Id. ¶ 117.
89
Id. ¶ 213. I note that the Plaintiffs include Kandarian in this group of seven, though they do not
allege that Kandarian was on the Demand Board.
18
d. Item 4: The New York Class Action
Later in 2012, MetLife, Kandarian, and four members of the Demand Board
were named defendants in a New York class action lawsuit, involving the issues
addressed in the RSA.90 In the answer filed in that lawsuit, they affirmed, “MetLife
has accessed the SSA-DMF for specific purposes since the 1980s.”91
e. Item 5: The Department of Labor Investigation and
MetLife’s Pilot Program
In 2015, the U.S. Department of Labor (“DOL”) opened an investigation in
response to pensioners asking why they were not receiving pension payments.92
Spurred by the DOL investigation, in December 2017 MetLife launched a discrete
internal program (the “Pilot Program”) that searched for its Pension Risk Transfer
Business annuitants using methods beyond the Company’s traditional two-letter
notice procedure.93 The Pilot Program’s goals were to maintain contact with
annuitants prior to their expected retirement dates as well as to “utilize more robust
procedures to locate and establish contact with deferred participants who have not
yet claimed a pension benefit.”94 The Pilot Program revealed that using additional
contact methods resulted in the discovery of a great number of living annuitants
90
Id. ¶ 120.
91
Id.
92
Id. ¶ 121.
93
Id.
94
Id. ¶ 123.
19
owed benefits.95 The Board discussed the findings from the Pilot Program at a
meeting in January 2018.96
f. Item 6: The Toland Litigation
In 1994, a former Martindale-Hubbell employee retired.97 MetLife owed him
retirement benefits, but it did not notify him he was eligible until 2012.98 He died in
2013.99 In 2016, his estate brought a FINRA arbitration against MetLife.100 MetLife
stated that it did not possess a current address prior to 2012.101
g. Item 7: The Internal Auditor’s Report
In September 2016, MetLife’s Executive Vice President & Chief Auditor
presented the Audit Committee with an “Internal Auditor’s Report.”102 According
to the report, the internal audit department had reviewed the “Corporate Benefits
95
Id. ¶ 122. The Plaintiff alleges that, “the pilot program determined that 42% of the 750
annuitants [i.e. the sample size] in the pilot were alive, underscoring the gross inadequacy of
MetLife’s policies and procedures.” Id.
96
Id. According to the Complaint, all Director Defendants attended except for Morrison. Id.
97
Id. ¶ 124.
98
Id.
99
Id.
100
Id.
101
Id. ¶ 125.
Id. ¶ 128. “Defendants Sicchitano, Grisé, Kinney, Kelly, Jr., and Kelly, III all served on the
102
Audit Committee and attended the September 26, 2016 meeting where this Internal Auditor’s
Report was presented.” Id. ¶ 131.
20
Funding’s … [Annuity Customer Experience] Platform Closeout Implementation
and Administration processes.”103 The Internal Auditor’s Report stated:
[C]ontrol weaknesses were identified over several areas, including
contract accuracy, manual certificate mailings, and retirement letter
mailings (e.g. age 65 and 70.5). Opportunities exist to enhance existing
controls to ensure timely processing of held and suspended payments
as well as retirements. Additionally, management should enhance
procedures to clearly identify when transaction processing for a
contract transfers to the Closeout Administration team.104
The Internal Auditor’s Report set a target date of December 31, 2016 to address the
problem.105 The Audit Committee took no further action regarding the report and
did not follow-up on the identified control weaknesses to see if they had been
remedied.106
According to the Complaint, two other internal MetLife activities indicate that
the Company had the opportunity to address the two-letter notification procedure.
A “valuation system upgrade,” complete by September 2015, revisited policies
regarding “reserve treatment of lives that are deferred past their normal retirement
age (i.e. age 65-70).”107 MetLife did not upgrade the policies for the Pension Risk
103
Id. ¶ 129 (alteration in Complaint).
104
Id. ¶ 130.
105
Id. ¶ 133.
106
Id.
107
Id. ¶ 136.
21
Transfer Business.108 Additionally, no procedure ensured that annuitants “presumed
dead” were sent a proof-of-life request, regardless of whether the annuity contract
required such a request.109
3. MetLife’s Board Committees and Codes of Conduct
Several Board committees were involved in overseeing operations and
making risk evaluations for the Company, including the Audit Committee, the
Compensation Committee, and the Finance & Risk Committee. 110 Each committee
possessed internal formalized codes of conduct that outlined its duties and
responsibilities.111 According to the Plaintiffs, abiding by these codes would have
led the committees to uncover and evaluate the shortcomings in the Pension Risk
Transfer Business.
The Audit Committee “oversees the Company’s compliance with legal and
regulatory requirements.”112 It “reviews with management, the internal auditor and
the independent auditor, the Company’s system of internal control over financial
reporting. . .”113 The Audit Committee’s charter reiterates these directives.114 The
108
Id.
109
Id. ¶ 137.
110
Id. ¶ 58.
111
Id. ¶ 59.
112
Id. ¶ 60.
113
Id.
114
Id. ¶ 61 (according to its charter, the Audit Committee evaluates “the adequacy and
effectiveness of the Company’s internal control over financial reporting, including any significant
22
Audit Committee also receives updates from management and the auditors about the
“status of any remediation plans for any material weaknesses and significant
deficiencies in the design and operation of internal control over financial
reporting.”115 It is responsible for discussing internal controls, financial reporting,
and any discrepancies in these areas with both management and the auditors.116
Additionally, the Audit Committee will discuss risk assessment and address material
communications from regulators and government agencies that relate to the
Company’s financial statements.117
The Compensation Committee approves the CEO’s compensation and
evaluates the CEO’s performance in light of compensation objectives.118 It also
approves compensation of other executive officers.119 This involves evaluating
compensation programs to ensure they do not encourage excessive risk-taking.120
deficiencies or material weaknesses in the design or operation of internal control over financial
reporting that could adversely affect the Company’s ability to record, process, summarize and
report financial information.”).
115
Id.
116
Id.
117
Id.
118
Id. ¶ 63.
119
Id.
120
Id. ¶ 64.
