John Cumming v. Wesley R. Edens ( 2018 )


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  •    IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
    JOHN CUMMING, derivatively on behalf of                :
    NEW SENIOR INVESTMENT GROUP, INC.,                     :
    :
    Plaintiff,                 :
    :
    v.                                     : C.A. No. 13007-VCS
    :
    WESLEY R. EDENS, SUSAN GIVENS,                         :
    VIRGIS W. COLBERT, MICHAEL D. MALONE,                  :
    STUART A. MCFARLAND, CASSIA VAN DER                    :
    HOOF HOLSTEIN, FIG LLC, FORTRESS                       :
    OPERATING ENTITY I LP, FIG                             :
    CORPORATION, HOLIDAY ACQUISITION                       :
    HOLDINGS LLC, and FORTRESS                             :
    INVESTMENT GROUP LLC,                                  :
    :
    Defendants,                :
    :
    and                                     :
    :
    NEW SENIOR INVESTMENT GROUP, INC.,                     :
    :
    Nominal Defendant.         :
    MEMORANDUM OPINION
    Date Submitted: November 21, 2017
    Date Decided: February 20, 2018
    Jeffrey Gorris, Esquire, Christopher Foulds, Esquire and Christopher Quinn, Esquire
    of Friedlander & Gorris P.A., Wilmington, Delaware; David Wales, Esquire, David
    MacIsaac, Esquire and John Vielandi, Esquire of Bernstein Litowitz Berger &
    Grossmann LLP, New York, New York; Adam Warden, Esquire of Saxena
    White P.A., Boca Raton, Florida; Steven B. Singer, Esquire and Joshua H. Saltzman,
    Esquire of Saxena White P.A., White Plains, New York; J. Elazar Fruchter, Esquire
    of Wohl & Fruchter LLP, New York, New York, Attorneys for Plaintiff.
    Robert S. Saunders, Esquire, Ronald N. Brown, III, Esquire, Sarah R. Martin,
    Esquire and Elisa M.C. Klein, Esquire of Skadden, Arps, Slate, Meagher & Flom
    LLP, Wilmington, Delaware, Attorneys for Defendants.
    SLIGHTS, Vice Chancellor
    Plaintiff, John Cumming, is a stockholder of nominal defendant, New Senior
    Investment Group, Inc. (“New Senior”). He initiated this action derivatively on
    behalf of New Senior against members of the New Senior board of directors alleging
    they breached their fiduciary duties in connection with their approval of a transaction
    whereby New Senior acquired assets at an unfair price from an entity controlled by
    Fortress Investment Group, LLC (“Fortress”). Cumming asserts that a majority of
    the New Senior board was either interested in the transaction or disabled by conflicts
    arising from various relationships with a principal of Fortress, Wesley Edens.
    He further alleges that the transaction, comprised of three related and equally unfair
    elements, must be subject to the entire fairness standard of review. For both of these
    reasons, Cumming maintains that he is excused from demanding that the managers
    of New Senior assert these claims directly under either or both “prongs” of Aronson.1
    Defendants have moved to dismiss Cumming’s complaint under Court of
    Chancery Rules 23.1 and 12(b)(6). They argue he has failed to plead particularized
    facts to demonstrate demand excusal under Rule 23.1 and has failed to plead viable,
    non-exculpated claims that can survive their challenge under Rule 12(b)(6).
    I disagree.   The complaint pleads sufficiently particularized facts to create a
    1
    Aronson v. Lewis, 
    473 A.2d 805
    , 814 (Del. 1984) overruled on other grounds, Brehm v.
    Eisner, 
    746 A.2d 244
     (Del. 2000) (citing 8 Del. C. § 141(a)) (holding that demand on a
    board is excused where a plaintiff alleges particularized facts creating a “reasonable doubt”
    that either (1) a majority of the directors were disinterested and independent, or (2) the
    challenged transaction was a valid exercise of business judgment).
    1
    reasonable doubt that a majority of the New Senior board was disinterested or
    independent. It also pleads facts that support a reasonable inference that the
    defendants breached their duty of loyalty by approving a conflicted, unfair
    transaction, and thereby pleads a non-exculpated claim under 8 Del. C. § 102(b)(7).
    Finally, the complaint pleads a reasonably conceivable claim of aiding and abetting
    a breach of fiduciary duty against Fortress (and its affiliates) by alleging that
    Fortress, as seller, knowingly exploited conflicts of interest among members of the
    New Senior board in order to facilitate the transaction and thereby advance its own
    interests (and those of the interested directors) at the expense of New Senior
    stockholders. Accordingly, the motion to dismiss must be denied as to all counts of
    the complaint.
    I. BACKGROUND
    The relevant facts are drawn from the complaint’s well-pled allegations, the
    documents the complaint incorporates by reference and those matters I am permitted
    to consider by stipulation of the parties.2 For purposes of this motion to dismiss, the
    2
    EMSI Acq., Inc. v. Contrarian Funds, LLC, 
    2017 WL 1732369
    , at *1 (Del. Ch. May 3,
    2017). Plaintiff received certain documents from New Senior in response to a books and
    records demand. The parties agreed that documents produced in response to that demand
    would be deemed incorporated within the complaint whether or not referenced therein.
    Transmittal Aff. of Elisa M.C. Klein in Supp. of Defs.’ Opening Br. in Supp. of their Mot.
    to Dismiss Pl.’s Verified Am. Deriv. Compl. (“Klein Aff.”) Ex. 34 (Confidentiality
    Agreement) ¶ 7; Quinn Letter dated Nov. 16, 2017, Ex. 2, at 2. Notwithstanding this
    agreement, Plaintiff argues that Defendants have referred to materials outside of the
    produced or incorporated documents in resisting his motion to dismiss. Accordingly, he
    2
    Court accepts as true the well-pled facts in the Complaint and draws all reasonable
    inferences in Plaintiff’s favor.3
    A. Parties and Relevant Non-Parties
    Plaintiff, John Cumming, was a stockholder of New Senior at all relevant
    times and remains a New Senior stockholder today.4 He purports to bring this action
    derivatively on behalf of New Senior.
