Delaware Court Blocks Discovery to Support Demand Futility in Boeing Suit

The Delaware Court of Chancery has clarified that derivative plaintiffs cannot obtain discovery to support allegations of demand futility when drafting their complaints.

Cooley reports that Vice Chancellor Morgan Zurn granted a motion to stay discovery in a case against Boeing’s directors and officers, Oklahoma Firefighters Pension and Retirement System v. Calhoun, et al. Zurn ruled that plaintiffs must rely solely on books and records obtained through a Section 220 demand at the pleading stage.

The decision limits plaintiffs’ ability to use discovery from parallel litigation to bolster their claims before surviving a motion to dismiss.

The issue stems from a January 2024 incident in which an Alaska Airlines Boeing plane suffered a door plug detachment mid-flight. Though no injuries occurred, the event led to multiple lawsuits, including a securities class action and a shareholder derivative action.

Plaintiffs in the Chancery Court sought access to documents already produced in a related federal case to support their claim that Boeing’s board failed to act, thus justifying a demand futility allegation.

Boeing’s legal team argued this would circumvent Delaware’s procedural safeguards and prematurely force discovery.

Vice Chancellor Zurn sided with the defense, outlining three key reasons for staying discovery: the plaintiffs already possessed documents from their Section 220 request; Delaware law presumes a board can manage corporate claims unless proven otherwise; and no exception applied to override the standard rule against early discovery.

She dismissed the plaintiffs’ fairness arguments, reinforcing that derivative actions must respect Rule 23.1.

The decision is in line with the reluctance of the Delaware Court to allow pre-dismissal discovery in derivative cases.

According to Cooley, “Corporations should maintain comprehensive and accurate records to potentially reduce the likelihood of being required to produce emails or texts in response to Section 220 demands.”