23
The Compensation Committee may seek recoupment of earnings if the employee
engages in misconduct.121
The Finance & Risk Committee oversees risk in all areas of MetLife’s
business.122 This includes financial matters, capital structure, plans, policies, and
strategic actions.123
Several internal codes of conduct at MetLife also govern the Defendants’
behavior. The Director Defendants were under the Director’s Code of Business
Conduct and Ethics, which required reporting “any violations of law or
governmental rule or regulation. . .”124 The Officer Defendants were under
MetLife’s Code of Conduct, which required, among other things, that officers “[b]e
aware of . . . legal and regulatory requirements” and “[d]isclose or raise concerns
about any potential violations of law or policy. . .” 125 Finally, MetLife’s Financial
Management Code of Professional Conduct, which applied to Defendants Kandarian
and Hele, required that they “take personal responsibility for conducting the business
endeavors of MetLife fairly, [and] promote a culture of honesty and accountability.
121
Id. ¶ 65.
122
Id. ¶ 67.
123
Id.
124
Id. ¶¶ 69–70.
125
Id. ¶¶ 71–72.
24
. .”126 This included the responsibility to “provide appropriate disclosures to
stakeholders,” “[c]omply with applicable laws, rules and regulations,” “monitor and
improve, MetLife’s processes to maintain effective internal control over financial
reporting,” and to “seek at all times to present all reasonably available material
information on a timely basis to management and others. . .”127
4. Repercussions from the Pension Risk Transfer Business
The effect of the two-letter notice procedure in the Pension Risk Transfer
Business meant that the letters sometimes failed to reach annuitants, with the result
that MetLife would erroneously mark those annuitants Presumed Dead and release
the funds associated with their retirement into income instead of holding those funds
in reserve assets.128 In short, some funds properly marked as liabilities transformed,
due to the inadequate notice procedures, into assets.129 In December 2017, MetLife
first disclosed these shortcomings in an 8-K, announcing that it would be
implementing new notice procedures that would require strengthening its reserve
assets.130 According to the 8-K, these new procedures could be “material to
[MetLife’s] results of operations.”131 The Company followed up with an investor
126
Id. ¶ 73.
127
Id.
128
Id. ¶ 152.
129
Id. ¶ 153.
130
Id. ¶ 154.
131
Id.
25
conference call, at which Defendant Hele reiterated that the updated outreach
procedures could lead to “material” changes in “results of operations.”132 The Wall
Street Journal published an article addressing the announcement, and it calculated,
based on the information provided in the notice, that the changes could result in
overdue benefits of up to $540 million.133
Litigation ensued. MetLife was the subject of a securities class action in
February 2018 in the Eastern District of New York.134 Also in February 2018, the
NYDFS examined MetLife’s Pension Risk Transfer Business, and in January 2019,
MetLife entered into a “settlement requir[ing] MetLife to pay a $19.75 million fine
to the state and $189 million in restitution to affected retirees.”135 This 2019
settlement agreement listed a paragraph of New York statutory and administrative
laws that the NYDFS asserted MetLife had violated.136 Additionally, in June 2018,
the Enforcement Section of the Massachusetts Securities Division sued MetLife, in
part regarding its Pension Risk Transfer Business procedures, resulting in a payment
132
Id. ¶ 155.
133
Id. ¶ 156.
134
Id. ¶ 141.
135
Id. ¶ 146–47.
136
Id., Ex. A., In re Metropolitan Life Ins. Co., No. 2019-0002-S, Consent Order, ¶ 5, Violations.
26
of $1 million in fines for violation of Massachusetts state laws.137 An SEC inquiry
is ongoing.138
On January 29, 2018, MetLife issued a press release announcing it would
revise previous financials to strengthen its reserves in an amount between $525
million and $575 million, including a $165 million to $195 million impact on its
2017 net income.139 In this press release, MetLife also disclosed the NYDFS
examination and the SEC inquiry.140
In an earnings call—disclosed in a February 2018 8-K—MetLife outlined
steps to remediate the inadequate annuitant contact procedures, which it labeled a
“material weakness.”141 In communications with the public, MetLife expressed that
the Company was “deeply disappointed that we fell short of our own high
standards.”142 On a conference call in February 2018, Kandarian called the
procedures in the Pension Risk Transfer Business an “operational failure that never
should have happened,” and “deeply embarrassing.”143 Kandarian noted on this call
that the “operational failure” had been ongoing for approximately twenty-five
137
Id. ¶¶ 143–45.
138
Id. ¶ 148.
139
Id. ¶ 157.
140
Id.
141
Id. ¶ 159.
142
Id. ¶ 161.
143
Id. ¶ 164.
27
years.144 The superintendent of the NYDFS noted that MetLife’s ongoing failure
was a failure “to adapt its protocols for paying claims in the modern era of worker
mobility: ‘What used to be standard protocol for finding retirees who are owed
benefits is no longer sufficient.’”145
CFO Hele retired in May 2018—according to the Plaintiffs, his retirement was
in response to these events.146 Internal documents show the Company estimates
paying around $50 million in legal and consulting fees for legal and corrective
measures.147 In its 2017 10-K, released in March 2018, MetLife reiterated that it had
“identified material weaknesses in MetLife, Inc.’s internal control over financial
reporting related to the administrative and accounting practices of certain [RIS]
group annuity reserves,” and, as a result, “MetLife, Inc. has not maintained effective
internal control over financial reporting as of December 31, 2017[.]” 148 These
material weaknesses implied that MetLife’s previous statements, dating back for
years, that its reserve funds were sufficient and its financials accurately stated, were
in fact inaccurate.149
144
Id. ¶ 165.
145
Id. ¶ 170.
146
Id. ¶ 173.
147
Id. ¶ 174.
148
Id. ¶ 176. This included overstating the Company’s revenue and income. Id. ¶ 177.
149
Id. ¶¶ 181–87.
28
In total, the inadequate procedures in the Pension Risk Transfer Business led
to the nonpayment of retirement benefits for 13,500 living retirees, or around 2.25%
of the 600,000 retirees whose pensions MetLife managed.150 MetLife presumed
these 13,500 annuitants dead and released reserve funds associated with their
pension benefits into income, resulting in “an approximately $510 million
overstatement of MetLife’s profits.”151
The Plaintiffs allege that these events constituted a breach of the Defendants’
fiduciary duties, resulting in both reputational and monetary damages to the
Company.152 The Plaintiffs also plead demand futility, arguing that a majority of the
Demand Board are “interested” in the litigation solely, as I read the Complaint,
“because they face a substantial likelihood of liability for their role in MetLife’s
improper misconduct.”153 In addition to claims of breach of fiduciary duty, the
Plaintiffs allege unjust enrichment against all Defendants and corporate waste
against the Director Defendants.154
150
Id. ¶ 179.
151
Id.
152
Id. ¶¶ 195–211.