    Nominal Defendant, New Senior, is a Delaware corporation with its principal
    place of business in New York.5 It has no employees of its own.6 Rather, it is an
    externally-managed, publicly-traded real estate investment trust (“REIT”) that owns
    a portfolio of senior housing facilities totaling 154 properties across the United
    urges me to convert this motion into a motion for summary judgment, and then allow him
    to take discovery before addressing the motion. Pl.’s Answering Br. in Opp’n to Defs.’
    Mot. to Dismiss (“Pl.’s Answering Br.”) 17 n.8; Transcript of Oral Argument on Defs.’
    Mot. to Dismiss, Nov. 21, 2017, D.I. 33 (“Tr.”) 62:12–63:5. Consistent with this Court’s
    practice, beyond the four corners of the Verified Amended Derivative Complaint
    (“Complaint”), I have considered only those documents produced by New Senior in
    response to the Section 220 demand or incorporated by Cumming in his Complaint. “[I]f a
    document or the circumstances support more than one possible inference, and if the
    inference that [P]laintiff seeks is reasonable, then [P]laintiff [has] receive[d] the inference.”
    Amalgamated Bank v. Yahoo! Inc., 
    132 A.3d 752
    , 798 (Del. Ch. 2016). Thus, I decline
    Plaintiff’s invitation to convert this motion into a motion for summary judgment.
    3
    Wayne Cty. Empls.’ Ret. Sys. v. Corti, 
    2009 WL 2219260
    , at *8 (Del. Ch. July 24, 2009).
    4
    Verified Am. Deriv. Compl. (“Compl.”) ¶ 21.
    5
    Compl. ¶ 22.
    6
    Compl. ¶ 29.
    3
    States.7 New Senior was originally formed as a subsidiary of Drive Shack, Inc.
    (“Drive Shack”), which is another publicly-traded REIT managed and dominated by
    Fortress.8 New Senior was spun off from Drive Shack in November 2014.9
    Defendant, Fortress, is a global asset and investment management firm.10
    It was founded by, among others, Defendant, Wesley Edens (“Edens”), in 1998 and
    went public in 2007.11
    Defendant, Fig LLC (“FIG”), is New Senior’s manager and an indirect
    subsidiary of Fortress.12 FIG is wholly owned and managed by Defendant, Fortress
    Operating Entity I LP (“FOE I”).13 FOE I’s sole general partner is FIG Corporation
    (“FIG Corp.”), a wholly-owned Fortress subsidiary.14 FIG Corp. and Fortress’ three
    7
    Compl. ¶ 22.
    8
    Compl. ¶ 23.
    9
    Compl. ¶ 23.
    10
    Compl. ¶ 24.
    11
    Compl. ¶ 24. “As of April 2, 2015, Fortress, Edens and other New Senior insiders owned
    approximately 7.2% of New Senior’s outstanding stock.” Compl. ¶ 27.
    12
    Compl. ¶ 31. FIG also manages, inter alia, the Fortress funds that own Holiday, Drive
    Shack and Fortress investment funds that own a majority of Nationstar Mortgage Holdings,
    Inc. 
    Id.
    13
    Compl. ¶ 32.
    14
    Compl. ¶ 33. I note that the Complaint collectively refers to Fortress, FIG, FOE I and
    FIG Corp. as “Fortress.” Compl. ¶ 34. I have done my best to differentiate among the
    entities, when necessary, with help of the parties’ briefing and the incorporated documents.
    Otherwise, I adopt the convention utilized in the Complaint and refer to the Fortress entities
    4
    “principals” (including Edens) own 100% of FOE I’s limited partnership interests.15
    “Fortress, FIG, FOE I, FIG Corp., Drive Shack, and New Senior all operate out of
    the same offices.”16
    Defendant, Holiday Acquisition Holdings LLC (”Holiday”),17 “is the second
    largest private owner and operator of independent living communities for seniors in
    the United States.”18 In 2007, Holiday was acquired by Fortress Holiday Investment
    Fund (“FHIF”), a Fortress-managed private equity fund. Since then, it has been
    “controlled and majority-owned by Fortress,” primarily through FHIF.19
    At the time of the challenged transactions, New Senior’s board of directors
    (the “Board” or the “New Senior Board”) had six members: Edens, Susan Givens,
    collectively as “Fortress.” An organizational chart is attached as an appendix to this
    Memorandum Opinion.
    15
    Compl. ¶ 33. Fortress’ “principals” are Defendant Edens and non-parties, Peter L.
    Briger, Jr. and Randal A. Nardone. 
    Id.
    16
    Compl. ¶ 35.
    17
    The portfolio of properties at issue here belonged to and was sold by Holiday Retirement,
    which is alleged to be an affiliate of Holiday Acquisition Holdings LLC (the only named
    “Holiday” defendant in this matter). Compl. ¶ 3 n.2. Because of the interrelationship of
    the Holiday companies, the Complaint refers to “Holiday Retirement, with its affiliates,
    including Harvest Facility Holdings LP, Holiday Facility Holdings, LP, Holiday
    Acquisition Holdings LLC, and Holiday AL Holdings LP” collectively as “Holiday.” 
    Id.
    Once again, I will follow the Complaint and refer to the Holiday entities collectively as
    “Holiday.”
    18
    Compl. ¶ 36.
    19
    Compl. ¶ 36.
    5
    Virgis Colbert, Michael Malone, Stuart McFarland and Cassia van der Hoof
    Holstein, all of whom joined the Board by Fortress’ designation in October 2014.20
    The committee of New Senior’s board of directors organized to negotiate and
    consummate the transaction at issue here (the “Transaction Committee”) comprised
    Malone, Van der Hoof Holstein, Colbert and McFarland.21 As of the filing of this
    action, the Board consisted of seven members, the six members serving at the time
    of the challenged transaction and Robert Savage.22 Savage is not a defendant in this
    action.
    Defendant, Edens, is Fortress’ founder and one of its “Principals.”23 He is
    also Fortress’ largest stockholder24 and the co-chairman of its board of directors.25
    At Fortress, “Edens is responsible for Fortress’ private equity and publicly traded
    alternative investment businesses, which include both Holiday and New Senior.”26
    20
    Compl. ¶¶ 27, 37, 52, 60, 63, 134.