153
See id. ¶¶ 212–30.
154
Id. ¶¶ 249–74.
29
C. Procedural History
Prior to consolidation, individual plaintiff groups filed separate books and
records actions under 8 Del. C. § 220 in the first half of 2018.155 The resulting
fiduciary actions were consolidated on August 16, 2019.156 The Plaintiffs filed the
consolidated Complaint on September 9, 2019.157 The Defendants filed their Motion
to Dismiss on October 11, 2019.158 After briefing completed, I heard argument on
May 5, 2020, after which I received supplemental submissions from the parties on
May 11, 2020.159 I considered the matter fully submitted at that time.
II. LEGAL STANDARDS
The Plaintiffs have filed a derivative complaint on behalf of the Company.
Under Delaware law, “[t]he business and affairs of every corporation . . . shall be
managed by or under the direction of a board of directors. . .” 160 As such, it is
typically the board’s prerogative to determine whether the corporation initiates and
maintains a lawsuit.161 In order “to displace the board’s authority over a litigation
155
Id. ¶¶ 188–91. The Plaintiffs allege the books and records produced by the Company were
inadequate. Id. ¶¶ 192–94.
156
Order for Consolidation of Cases, D.I. 21. The original cases were Lifschitz v. Kandarian, et
al., C.A. No. 2019-0452-SG and Felt v. Daniel, et al., C.A. No. 2019-0594-SG.
157
Consolidated Verified Stockholder Derivative Compl., D.I. 24.
158
Defs.’ Mot. to Dismiss Consolidated Verified Stockholder Derivative Compl., D.I. 32.
159
D.I. 45.
160
8 Del. C. § 141(a).
161
Hughes v. Hu, 2020 WL 1987029, at *9 (Del. Ch. Apr. 27, 2020) (“Directors of Delaware
corporations derive their managerial decision making power, which encompasses decisions
30
asset and assert the corporation’s claim,” a derivative plaintiff must do one of two
things.162 Either the plaintiff may make a pre-suit demand on the board, requesting
that it bring the action on behalf of the company, then demonstrate that the demand
was wrongfully refused by the board, or the plaintiff may plead that such a demand
would be futile because a majority of “the directors are incapable of making an
impartial decision regarding such litigation.”163
Where a plaintiff pleads demand futility, Court of Chancery Rule 23.1
requires the plaintiff to “allege with particularity . . . the reasons for the plaintiff’s
failure to obtain the action or for not making the effort [of placing a demand on the
board].”164 To plead demand futility, this Court requires “particularized factual
allegations” creating a “reasonable doubt that, as of the time the complaint is filed,
the board of directors could have properly exercised its independent and
disinterested business judgment in responding to a demand.”165 Thus, “the pleading
burden imposed by Rule 23.1 . . . is more onerous than that demanded by Rule
whether to initiate, or refrain from entering, litigation, from 8 Del. C. § 141(a).” (quoting Zapata
Corp. v. Maldonado, 430 A.2d 779, 782 (Del. 1981))).
162
Id. at *10 (citing Aronson v. Lewis, 473 A.2d 805, 811 (Del. 1984)).
163
Rales v. Blasband, 634 A.2d 927, 932 (Del. 1993).
164
Ct. Ch. R. 23.1.
165
Rales, 634 A.2d at 934.
31
12(b)(6).”166 “Though a complaint may plead a ‘conceivable’ allegation that would
survive a motion to dismiss under Rule 12(b)(6), ‘vague allegations are . . .
insufficient to withstand a motion to dismiss pursuant to Rule 23.1.’”167 In sum,
while a derivative plaintiff “need not plead evidence,” she “must comply with
stringent requirements of factual particularity that differ substantially from . . .
permissive notice pleadings.”168 In meeting the pleading requirements under both
rules, however, the plaintiff is entitled to all reasonable inferences in her favor.
Here, the Plaintiffs plead demand futility, arguing that a majority of the
members of the Demand Board169 face a substantial likelihood of liability regarding
these matters and are therefore incapable of making the decision as to whether the
Company should pursue the litigation.170 The Plaintiffs’ underlying theory of
liability is a breach of fiduciary duty claim under In re Caremark Int’l Inc.,171 based
166
In re Goldman Sachs Grp., Inc. S’holder Litig., 2011 WL 4826104, at *6 (Del. Ch. Oct. 12,
2011) (internal alterations omitted) (quoting McPadden v. Sidhu, 964 A.2d 1262, 1269 (Del. Ch.
2008)).
167
Id. (quoting McPadden, 964 A.2d at 1269). As explained in In re Goldman Sachs Grp., Inc.,
“[t]his difference reflects the divergent reasons for the two rules: Rule 12(b)(6) is designed to
ensure a decision on the merits of any potentially valid claim, excluding only clearly meritless
claims; Rule 23.1 is designed to vindicate the authority of the corporate board, except in those
cases where the board will not or (because of conflicts) cannot exercise its judgment in the interest
of the corporation.” Id.
168
Hughes v. Hu, 2020 WL 1987029, at *10 (Del. Ch. Apr. 27, 2020) (citing Aronson v. Lewis,
473 A.2d 805, 816 (Del. 1984); Brehm v. Eisner, 746 A.2d 244, 254 (Del. 2000)).
169
Defined in the factual recitation as Defendants Grisé, Gutierrez, Herzog, Hubbard, Kelly III,
Kennard, Kilts, Kinney, Morrison and non-parties Hassell, McKenzie, and Khalaf.
170
Compl., ¶¶ 212–30.
171
698 A.2d 959 (Del. Ch. 1996).
32
on the Board’s lack of oversight, as well as claims for unjust enrichment and
corporate waste secondary to a finding of a Caremark violation.172 Because the
Plaintiffs’ allegations center on the Board’s failure to act (rather than an affirmative
Board decision), the demand futility test in Rales v. Blasband, described above,
applies.173 Under the Rales test, to plead that directors are interested in the litigation
in a way that deprives them of independence, the Plaintiffs must allege facts showing
that a majority of directors on the Demand Board face a “substantial likelihood of
personal liability” in the action.174 Mere “potential directorial liability is insufficient
to excuse demand.”175 Of course, the fact that wrongdoing is alleged against the
directors themselves or that directors are named defendants in an action does not by
itself deprive them of independence;176 otherwise, compliance with Rule 23.1 in
derivative pleadings would be self-proving.
172
In other words, the Plaintiffs allege that where salaries or bonuses are paid to fiduciaries who
fail to act in compliance with Caremark obligations, that remuneration constitutes unjust
enrichment or waste.
173
See Hughes, 2020 WL 1987029, at *13 n.3 (collecting Delaware cases applying the Rales test
when the underlying allegations against the board are based on lack of oversight). The parties
agree that the Rales test applies, rather than the Aronson test, which deals with a subset of situations
in which an act or decision by the demand board is at issue. Though not at issue here, Vice
Chancellor Laster conducted a detailed examination of the interaction between the Rales and
Aronson tests in Hughes, 2020 WL 1987029, at *9–13.
174
Rales v. Blasband, 634 A.2d 927, 936 (Del. 1993).
175
In re Goldman Sachs Grp., Inc. S’holder Litig., 2011 WL 4826104, at *18 (Del. Ch. Oct. 12,
2011).
176
See Hartsel v. Vanguard Grp., Inc., 2011 WL 2421003, at *27 (Del. Ch. June 15, 2011); Jacobs
v. Yang, 2004 WL 1728521, at *6 n.31 (Del. Ch. Aug. 2, 2004).
33
III. ANALYSIS
The Defendants have moved to dismiss on two grounds: first, under Rule 23.1,
arguing that demand should have been made on the Board; and second, under Rule
12(b)(6), arguing that even if demand were excused, the Plaintiffs fail to state a claim
upon which relief can be granted. “Courts assess demand futility on a claim-by-
claim basis.”177 I examine the Rule 23.1 basis for each claim below. Finding that
analysis dispositive, I need not consider the Rule 12(b)(6) basis for dismissal.178
Below, I address, with respect to each Count, whether the Complaint contains
sufficient specific allegations from which I may infer a substantial likelihood of
liability on the part of a majority of the Demand Board, thus excusing demand.
A. Counts I and II: Breach of Fiduciary Duties
Under Caremark, “[t]he board of a Delaware corporation has a fiduciary
obligation to adopt internal information and reporting systems that are ‘reasonably
designed to provide to senior management and to the board itself timely, accurate
information sufficient to allow management and the board, each within its scope, to
reach informed judgments concerning both the corporation’s compliance with law
177
Kandell ex rel FXCM, Inc. v. Niv, 2017 WL 4334149, at *11 (Del. Ch. Sept. 29, 2017).
178
See In re Dow Chem. Co. Derivative Litig., 2010 WL 66769, at *1 n.1 (Del. Ch. Jan. 11, 2010)
(“demand futility under Rule 23.1 is logically the first issue for all derivative claims and if
plaintiffs cannot succeed under the heightened pleading requirements of Rule 23.1 ... there is no
need to proceed to an analysis of the merits of the claim under Rule 12(b)(6).”) (internal citations
and alterations omitted).
34
and its business performance.’”179 For Rule 23.1 purposes, Caremark liability is a
substantial likelihood for directors if the allegations of the complaint establish that
“(a) the directors utterly failed to implement any reporting or information system or
controls; or (b) having implemented such a system or controls, consciously failed to
monitor or oversee its operations thus disabling themselves from being informed of
risks or problems requiring their attention.”180 These are typically described as the
two “prongs” of a Caremark claim.
In Count I, the Plaintiffs allege the Director Defendants breached their
fiduciary duties by “knowingly or intentionally failing or refusing to implement
regulator-mandated remedial measures [prescribed for other business lines in the
2012 RSA] to MetLife’s pension risk transfer business and knowingly or
intentionally failing to put in place and/or monitor a reasonable system and controls
to ensure the identification of unresponsive and missing group annuity annuitants
and pension beneficiaries.”181 The Plaintiffs also allege that the Board had “actual
or constructive knowledge that MetLife’s internal controls were inadequate” and
“chose to do nothing about these deficiencies.”182 According to the Plaintiffs, the
179
In re China Agritech, Inc. S’holder Derivative Litig., 2013 WL 2181514, at *18 (Del. Ch. May
21, 2013) (quoting In re Caremark Int’l Inc. Derivative Litig., 698 A.2d 959, 970 (Del. Ch. 1996)).
180
Hughes v. Hu, 2020 WL 1987029, at *14 (Del. Ch. Apr. 27, 2020) (quoting Stone ex rel.
AmSouth Bancorporation v. Ritter, 911 A.2d 362, 370 (Del. 2006)).
181
Compl., ¶ 233.
182
Id. ¶ 234.
35
Board “consciously and in bad faith chose not to cause the Company to act in
accordance with positive law.”183 The Plaintiffs allege that a majority of the Demand
Board—seven members—served at the time of the 2012 RSA (or joined shortly
thereafter during its implementation period) and so lack independence.184 The
Plaintiffs ultimately allege that a total of nine members of the Demand Board also
lack independence due to their service on the Audit or Finance and Risk Committees
at the relevant times.185
The language from the Complaint quoted above is phrased broadly and
appears aimed at capturing both prongs of a Caremark claim. Thus, the Plaintiffs
allege both that the Director Defendants failed to put a system of internal controls in
place, and that they consciously disregarded evidence of corporate violation of
positive law or consciously ignored the systematic inadequacies that kept such
evidence from reaching them. Briefing and argument helped clarify the Plaintiffs’
183
Id. ¶ 235.
184
Id. ¶ 213. These members are Kandarian, Grisé, Gutierrez, Hubbard, Kinney, Kennard, and
Kilts. Id. The Plaintiffs allege that “[a]t the time Plaintiff Lifschitz’s complaint was filed, the
Board was comprised of eleven directors: Grisé, Gutierrez, Hassell, Herzog, Hubbard, Kelly, III,
Kennard, Khalaf (CEO), Kilts, Kinney, McKenzie and Morrison.” Id. By my count, this lists
twelve directors, not eleven. The Plaintiffs then allege that “More than half of the Board (7 out of
12 members) were members of the MetLife Board at the time of the 2012 RSA or shortly
thereafter,” and list Kandarian among that 7-member majority, even though they do not allege—
because he retired in April 2019—that Kandarian was a member of the Demand Board.
185
Id. The Plaintiffs implicate Director Defendants Herzog and Kelly, III in addition to the seven
(or six) Director Defendants serving on the Board at the time of the RSA or joining shortly
thereafter. Id. ¶ 222.