    21
    Compl. ¶¶ 14–17.
    22
    Compl. ¶ 134.
    23
    Compl. ¶¶ 23, 33. The Complaint alleges that the three-person control group of Fortress
    together owns approximately 45% of Fortress’ voting stock. Compl. ¶ 37.
    24
    According to the Complaint, “[a]s of April 6, 2016, [Edens] owned approximately 22.6%
    of Fortress’ Class A shares and about 27.2% of its Class B shares” making him Fortress’
    largest stockholder. Compl. ¶ 37.
    25
    Compl. ¶¶ 24, 33, 37.
    26
    Compl. ¶ 38.
    6
    Edens has been the Chairman of the New Senior Board since October 2014.27
    He also serves as a director of FIG Corp., as officer and general partner of the funds
    that own Holiday, and as a director of non-party, A&K Global Health LLC
    (“A&K”), which was founded by Fortress in 2011.28 Along with Givens, he was
    designated as one of two members of the New Senior Board’s pricing committee
    that determined the price of the equity offering used, in part, to fund the transaction
    at issue (the “Pricing Committee”).29
    Defendant, Givens, is New Senior’s CEO and a member of its Board.30
    Givens also serves as managing director of Fortress’ private equity group31 and holds
    interests in Holiday through Fortress’ private equity fund.32 She was New Senior’s
    lead negotiator in the acquisition of the portfolio of properties challenged here and,
    as noted, served on the two-person Pricing Committee alongside Edens.33
    27
    Compl. ¶ 37.
    28
    Compl. ¶¶ 33, 36, 39.
    29
    Compl. ¶ 6.
    30
    Compl. ¶ 41.
    31
    Compl. ¶ 41.
    32
    Compl. ¶¶ 41, 135. Givens did not disclose the amount of her ownership interest in
    Holiday in her director questionnaire. Transmittal Aff. of Christopher P. Quinn (“Quinn
    Aff.”) Ex. 2, at SNR00000108.
    33
    Compl. ¶ 41.
    7
    Defendant, Malone, served as Chairman of the Transaction Committee.34
    From 2008 to 2012, Malone served as managing director of Fortress.35 He also sits
    on the boards of directors of a Fortress-affiliated company, non-party Nationstar
    Mortgage Holdings (“Nationstar”), and Walker & Dunlop, which provided financing
    for the challenged transaction.36 Malone holds ownership interests in Fortress, New
    Senior and Walker & Dunlop.37 At the time of the challenged transaction, Malone
    had retired from his Senior Executive Banker and Managing Director positions at
    Bank of America after 24 years of service and, thus, did not have full-time
    employment.38 It is alleged he earned $1.7 million in director fees between 2012
    and 2015 from Fortress-managed companies.39
    Defendant, Van der Hoof Holstein, was added to the Transaction Committee
    by written consent after its inception.40 In addition to her service on the New Senior
    34
    Compl. ¶ 42.
    35
    Compl. ¶¶ 43–44.
    36
    Compl. ¶¶ 45–49.
    37
    Compl. ¶¶ 44, 50.
    38
    Klein Aff. Ex. 4 (2015 Proxy Statement), at 7.
    39
    Compl. ¶ 51.
    40
    Compl. ¶ 52.
    8
    Board, she also serves on the board of directors of A&K together with Edens.41
    Van der Hoof Holstein’s full-time employment is with Partners in Health (“PIH”), a
    nonprofit medical organization, where she has served as Chief Partnership
    Integration Officer since 2010.42 It is alleged that Edens’ wife serves on the board
    of directors of PIH and that the Edens family is a “trusted partner” of the
    organization, donating money and otherwise providing significant support for PIH’s
    worldwide relief efforts.43
    Van der Hoof Holstein has also served as Associate Director of the Global
    Health Delivery Partnership (“GHDP”) for the Department of Global Health and
    Social Medicine at Harvard Medical School since 2011.44            According to the
    Complaint, GHDP has received continued substantial support from Edens over many
    years.45
    Defendant, Colbert, was also a member of the Transaction Committee.46
    In addition to his service on the New Senior Board, Colbert “has served in a variety
    41
    Klein Aff. Ex. 4 (2015 Proxy Statement), at 8; Compl. ¶ 39.
    42
    Compl. ¶ 53.
    43
    Compl. ¶¶ 54–56.
    44
    Compl. ¶¶ 57–58.
    45
    Compl. ¶ 15.
    46
    Compl. ¶ 60.
    9
    of key leadership positions with Miller Brewing Company since 1979,” and
    “continues to serve as Senior Advisor to MillerCoors LLC.”47 He previously served
    on the boards of directors for several other companies.48 It is alleged that around the
    time Colbert became a member of the Board, Edens (as controlling owner) invited
    Colbert to join him as a co-owner of the Milwaukee Bucks (the NBA team), through
    Partners for Community Impact, LLC, and that Colbert accepted the invitation.
    Colbert now enjoys the unique opportunity of being a co-owner of an NBA
    franchise, along with approximately 24 others in the Bucks’ ownership group.49
    Defendant, McFarland, was the final member of the Transaction Committee.50
    McFarland also serves as a Fortress-designated director of Drive Shack, which, as
    mentioned, is managed by Fortress and was New Senior’s parent prior to the spin-
    off in November 2014.51 McFarland receives 60% of his publicly declared income
    47
    Klein Aff. Ex. 4 (2015 Proxy Statement), at 6.
    48
    Klein Aff. Ex. 4 (2015 Proxy Statement), at 6.
    49
    Compl. ¶¶ 60, 62.
    50
    Compl. ¶ 63.
    51
    Compl. ¶¶ 23, 63.
    10
    from his various board fees.52 He lists his address with the SEC for investment
    purposes (for non-Fortress investments) as “C/O Fortress Investment Group.”53
    B. New Senior’s Spin-Off
    New Senior was spun off from Drive Shack in 2014 (the “Spin-Off”).54 Prior
    to the Spin-Off, “Drive Shack was dominated by Fortress, as most of Drive Shack’s
    board and management were affiliated with Fortress.”55 Edens served as the
    chairman of Drive Shack’s board from 2002 until May 2016 and as its CEO from
    2002 until 2007.56 As part of the Spin-Off, Fortress “appointed all of New Senior’s
    directors, classified the Board with staggered terms, and severely curtailed the filling
    of director vacancies and the removal of directors.”57 It also “installed Fortress-
    affiliated personnel as the senior management of New Senior.”58
    52
    Compl. ¶ 63.