36
position, as they wisely focused solely on the second prong of Caremark.186 To the
extent the Plaintiffs attempt to put forward a claim under Caremark’s first prong, I
find that attempt fails.187 It is clear from the Complaint that MetLife had an extensive
network of internal controls.188 The Plaintiffs claim here is really that the Board
consciously failed to oversee and implement controls they knew were necessary to
regulatory compliance, by failing to ensure that the Company applied the “Thorough
Search” standard, to which it had agreed in the 2012 RSA, to the Pension Risk
Transfer Business.189 This bad-faith failure to act, per the Plaintiffs, led the
186
See Pls.’ Answering Br., at 24 (“Under the second prong of Caremark, [the Directors’]
conscious disregard of those red flags amounts to non-exculpated bad faith breach of their
fiduciary duties of oversight and loyalty.”). Count II of the Complaint brings breach of fiduciary
duty claims against the Officer Defendants. Compl., ¶¶ 240–48. I consider the Board’s ability to
consider Count II subordinate to Count I. The Plaintiffs do not argue that any Board members
were beholden to management in a way that would disable them from evaluating those claims,
assuming that they are not themselves likely subject to liability.
187
In their briefing, the Plaintiffs sometimes blend the language of the two Caremark prongs,
arguing that “[w]hen various matters of legal and regulatory importance arose, but no information
was flowing to the Board or its Committees, the Director Defendants should have known that there
were sustained and systematic failures of their oversight systems and controls.” Pls.’ Answering
Br., at 44. But the standard for a Caremark claim through a systematic failure to implement
controls is that the board “utterly failed to implement any reporting or information system or
controls.” Stone ex rel. AmSouth Bancorporation v. Ritter, 911 A.2d 362, 370 (Del. 2006).
188
The Plaintiffs allege that MetLife has an Audit Committee, as well as a Finance and Risk
Committee, and further alleges that these committees meet regularly (indeed, frequently), that they
have internal codes of conduct, and that the Audit Committee receives reports from MetLife’s
internal auditor. Compl., ¶¶ 60–62, 67–68, 128–33. Moreover, the Plaintiffs specifically allege
that other “red flags” such as the Pilot Program’s results, reached the Board level through internal
reporting systems. Compl., ¶ 122. Thus, to the extent the Plaintiffs allege the Board utterly failed
to implement a reporting system, such an allegation is contradicted by other specific allegations in
the Complaint.
189
The Plaintiffs chiefly allege an oversight claim. However, some language in the Complaint
suggests the Plaintiffs are alleging the Director Defendants purposefully caused the Company to
violate the law. “Where directors intentionally cause their corporation to violate positive law, they
37
Company to violate various regulatory provision via its conduct of the Pension Risk
Transfer Business.190
Director liability for an oversight claim under Caremark requires bad faith on
the part of the directors (where, as here, they are exculpated from liability for breach
of care).191 Inaction amounting to bad faith requires that “the directors knew that
they were not discharging their fiduciary obligations.”192 As is now “oft-repeated .
. . a Caremark claim is among the hardest to plead and prove.” 193 Regarding the
second Caremark prong—at issue here—a plaintiff can establish a board’s bad faith
by showing that it saw red flags related to compliance with law and consciously
disregarded those flags.194 This Court has noted that “red flags are only useful when
act in bad faith.” Kandell ex rel FXCM, Inc. v. Niv, 2017 WL 4334149 (Del. Ch. Sept. 29, 2017)
(quoting In re Massey Energy Co., 2011 WL 2176479, at *20 (Del. Ch. May 31, 2011)). The
Complaint alleges the “Board . . . turned a blind eye to management’s annuity nonpayment
scheme.” Compl., ¶ 16. The Plaintiffs’ allegation that comes the closest to such a “scheme” is the
allegation that I must infer that the Board specifically approved MetLife’s carving out the Pension
Risk Transfer Business from the “Thorough Search” required for other lines of business by the
2012 RSA. Id. ¶ 113. If this is the Plaintiffs’ contention—that in 2012 the Board acted specifically
to carve out the Pension Risk Transfer Business from a regulatory settlement so that MetLife could
continue acting illegally in that line of business—there are no specific factual allegations
supporting such a conclusion
190
As I understand the Complaint, the Plaintiffs charge the Defendant Directors with permitting
the Company to violate regulatory strictures, that is, to violate positive law. The Plaintiffs do not
appear to argue that Caremark can apply here to bad-faith failure to oversee business risk alone.
191
Stone ex rel. AmSouth Bancorporation v. Ritter, 911 A.2d 362, 370 (Del. 2006).
192
Id. (emphasis added).
193
In re Clovis Oncology, Inc. Derivative Litig., 2019 WL 4850188, at *12 (Del. Ch. Oct. 1, 2019).
194
Id. at *13 (citing South v. Baker, 62 A.3d 1, 16–17 (Del. Ch. 2012); In re Goldman Sachs Grp.,
Inc. S’holder Litig., 2011 WL 4826104, at *19 (Del. Ch. Oct. 12, 2011).
38
they are either waived in one’s face or displayed so that they are visible to the careful
observer,” keeping in mind that “the careful observer is one whose gaze is fixed on
the company’s mission critical regulatory issues.”195
The Plaintiffs run seven different “red flags” up the Caremark flagpole in the
Complaint and in briefing. At oral argument, however, they contained their
presentation to two of these red flags: the 2012 RSA and the 2016 Internal Auditor’s
Report.196 I agree with the Plaintiffs’ flag-parsing, and I focus chiefly on those two.
However, mindful of the potential that notice of wrongdoing or lack of control
communicated to the Board ought to be viewed cumulatively in order to assess
potential bad faith, I group six of the red flag incidents into two related groups, and
view them through a cumulative lens.197
195
Clovis, 2019 WL 4850188, at *13 (quoting Wood v. Baum, 953 A.2d 136, 143 (Del. 2008); In
re Citigroup Inc. S’holders Litig., 2003 WL 21384599, at *2 (Del. Ch. June 5, 2003), aff’d sub
nom. Rabinovitz v. Shapiro, 839 A.2d 666 (Del. 2003)).
196
See Tr. of 5.5.20 Telephonic Oral Argument on Defs.’ Mot. to Dismiss (“Oral Argument Tr.”),
at 33:8–15 (“We’re going to focus on two of the red flags discussed in the complaint today.”).
197
The remaining purported “red flag” the Plaintiffs cite is an arbitration proceeding against the
Company, the “Toland litigation.” The Plaintiffs allege that an annuitant, Mr. Toland, was entitled
to pension payments for many years after he retired, but MetLife did not pay annuities until one
year before his death, presumably because the two-letter notification system failed. Compl., ¶ 124.
His estate brought FINRA arbitration against MetLife. Id. The Plaintiffs appear to offer this “red
flag” more to put a human face on the problem than to suggest oversight liability. There is no
allegation that the arbitration with this single annuitant’s estate reached the board level, nor is there
reason to infer that it likely did so. The existence of this litigation does nothing to indicate director
inaction in the face of a known duty.
39
1. “Red Flags” 1-4 (Regulatory Action and the 2012 RSA)
The Plaintiffs’ first four “red flags” relate to regulatory action and subsequent
securities litigation directed at MetLife in 2011 and 2012. These are fully described
above; I restate the events briefly here. In 2011, MetLife executives testified at
investigative hearings before state regulators related to life insurance and annuity
practices.198 That investigative action asked specific questions about MetLife’s use
of the Social Security “death list,” the SSA-DMF.199 In 2011, the NYDFS issued
guidance to MetLife and other insurers that they should use the SSA-DMF to
actively search for death benefit claims.200 At the request of the NYDFS, MetLife
conducted such a search and discovered $112 million in unpaid death benefits.201
These investigations and the regulatory guidance culminated in MetLife’s 2012 RSA
with multiple states’ insurance regulators, under which it agreed to pay $40 million
to the states, distribute $438 million over 17 years for unpaid benefits, and
implement policy changes in its death benefit notice procedures.202 Those policy
changes required a Thorough Search, under which MetLife “began using certified
mail, electronic mail, the telephone, SSA-DMF, and online databases to identify and
198
Id. ¶¶ 99–102.
199
Id. ¶¶ 102, 104.
200
Id. ¶ 94.
201
Id. ¶ 95.
202
Id. ¶¶ 107, 110–13.
40
contact annuitants.”203 In the RSA, MetLife denied any legal violations.204
Afterward, four members of the Demand Board were named in a class action
securities lawsuit, apparently based on the facts underlying the RSA.205
Nothing in the investigations or the RSA put those who became aware of them
on direct notice of deficiencies in the Pension Risk Transfer Business and its tracking
of annuitants. That business was an old line at MetLife, and the two-letter notice
system had been in place for years. Meanwhile, MetLife was also in the life
insurance business, and was allegedly paying death benefits only when informed (by
estate administrators or others) that an insured had died. Through the RSA, the
NYDFS ensured that MetLife would take an active role, by monitoring the SSA-
DMF and other means, in finding (and paying) decedent beneficiaries going forward.
The Plaintiffs consider—rightly, in my view—that life insurance and Pension
Risk annuities are “analogous” lines of business within MetLife. Their argument is
that anyone familiar with the RSA would conclude that it would also be prudent to
use the SSA-DMF and other enhanced methods of contact like email, telephone, and
online search tools as a negative check on the presumption that annuitants not
203
Id. ¶ 113.
204
See RSA, Recitals.
205
Compl., ¶¶ 120, 217–18.
41
responding to the two notice letters were dead.206 That it would occur to a prudent
person that the SSA-DMF and updated contact procedures would be useful in that
regard is plausible. As the Plaintiffs point out, the Superintendent of the NYDFS
stated that use of the tools at hand was important in light of enhanced technology
and increased residential mobility on the part of pensioners: “What used to be
standard protocol for finding retirees who are owed benefits is no longer
sufficient.”207 But the failure to recognize that use of the SSA-DMF in one way in
one line of business made it wise to use it differently in another, and the failure to
modernize other administrative contact procedures, even if those failures imply
unwise or imprudent management, does not thereby also imply bad faith. I cannot
assume the use of the SSA-DMF as a negative check on a death assumption for
pension annuities is so strongly suggested by its use to identify life insurance
beneficiaries that failure to make that logical leap is an indicator of bad faith.
Plaintiffs ask me to impute to the Defendant Directors the knowledge that the state
regulators believed that it was unlawful to avoid prompt payment of death benefits
by ignoring the SSA-DMF and other opportunities to contact beneficiaries. Even if
I do so, that would not imply that failure to use the SSA-DMF and those other
206
See Pls.’ Answering Br., at 12 (“While [the regulatory proceedings] focused on life insurance
practices, these are the exact practices for which MetLife is now facing substantial liabilities in its
RIS Unit”; therefore, MetLife should have “taken steps to ensure [it] was complying with that
guidance across all of its insurance annuity and retained asset accounts, including the RIS Unit.”).
207
Id. ¶ 170.
42
modern contact methods as a check on assumptions of death in the Pension Risk
Transfer Business was so clearly unlawful that a failure to ensure its application
there amounts to bad faith.208
The other problem with relying on the RSA and the predicate investigations
to serve as red flags displayed before the Director Defendants is that, even if the
epistemological leap just referenced were appropriate, there are insufficient
allegations from which I may infer that knowledge of such was presented to the
Director Defendants themselves. The Complaint does not allege that the full Board
received notice of any of the regulatory actions at the time. The Plaintiffs here, to
their credit, made full use of Section 220 to inform their Complaint. In their briefing,
the Plaintiffs state that “the 220 Documents, including Board minutes, are silent”
about whether these regulatory actions “reached the Board’s attention.”209 In the
absence of specific facts indicating it was brought to the Board, the Plaintiffs rely on
a theory of “constructive knowledge,” alleging that it is “highly likely” the
regulatory actions made it to the Board given their significant legal nature.210 This
208
See Kandell ex rel FXCM, Inc. v. Niv, 2017 WL 4334149, at *17 (Del. Ch. Sept. 29, 2017)
(finding that it would be “perverse to hold directors responsible for knowledge of every regulation
or law that might impact their entity, or for every policy undertaken by corporate employees; that
is the basis for the scienter requirement and the focus on purported red flags implying director
knowledge.”).
209
Pls.’ Answering Br., at 39.
Compl., ¶¶ 105, 113; see Pls.’ Answering Br., at 39–45 (describing theory of “Constructive
210
Knowledge of . . . Red Flags”).
43
Court has generally rejected constructive knowledge of unlawful conduct as a theory
in demand futility cases.211 Additionally, the Plaintiffs put great weight on the
Company’s codes of conduct and the Board committee charters to argue that various
directors should have had knowledge or should have reported to the full Board, based
on their tasked oversight. “As numerous Delaware decisions make clear, an
allegation that the underlying cause of a corporate trauma falls within the delegated
authority of a board committee does not support an inference that the directors on
that committee knew of and consciously disregarded the problem for purposes of
Rule 23.1.”212
In contrast to these constructive or “should-have” theories of knowledge, the
Plaintiffs also allege that four members of the Demand Board were named
defendants in a New York federal class action that concerned the same issues as the
regulatory actions.213 Being named a defendant in an analogous action would
211
See Horman v. Abney, 2017 WL 242571, at *7 (Del. Ch. Jan. 19, 2017) (“Delaware courts
routinely reject the conclusory allegation that because illegal behavior occurred, internal controls
must have been deficient, and the board must have known so.” (quoting Desimone v. Barrows, 924
A.2d 908, 940 (Del. Ch. 2007))).