    53
    Compl. ¶ 63.
    54
    Compl. ¶ 3.
    55
    Compl. ¶ 26.
    56
    Compl. ¶ 26.
    57
    Compl. ¶ 27.
    58
    Compl. ¶ 28.
    11
    C. The FIG-New Senior Management Agreement
    “In conjunction with the Spin-Off, New Senior entered into a management
    agreement [] with Fortress’ subsidiary FIG[], pursuant to which FIG[] manages New
    Senior’s day-to-day operations.”59        Thus, all of New Senior’s management is
    employed by FIG. Under the management agreement, FIG receives compensation
    in the form of an annual management fee of 1.5% of New Senior’s gross equity as
    well as incentive compensation of 25% on New Senior’s returns above a certain
    threshold.60 The management agreement further provides that FIG is to receive 10%
    of the number of shares sold in any stock offering at the offering’s exercise price.61
    According to New Senior’s public disclosures, New Senior is “completely
    reliant on [FIG].”62 Thus, New Senior is “subject to the risk that [FIG] will terminate
    59
    Compl. ¶ 28. At the time of the challenged transaction, New Senior’s management team
    consisted of: (i) Givens, New Senior’s CEO and Fortress’ private equity group’s managing
    director; (ii) Justine Cheng, New Senior’s CFO, Treasurer and COO and also a managing
    director of Fortress’ private equity group, employed by Fortress since 2004; (iii) Julien P.
    Hontang, New Senior’s Chief Accounting Officer and managing partner of Fortress’
    private equity fund; and (iv) Cameron MacDougall, New Senior’s secretary and a
    managing partner and general counsel of Fortress’ private equity fund, employed by
    Fortress since 2007. Compl. ¶ 29.
    60
    Klein Aff. Ex. 1 (FIG Management Agreement), at 9. “Gross Equity” is defined as “for
    any period [] (A) the sum of (i) the ‘Total Equity,’ plus (ii) the value of contributions made
    by partners other than [New Senior], from time to time, to the capital of any subsidiary . . .
    less (B) any capital dividends or capital distributions . . . .” 
    Id.
    61
    Klein Aff. Ex. 1 (FIG Management Agreement), at 10.
    62
    Klein Aff. Ex. 25 (Preliminary Prospectus Supplement June 22, 2015), at S-22.
    12
    the Management Agreement and that [New Senior] will not be able to find a suitable
    replacement for [its] [m]anager in a timely manner, at a reasonable cost or at all.”63
    The public disclosures confirm that the management agreement was “not negotiated
    at arm’s length, and its terms, including fee payable, may not be as favorable to [New
    Senior] as if it had been negotiated with an unaffiliated party.”64
    D. The Challenged Transaction
    The transaction at issue here is more accurately described as three separate
    (but inextricably intertwined) transactions, each of which Plaintiff alleges was
    detrimental to New Senior. First, the overarching transaction was New Senior’s
    acquisition of a portfolio of properties (the “Holiday Portfolio”) from Defendant
    Holiday (the “Acquisition”) at an allegedly unfair price. Second, New Senior
    financed the Acquisition (in part) through an equity offering that allegedly favored
    Fortress to the detriment of New Senior. And third, New Senior entered into a
    property management agreement with Holiday to manage the Holiday Portfolio at
    allegedly higher-than-market rates (collectively the “Challenged Transactions”).65
    63
    Klein Aff. Ex. 25 (Preliminary Prospectus Supplement June 22, 2015), at S-22.
    64
    Klein Aff. Ex. 25 (Preliminary Prospectus Supplement June 22, 2015), at S-22.
    65
    New Senior and Holiday Acquisitions Holdings, LLC were the parties to the
    management agreement. Klein Aff. Ex. 35 (2016 Proxy Statement), at 26.
    13
    1. The Acquisition
    The Board was first made aware of the possibility of acquiring the Holiday
    Portfolio at a meeting on May 5, 2015.66 At that meeting, “Givens informed three
    members of the Board that Holiday had solicited bids for the sale of the Holiday
    Portfolio” and that she “expected to submit a bid” on New Senior’s behalf.67
    She also “indicated the expected price range for the portfolio.”68 In her presentation,
    Givens advised the Board that the Acquisition would be part of New Senior’s “key
    initiative” to “build pipeline and close on new acquisitions.”69 In response to
    Givens’ announced intentions, the Board discussed its plan to form a transaction
    committee “if [New Senior] were invited to proceed to the second round of
    bidding.”70
    When the Board next met to discuss the possible acquisition, on May 15, 2015,
    Givens reported that she had already made an opening non-binding bid of
    66
    This meeting was attended by “Fortress-affiliated members of New Senior’s
    management team.” Compl. ¶ 73 n.8. None of the Fortress-affiliated employees recused
    themselves from the meeting. Compl. ¶ 75. Neither Van der Hoof Holstein nor Edens
    were present. Compl. ¶ 73 n.8; Klein Aff. Ex. 5 (May 5, 2015 Board Minutes).
    67
    Compl. ¶ 73.
    68
    Klein Aff. Ex. 5 (May 5, 2015 Board Minutes).
    69
    Klein Aff. Ex. 6 (Board Presentation May 5, 2015), at SNR00000230-231.
    70
    Klein Aff. Ex. 5 (May 5, 2015 Board Minutes).