212
South v. Baker, 62 A.3d 1, 17 (Del. Ch. 2012) (citing Wood v. Baum, 953 A.2d 136, 142 (Del.
2008); In re Goldman Sachs Grp., Inc. S’holder Litig., 2011 WL 4826104, at *22–23 (Del. Ch.
Oct. 12, 2011); In re Citigroup Inc. S’holder Derivative Litig., 964 A.2d 106, 126–28 (Del. Ch.
2009); Rattner v. Bidzos, 2003 WL 22284323, at *12–13 (Del. Ch. Oct. 7, 2003); Desimone, 924
A.2d at 938).
213
Compl., ¶¶ 120, 217–18. This includes Director Defendants Kandarian, Grisé, Kilts, Hubbard,
and Kinney, all of whom except Kandarian were on the Demand Board. Id. ¶ 216.
44
provide directors with notice.214 It is therefore reasonable to infer that four
directors—a minority—on the Demand Board had actual knowledge of the
underlying regulatory issues. The Plaintiffs specifically argue, however, that the
implicated directors never made a report of this to the full Board.215
In the absence of specific factual allegations, as required under Rule 23.1, the
Plaintiffs require too many attenuated inferences to traverse from regulatory
guidance and settlements on the part of the Company, to bad faith on the part of any
director with regard to the Pension Risk Transfer Business. First, I would have to
infer that a majority of the Board had actual notice of the regulatory actions, when
the alleged facts only indicate that four members of the Demand Board had notice.
Then, I would have to infer that the Board was aware of positive law violations, or
that inaction would permit such violations, despite the fact that the regulatory
guidance does not point to a positive law violation, and that MetLife specifically
denied such violations in the RSA. After this, I would have to make the inference
that the Board took this knowledge of regulatory action and positive law violation
and understood that the same infirmities could be present in “administrative
214
See In re Fitbit, Inc. S’holder Derivative Litig., 2018 WL 6587159, at *16 (Del. Ch. Dec. 14,
2018), aff’d sub nom. Fitbit, Inc. v. Agyapong, 202 A.3d 511 (Del. 2019) (“Defendants’ exposure
in the federal Securities Action is also a relevant factor in the Rales analysis.”).
215
Pls.’ Answering Br., at 38–39 (“When they were named as defendants in that case in 2012 . . .
they, or general counsel, should have alerted the rest of the Board that the Company and its
directors and officers faced a substantial likelihood of personal liability for the unlawful RIS
conduct that was afoot . . . [i]t does not appear that this happened.” (internal citations omitted)).
45
procedures in an analogous line of business.”216 Then, finally, I would have to infer
from the absence of reform to these procedures in the “analogous line of business”
that the Board in bad faith ignored the red flags.
Such a line of inferences cannot not hold up under the demanding Rule 23.1
analysis, which requires specific factual allegations in order to draw an inference of
bad faith on the part of directors. “Demand will be excused only where the facts
alleged, together with reasonable inferences therefrom, if true make it substantially
likely that any illegality on the part of the Company arose from the directors’ bad
faith.”217 Here, what the Plaintiffs have alleged supports an inference of failure of
prudence on the part of the Defendants; and a lack of imagination, perhaps, sufficient
to understand the need to reform outworn administrative practices in one line of
business given similar deficiencies in another line. I cannot, however, draw the
inference that the regulatory actions were red flags that any director, assuming she
had notice, consciously disregarded in bad faith. Therefore, the regulatory actions
cannot serve as a basis for a substantial likelihood of liability.
216
See Compl., ¶ 118.
217
Kandell ex rel FXCM, Inc. v. Niv, 2017 WL 4334149, at *2 (Del. Ch. Sept. 29, 2017).
46
2. “Red Flag” 7 (The Internal Auditor’s Report) and “Red Flag” 5
(The Department of Labor Investigation and MetLife’s Pilot Program)
The second group of purported “red flags” include the allegation that in
September 2016, MetLife’s Chief Auditor presented the Audit Committee with the
Internal Auditor’s Report.218 That report stated:
[C]ontrol weaknesses were identified over several areas, including
contract accuracy, manual certificate mailings, and retirement letter
mailings (e.g. age 65 and 70.5). Opportunities exist to enhance existing
controls to ensure timely processing of held and suspended payments
as well as retirements. Additionally, management should enhance
procedures to clearly identify when transaction processing for a
contract transfers to the Closeout Administration team. 219
The Internal Auditor’s Report set a year-end target date to address the “control
weaknesses.”220 The Audit Committee did not follow up, and there is no indication
that the Report was brought to the attention of the Board.221 Three members of the
Demand Board were present at the Audit Committee meeting and reviewed the
Internal Auditor’s Report.222
218
Compl., ¶ 128.
219
Id. ¶ 130.
220
Id. ¶ 132.
221
See id. ¶ 133 (“based on the minutes produced in response to the 220 Demands, the Audit
Committee . . . took no further action regarding the identified deficiency.”); Pls.’ Answering Br.,
at 35 (“There is no evidence that the Audit Committee reported these control weakness findings to
the full Board.”).
222
Id. ¶ 131. “Director Defendants Sicchitano, Grisé, Kinney, Kelly, Jr., and Kelly, III” were
present. Id. Of these five, three—Grisé, Kinney, and Kelly, III—are on the Demand Board.
47
The Complaint also alleges that, around the same time period as the Internal
Auditor’s Report, the United States Department of Labor opened an investigation
into pensioners’ reporting that pensions were going unpaid, and that MetLife
responded to the investigation by creating a “Pilot Program” for the Pension Risk
Transfer Business.223 The Pilot Program eventually showed that the two-letter
notification system was inadequate, and proposed new methods to identify and pay
annuitants.224 The Board reviewed these findings in January 2018.225 By that point,
MetLife had publicly announced (a month before, in December 2017), the
shortcomings in its Pension Risk Transfer Business.226 Within a month of the
Board’s review of the Pilot Program, the Company announced it would revise
earnings, issued public apologies, and undertook remedial measures.227 Clearly, the
Board had notice of the DOL investigation and the Pilot Program in January 2018,
and MetLife identified, disclosed, and responded to the problem.