    14
    $660 million for the Holiday Portfolio.71 She then outlined the specifics of the bid,
    including that “Fortress and its affiliates would manage the Holiday Portfolio post-
    acquisition,”72 that “management had begun speaking to lenders about potential
    financing” and that, “in the event the Company won the auction, she would
    recommend conducting an equity offering in order to fund a portion of the purchase
    price.”73 Givens explained that Holiday was motivated to sell “because the funds
    that own a majority of Holiday [were] seeking to monetize their investments in order
    to return capital to [their] investors in the near term.”74 She closed by emphasizing
    that she expected the sales process to be “very competitive.”75
    Following Givens’ presentation and the Board’s discussion of the proposed
    acquisition, Cameron MacDougall, the Board’s Secretary and a managing director
    and general counsel of Fortress, outlined the process by which the Board should
    evaluate the proposed acquisition and answered Board member questions regarding
    71
    Compl. ¶¶ 73, 77; Klein Aff. Ex. 7 (May 15, 2015 Board Minutes). Plaintiff alleges that
    “Givens never explained how she calculated the $660 million bid amount.”
    Pl.’s Answering Br. 15. Indeed, the May 15 Board Minutes are silent as to how the bid
    was calculated. Klein Aff. Ex. 7.
    72
    Compl. ¶¶ 78–80, Klein Aff. Ex. 7 (May 15, 2015 Board Minutes), at 2.
    73
    Klein Aff. Ex. 7 (May 15, 2015 Board Minutes).
    74
    Klein Aff. Ex. 7 (May 15, 2015 Board Minutes), at 2.
    75
    Compl. ¶ 77.
    15
    applicable legal standards.76 The Board did not seek out or receive independent legal
    or financial advice at this time.77 Based on the information provided, the Board
    agreed to form the Transaction Committee at this meeting but did not actually do so
    until later.78 Edens recused himself from this May 15 meeting and declared that he
    would continue to recuse himself from meetings where the Board intended to discuss
    a potential acquisition of the Holiday Portfolio due to his affiliation with Fortress.79
    The Board met again on May 18, 2015, and again Givens requested that
    MacDougall advise the Board on its actions in evaluating the potential acquisition.80
    The Board decided that the Transaction Committee would comprise Malone, Colbert
    and McFarland. It was determined that Van der Hoof Holstein could not join the
    Transaction Committee at that time given her other commitments.81 While its
    members were selected, the Board, again, elected not to form the Transaction
    Committee at this meeting. The Board did, however, interview candidates to serve
    76
    Compl. ¶ 79; Klein Aff. Ex. 4 (2015 Proxy Statement), at 16; Klein Aff. Ex. 7 (May 15,
    2015 Board Minutes), at 2.
    77
    Compl. ¶ 79.
    78
    Compl. ¶ 79; Klein Aff. Ex. 7 (May 15, 2015 Board Minutes), at 2.
    79
    Compl. ¶ 74; Klein Aff. Ex. 7 (May 15, 2015 Board Minutes).
    80
    Compl. ¶ 81.
    81
    Compl. ¶ 81.
    16
    as independent counsel for the Transaction Committee, and ultimately decided to
    retain Davis, Polk & Wardwell (“Davis Polk”).82
    The next day, the Board finally resolved to form the Transaction Committee
    (comprising Malone, Colbert and McFarland, with Malone as Chairman) and
    delegated to this committee the full authority to consider and accept or reject the
    potential acquisition.83 During this meeting, the Board was informed, for the first
    time, of Givens’ interest in the transaction due to her indirect ownership interest in
    Holiday.84 Notwithstanding this revelation, it does not appear that the Board pressed
    for specifics regarding the extent of Givens’ interest in Holiday or the extent to
    which she would or should remain involved in the negotiations.85 While Givens
    recused herself from the meeting, she continued thereafter to function as New
    Senior’s lead negotiator.86
    On May 29, 2015, Givens learned that the two other bidders for the Holiday
    Portfolio had dropped out of the bidding process.87              Without input from
    82
    Compl. ¶ 81.
    83
    Klein Aff. Ex. 10 (May 19, 2015 Board Minutes), at SNR00000238; Compl. ¶ 82.
    84
    Compl. ¶ 82.
    85
    Compl. ¶ 82.
    86
    Compl. ¶ 82.
    87
    Compl. ¶ 83; Klein Aff. Ex. 11 (May 19, 2015 Committee Minutes). Plaintiff alleges
    that the documents produced in response to his books and records demand did not disclose
    any final bids from other potential bidders. Compl. ¶ 76; Pl.’s Answering Br. 17 n.8.
    17
    (or knowledge of) the Transaction Committee or the Board, Givens reduced New
    Senior’s bid by $20 million (to $640 million).88 The Transaction Committee was
    not informed of the revised bid until its first meeting on June 1, 2015, when Givens
    (who was in attendance along with three other Fortress-affiliated individuals)
    advised that the remaining bidders had dropped out, announced that she had
    unilaterally lowered the bid and declared that final bids were due on June 5, 2015,
    only four days later.89 Davis Polk was not in attendance at this meeting.90
    Givens explained that her reduced $640 million bid was “derived by applying
    the capitalization rate implied by the purchase price for the last portfolio marketed
    Having found nothing in the documents that contradicts this allegation, for purposes of this
    motion, I accept the allegation as true.
    88
    Compl. ¶ 83.
    89
    Compl. ¶¶ 85–86. Plaintiff and Defendants disagree whether the bids due on June 5 were
    still to be non-binding. Defendants assert that the bids were to remain non-binding, that
    the Transaction Committee was free to walk away from the Acquisition and that there is
    “no support in the Yahoo record that the company was committed to anything. It made a
    nonbinding proposal.” Tr. 11:6–8; Defs.’ Opening Br. in Supp. of the Mot. to Dismiss
    Pl.’s Verified Am. Deriv. Compl. (“Defs.’ Opening Br.”) 12–13. Plaintiff, on the other
    hand, asserts that none of the so-called Yahoo documents support the contention that the
    offer was “non-binding” and, therefore, I must either ignore Defendants’ assertion to the
    contrary or convert this motion into a motion for summary judgment. Pl.’s Answering
    Br. 17 n.9. At this stage, because the documents incorporated in the Complaint do not
    speak to the character of the bid provided to Holiday as of June 5, I will accept as true
    Plaintiff’s allegation that the bid was binding upon New Senior.
    90
    Compl. ¶ 98.
    18
    by Holiday and sold to Northstar Realty Finance Corporation [], which was 6.1%.”91
    In presenting this justification for the revised bid, Givens failed to “disclose whether
    Northstar was the only bidder for its asset purchase from Holiday” and wrongfully
    compared the Northstar deal occupancy rate, which was 90%, to the 87.6% rate
    purportedly implicated by the Holiday Portfolio.92            These flaws, according to
    Plaintiff, rendered the Northstar deal inapposite. Moreover, none of the values used
    by Givens to support her lowered bid were or could be independently verified.93
    As of this first meeting of the Transaction Committee, even though only New
    Senior remained in the process, Citigroup, the broker for the proposed acquisition,
    still had not declared New Senior as the winning bidder. Nevertheless, Givens
    advised the Transaction Committee that she expected that announcement to occur
    91
    Compl. ¶ 89.
    92
    Compl. ¶¶ 90, 92.
    93
    Compl. ¶ 91. Plaintiff alleges that “the minutes of the June 1, 2015 Transaction
    Committee meeting reflect no discussion or debate concerning whether New Senior’s
    enhanced bargaining position warranted a substantially larger reduction than a mere
    $20 million in New Senior’s initial $660 million bid.” Compl. ¶ 87. The minutes from
    that meeting state that “[t]he Transaction Committee engaged in a robust discussion
    regarding the information conveyed by Ms. Givens. They asked a variety of questions
    regarding the expected risks and benefits of the acquisition, the proposed capitalization
    rate, and the terms of the purchase agreement, and each question was answered to the
    Transaction Committee’s satisfaction.” Klein Aff. Ex. 11 (June 1, 2015 Committee
    Minutes), at 2. At this stage, drawing all reasonable inferences in Plaintiff’s favor, I find
    that the particularized facts pled support Plaintiff’s allegation that Givens was not pressed
    to justify her decision to reduce the bid by only $20 million.
    19
    soon.94 With the end of the process in sight, Givens suggested that the Transaction
    Committee select a financial advisor to assess the fairness of the proposed price and
    assured the Committee that, in the meantime, she would negotiate further favorable
    price adjustments.95 Givens ultimately negotiated an additional $5 million in capital
    expenditure adjustments.96
    At its June 2 meeting, the Transaction Committee retained Greenhill & Co.
    (“Greenhill”) as its financial advisor.97         The following day, Givens made a
    presentation to Greenhill in which she outlined the specific terms of the Acquisition
    and explained that the draft agreement did not contain a financing contingency
    because “New Senior had determined that agency financing was preferable.”98
    On June 16, 2015, the entire Board met to consider the Acquisition and to hear
    from Givens and Edens regarding their views in support of the transaction.99
    94
    Klein Aff. Ex. 11 (June 1, 2015 Committee Minutes), at 2.
    95
    Compl. ¶¶ 98–99.
    96
    Compl. ¶ 99.
    97
    Compl. ¶ 101; Klein Aff. Ex. 14 (June 2, 2015 Committee Minutes). Notably, Greenhill
    was not retained until after Givens had already submitted the final bid of $640 million.
    Compl. ¶ 101.
    98
    Compl. ¶ 102. Plaintiff is highly critical of the fact that no reason was given for failing
    to include a financing contingency in the final bid for New Senior’s protection, especially
    given its leverage as the sole bidder for the assets. 
    Id.
     Defs.’ Reply Br. in Further Supp.
    of Their Mot. to Dismiss Pl.’s Verified Am. Deriv. Compl. (“Defs.’ Reply Br.”) 18–19.
    99
    Klein Aff. Ex. 18 (June 16, 2015 Board Minutes).
    20
    Immediately following this Board meeting, the Transaction Committee met and,
    after a briefing by Givens, management left the meeting. 100 With management out
    of the room, Malone requested that Greenhill provide an overview of the
    transactional structure including an analysis of the conflicts of interest.101 Greenhill
    complied and then reviewed its preliminary analysis of the “fairness, from a financial
    point of view, to [New Senior] of the [c]onsideration to be paid.”102 This analysis
    included comparable transactions (although Greenhill noted that the senior living
    market made this “analysis relatively less meaningful”), a discounted cash flow
    analysis and the view of certain Wall Street research analysts.103 The meeting lasted
    about two hours.104
    On June 21, 2015, the meeting of the Transaction Committee once again
    began with a presentation from lead negotiator Givens, this time focused on the
    proposed financing plan and other more granular aspects of the Acquisition.105 After
    100
    Klein Aff. Ex. 19 (June 16, 2015 Committee Minutes). Van der Hoof Holstein began
    attending Transaction Committee meetings on June 10, 2015, although she was not
    designated as a member of the Committee until June 19. Compl. ¶ 103.
    101
    Klein Aff. Ex. 19 (June 16, 2015 Committee Minutes).
    102
    Compl. ¶¶ 102, 104; Quinn Aff. Ex. 5 (Greenhill Fairness Opinion), at 4; Klein Aff.
    Ex. 19 (June 16, 2015 Committee Minutes), at SNR00000248.
    103
    Klein Aff. Ex. 19 (June 16, 2015 Committee Minutes), at SNR00000249.
    104
    Compl. ¶¶ 102, 104; Quinn Aff. Ex. 5 (Greenhill Fairness Opinion), at 4.
    105
    Klein Aff. Ex. 22 (June 21, 2015 Committee Minutes).
    21
    management left the meeting, the Committee received Greenhill’s final fairness
    presentation and unanimously determined to recommend that the Board authorize
    the Acquisition.106 Immediately thereafter, the Board convened a meeting and
    approved the Acquisition with both Edens and Givens recusing.107 No stockholder
    vote was requested.108
    2. The Secondary Offering
    The Acquisition was financed in part by a secondary public offering of New
    Senior common stock (the “Secondary Offering”).109 The Board delegated the task
    of determining the terms of the Secondary Offering to Edens and Givens by
    resolution dated June 21, 2015, appointing them as the sole members of the Pricing
    Committee.110 On June 23, 2015, the Pricing Committee met for the first time and
    resolved to offer $266,973,360111 in equity at a price of $13.75 per share.112 Only a
    106
    Compl. ¶¶ 106–07; Klein Aff. Ex. 22 (June 21, 2015 Committee Minutes).
    107
    Klein Aff. Ex. 24 (June 21, 2015 Board Minutes), at SNR00000260–61.
    108
    Compl. ¶ 19.