To recapitulate, several pertinent things occurred shortly before the time
MetLife filed the Form 8-K identifying weaknesses in its recognition of and payment
to Pension Risk Transfer annuitants, in late 2017. In September of the prior year,
223
Id. ¶¶ 121, 123.
224
Id. ¶ 122.
225
Id.
226
Id. ¶ 154.
227
Id. ¶¶ 154, 157, 161, 164.
48
the internal auditor informed the Audit Committee, with three members of the
MetLife Demand Board, about control weaknesses in the Pension Risk Transfer
Business, with a target to address the weaknesses by the end of 2016. The Audit
Committee failed to follow up thereafter. About this time, Company management
became aware of DOL’s investigation of pensioners’ complaints, and the Company
set up a “Pilot Program” to address ways of tracking and paying Pension Risk
Transfer annuitants. That Pilot Program demonstrated the insufficiency of the two-
letter notice system. The Board reviewed the Pilot Program’s finding in January,
2018, just after the Company filed the form 8-K identifying material weakness in the
Pension Risk Transfer Business. A few weeks later, the Company revised earnings
and addressed the problems. Then, in February 2018, the NYDFS brought a
regulatory action that resulted in the 2019 settlement.
The question before me is not whether the Director Defendants could have
saved the Company from embarrassment, fines and securities litigation had the
Board been informed of weaknesses at the time of the Internal Auditors’ Report, and
taken prompt action. I can infer that those things would have happened. My analysis
must be whether, given the scenario alleged in the Complaint and described above,
I may conclude a substantial likelihood of liability on the Directors’ part. That
likelihood, in turn, must depend on the Director Defendants acting in conscious
disregard of their duties. A failure to undertake immediate remediation of a reported
49
defect, even where immediate action would be wise, is not evidence of bad faith
unless it implies a need to act so clear that to ignore it implies a conscious disregard
of duty. Such a failure, obviously, can only occur with knowledge of the defect. In
the scenario described above, drawing all reasonable inference in favor of the
Plaintiffs, the implication of bad faith is absent.228
In sum, the Plaintiffs do not offer specific factual allegations from which I can
reasonably infer that the Board was aware of red flags and ignored them in bad faith.
As a result, the allegations do not support a reasonable inference of Caremark
liability. Given that the Board does not face a substantial likelihood of liability from
Counts I and II, it is capable of reviewing those claims on behalf of the Company.229
Thus, the Plaintiffs’ failure to make a demand on the Board is fatal to these claims,
and they must be dismissed.
228
The allegation closest to stating indifference in the face of a duty to act is that the Audit
Committee failed to ensure that the remediation called for in the Internal Auditor’s Report was
implemented, and its failure to bring the Internal Auditor’s Report to the attention of the full board.
Only three members of the Demand Board were present at the delivery of the Internal Auditor’s
Report to the Audit Committee, and so even to the extent that presentation of the Report implied
a duty to act, failure to comply would taint only a minority of the Demand Board.
229
As noted previously, the Plaintiffs do not allege that any Director Defendant lacked
independence from management, and so the Board could have brought its business judgment to
bear in review of the allegations of bad faith brought against MetLife officers in Count II.
50
B. Counts III through V: Unjust Enrichment and Waste
In Counts III and IV of the Complaint, the Plaintiffs assert unjust enrichment
claims against the Director and Officer Defendants.230 Count V is related; it charges
the Director Defendants with waste in failing to claw back compensation paid
unjustly to the Officer Defendants. The Plaintiffs allegation in Count III (against the
Director Defendants) is that the Director Defendants, having failed in their oversight
duties, nonetheless “were awarded lavish compensation that did not account for their
roles in subjecting the Company” to penalties and lawsuits related to the Pension
Risk Transfer Business.231 In other words, the unjust enrichment claim against the
Director Defendants is premised on the unjustness of compensation in light of the
Director Defendants’ bad-faith failure of oversight. Since I have found that the
Plaintiffs have failed to establish the likelihood of the latter, I must conclude that the
former claim is likely to fail as well. In similar circumstances, this Court has found
that “[t]he unjust enrichment claim . . . is thus properly conceived as a form of
additional damages dependent on the plaintiff proving the oversight claim. . .”232 To
evaluate a demand to bring these unjust enrichment claims, the Board would have to
first evaluate the validity of the underlying oversight claims. A Rule 23.1 analysis
230
Compl., ¶¶ 249–63.
231
Id. ¶¶ 249–52.
232
Hughes v. Hu, 2020 WL 1987029, at *17 (Del. Ch. Apr. 27, 2020).
51
for the unjust enrichment claim “thus necessarily treads the same path as the demand
futility analysis . . . implicate[s] the same conduct,” and, therefore, obtains the same
result.233 Given my finding above that the Demand Board is capable of reviewing a
demand for the breach of fiduciary duty claims, it is also capable of reviewing the
unjust enrichment claims. In that case, obviously, the Board could evaluate the
unjust enrichment claims against management as well, thus demand is not excused
for the waste and Officer Defendant unjust enrichment claims.234
IV. CONCLUSION
The Defendants’ Motion to Dismiss under Rule 23.1 is granted based on the
Plaintiffs’ failure to make a demand on the MetLife Board prior to filing the
derivative Complaint. An appropriate order is attached.
233
Id. at *18. The Plaintiffs acknowledge this in their briefing. See Pls.’ Answering Br., at 58
(“These unjust enrichment claims spring entirely from the alleged breaches of fiduciary duty. . .”).
234
I confess to not fully understanding the waste claim. Corporate waste occurs when a company
trades assets for consideration of no value, or so little value as to make the exchange beyond the
range of reason. E.g. Weiss v. Swanson, 948 A.2d 433, 450 (Del. Ch. 2008). If the claim here is
that the Director Defendants failed to bring an action to attempt to recoup salary and benefits paid
to faithless officers of the Company, that does not state a claim of waste.
52
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
)
IN RE METLIFE INC. DERIVATIVE ) Consol. C.A. No. 2019-0452-
LITIGATION ) SG
)
ORDER
AND NOW, this 17th day of August, 2020, for the reasons set forth
contemporaneously in the attached Memorandum Opinion dated August 17, 2020,
IT IS HEREBY ORDERED that the Defendants’ Motion to Dismiss is GRANTED.
IT IS SO ORDERED.
/s/ Sam Glasscock III
Vice Chancellor
In re MetLife Inc. Derivative Litigation
Combined Opinion