    109
    Klein Aff. Ex. 24 (June 21, 2015 Board Minutes), at SNR00000266; Compl. ¶ 109.
    110
    Compl. ¶ 109; Klein Aff. Ex. 24 (June 21, 2015 Board Minutes), at SNR00000266.
    111
    Compl. ¶ 110.
    112
    Compl. ¶ 120. New Senior’s stock closed at $15.25 one day prior to the Secondary
    Offering. 
    Id.
     Neither the Board, the Transaction Committee nor the Pricing Committee
    ever questioned this discount. Compl. ¶ 113.
    22
    portion of the money raised through the equity offering was used to finance the
    Acquisition.113
    Edens and Givens received shares in the Secondary Offering totaling
    72,727,114 and FIG was granted a ten-year option to acquire 2,011,409 New Senior
    shares for the $13.75 offering price pursuant to its management agreement with New
    Senior.115 Greenhill did not assess the Secondary Offering as part of its fairness
    opinion and the Board was not apprised of either the number of shares to be offered
    or the offering price prior to approving the Acquisition.116 New Senior announced
    113
    Compl. ¶ 110. As discussed below, Plaintiff alleges Edens and Givens caused New
    Senior to offer more equity than was needed to complete the Acquisition out of self-
    interest. Compl. ¶ 111.
    114
    Compl. ¶ 122. The Complaint alleges that Edens, through a side agreement, was entitled
    directly to purchase 72,727 shares at the offering price and that an additional 102,917
    shares were allocated to certain employees and officers (also at the offering price) with
    14,545 shares allocated to Givens. 
    Id.
    115
    Compl. ¶ 121. The management agreement entitled FIG to 10% of the shares sold in an
    equity offering. Klein Aff. Ex. 1 (FIG Management Agreement).
    116
    Compl. ¶ 112; Quinn Aff. Ex. 5 (Greenhill Fairness Opinion), at 3. The June 21 Board
    Minutes state that MacDougall (not Davis Polk) “reviewed the terms of the equity offering”
    with the Board. Klein Aff. Ex. 24 (June 21, 2015 Board Minutes), at SNR00000261. Aside
    from that mention, the documents incorporated in the Complaint, contrary to Defendants’
    assertion, lead to the reasonable inference that the Board was not aware of the pricing of
    the shares to be sold in the equity offering prior to the creation of the Pricing Committee.
    See, e.g., Klein Aff. Ex. 24 (June 21, 2015 Board Minutes), at SNR00000267:
    RESOLVED, that the Board hereby approves the Offering and the sale and
    issuance of the Shares for a maximum aggregate offering price not to exceed
    $300 million (plus a 15% overallotment option) and on such other terms to
    be determined by the Pricing Committee . . .
    23
    the Secondary Offering on June 25, 2015.117 The market reacted poorly; New Senior
    stock closed at $14.14 on June 23 and dropped to $13.65 on June 26.118
    3. The Holiday Management Agreement
    As part of the Acquisition, Holiday and New Senior entered into a no-bid
    management agreement (the “Holiday Management Agreement”) under which
    Holiday would continue to manage the Holiday Portfolio.119                 The Holiday
    Management Agreement provided that Holiday would be compensated with 5% of
    New Senior’s revenues as well as an incentive fee of 20% above a designated
    threshold.120 These fees were significantly above market.121
    117
    Compl. ¶ 18. New Senior retained Citigroup as one of the underwriters and joint-book-
    running managers of the Secondary Offering even though Citigroup had represented
    Holiday and Fortress during the sale process leading up to the Acquisition. Compl. ¶¶ 114–
    15.
    118
    Compl. ¶ 18. Defendants contend that “[o]ver 60 potential investors submitted
    indications of interest in the Secondary Offering. Of those 60, nearly one-third placed a
    limit at or below $13.75 [per share]. Only 11 placed a limit above $13.75, and they only
    did so for an indication totaling less than $40 million, a woefully insufficient figure.”
    Defs.’ Opening Br. 20 (internal citation omitted).
    119
    Compl. ¶ 95.
    120
    Compl. ¶ 95; Klein Aff. Ex. 35 (2016 Proxy Statement), at 26.
    121
    Compl. ¶ 95 (“[C]ertain other managers charge a fixed amount of only 3% of revenues
    and certain other managers receive no incentive fee. As Givens conceded in her September
    2015 Interview, there are only ‘some cases’ where property managers are paid an incentive
    fee based on performance. Indeed, Holiday charges no incentive fee to New Senior for the
    ‘Hawthorn’ property portfolio that New Senior purchased from Holiday.”) (internal
    quotation omitted).
    24
    A Greenhill presentation made to the Transaction Committee indicates that
    the terms of the Holiday Management Agreement were first disclosed to the
    Committee during a June 2015 meeting.122               As with the Secondary Offering,
    Greenhill did not opine on the fairness of the Holiday Management Agreement.123
    Nor is there any indication that the Transaction Committee looked into or
    interviewed other managers for the Holiday Portfolio or even attempted to negotiate
    more favorable terms.124
    E. Fortress’ Alleged Interest in the Transactions
    Plaintiff alleges that Edens and Givens caused New Senior to enter into the
    Challenged Transactions to advance certain of Fortress’ own interests, including:
    (1) Fortress’ planned shift of assets to publicly-traded companies; (2) the
    approaching maturity date of FHIF (through which Fortress held its interests in
    Holiday); (3) the increase in FIG’s management fees resulting from the Secondary
    Offering; and (4) the increase in fees received through the Holiday Management
    Agreement as outlined previously. I discuss each briefly below.
    122
    Klein Aff. Ex. 12 (Transaction Committee Presentation: Holiday 28 Portfolio), at
    SNR0000038–39. The Complaint alleges that the Transaction Committee did not consider
    the Holiday Management Agreement and was not even apprised of its exact terms until
    after approval of the Acquisition. Compl. ¶¶ 96–97.
    123
    Quinn Aff. Ex. 5 (Greenhill Fairness Opinion), at 2.
    124
    Compl. ¶ 96.
    25
    1. The Planned Shift of Assets
    At the time of the Acquisition, Fortress was in the midst of a plan to shift its
    assets under management from private equity funds, like the funds that own Holiday,
    to its Permanent Capital Vehicles (“PCVs”), like New Senior.125 This shift would
    yield a greater return to Fortress because Fortress could “charge higher fees on the
    gross equity and operating results [of PCVs] . . . over a longer time period.”126
    Fortress disclosed this plan in a 2013 presentation where it outlined the “economic
    benefits of its ‘New Model.’”127 Presentations in 2014 and 2015 evidence Fortress’
    execution of the plan.128
    The sale of the Holiday Portfolio to New Senior was executed in furtherance
    of the New Model, as revealed in a statement made by Givens in an interview with
    Seniors Housing Business published in September 2015:
    New Senior has been, and we expect it will continue to be, Fortress’
    dedicated vehicle for investing in the seniors housing industry. While
    the private equity funds have a finite life to them, New Senior is one of
    the permanent capital vehicles at Fortress, given it is a public company
    with no time period upon which the equity has to be returned to
    investors.129
    125
    Compl. ¶ 72.
    126
    Compl. ¶¶ 9, 67, 70.
    127
    Compl. ¶ 67.
    128
    Compl. ¶¶ 70–71; Quinn Aff. Ex. 1 (Fortress Presentation), at 8–9.
    129
    Compl. ¶¶ 29, 66.
    26
    2. The Looming Maturity of FHIF
    Prior to the close of the Acquisition, Fortress was in need of liquidity because
    its fund, FHIF, through which it held its majority interest in Holiday, had a maturity
    date of January 2017, at which time FHIF was to return capital to its investors.130
    By selling the Holiday Portfolio to New Senior at an inflated price, Holiday seized
    an opportunity to facilitate the delivery of promised returns.131
    3. Increase of New Senior’s Gross Equity
    Plaintiff alleges that Fortress, Edens and Givens received unfair benefits from
    the $266 million Secondary Offering (of which only $175.3 million was used for the
    Acquisition) at the expense of New Senior in two ways: (1) the stock was offered at
    a “deep discount to the market price” and the offering included an award of options
    to Fortress, Edens and Givens at that discounted price; and (2) the Secondary
    Offering increased New Senior’s gross equity resulting in higher management fees
    to FIG (under pre-existing agreements) and a depressed New Senior share price, all
    compounded by the fact that Edens and Givens saw to it that more equity was issued
    than was needed to fund the Acquisition.132 Indeed, the increase of gross equity from
    130
    Compl. ¶ 4.
    131
    Compl. ¶ 4.
    132
    Compl. ¶¶ 6–8, 110–111, 115. The Secondary Offering caused New Senior’s market
    capitalization to drop by $100 million. Compl. ¶ 102.
    27
    the Secondary Offering led to an increase in FIG’s management fees from
    $8.5 million in 2014 to $14.3 million in 2015.133 Because the acquisition agreement
    did not contain a financing contingency, New Senior was locked into the Secondary
    Offering even if the market responded poorly to news of the Acquisition (which it
    did).134
    4. Holiday Benefits
    As noted, Givens arranged for Holiday to earn substantial fees through the
    Holiday Management Agreement.                 These fees benefited FHIF and ultimately
    Fortress.
    F. Procedural Posture
    Plaintiff filed his Verified Derivative Complaint on December 27, 2016.
    Defendants filed their first motion to dismiss on March 16, 2017. Plaintiff responded
    by filing his Verified Amended Derivative Complaint on June 8, 2017.135
    The Complaint has three counts: Count I asserts a breach of fiduciary duty claim
    against all of the directors of New Senior (excluding Robert Savage); Count II asserts
    a breach of fiduciary duty claim against Givens as an officer of New Senior; and
    133
    Compl. ¶ 119.
    134
    Compl. ¶ 113.
    135
    D.I. 12. See Del. Ct. Ch. R. 15(aaa).
    28
    Count III asserts an aiding and abetting breaches of fiduciary duty claim against
    Fortress, Holiday, FIG, FOE I and FIG Corp.
    Defendants now move to dismiss the Complaint for failure adequately to plead
    demand futility under Court of Chancery Rule 23.1 and failure to state a viable claim
    under Rule 12(b)(6). According to Defendants, Plaintiff cannot plead demand
    futility because a majority of the Board was disinterested and independent and the
    Challenged Transactions were products of valid exercises of the Board’s business
    judgment.136
    In riposte, Plaintiff argues that demand is excused as futile because there is
    reason to doubt (1) the disinterestedness and independence of a majority of the Board
    at the time of the filing of this action and (2) that the Challenged Transactions were
    otherwise the proper exercise of business judgment.137 Thus, Plaintiff argues he has
    satisfied both prongs of Aronson.138 As for the Rule 12(b)(6) motion, Plaintiff argues
    that he has pled sufficient facts to state claims for both breach of the duty of care and
    breach of the duty of loyalty. He also argues that entire fairness is the standard of
    review and that the pled facts support a reasonable inference of an unfair price and
    136
    Defs.’ Opening Br. 2–4.
    137
    In his first complaint, Plaintiff alleged that Fortress was a controlling stockholder of
    New Senior. The now-operative Complaint no longer makes that claim.
    138
    Aronson, 
    473 A.2d 805
    ; Pl.’s Answering Br. 41.
    29
    unfair process with respect to the Challenged Transactions.139 These same pled facts,
    according to Plaintiff, overcome Defendants’ Section 102(b)(7) defense.
    II. ANALYSIS
    There is no question that Cumming’s claims challenging the Board’s
    determination to acquire assets are derivative claims that ultimately belong to New
    Senior. It is appropriate, therefore, first to take up the threshold question of whether
    Cumming may bring these claims on behalf of New Senior. Because I find that
    Cumming has pled particularized facts that support a finding of demand futility such
    that he may bring this action derivatively, I must also consider whether he has stated
    viable claims to survive Defendants’ motion under Rule 12(b)(6). For the reasons
    that follow, I conclude that he has.
    A. Plaintiff Has Adequately Pled Demand Futility
    “[A] cardinal precept of the General Corporation Law of the State of Delaware
    is that directors, rather than shareholders, manage the business and affairs of the
    corporation.”140 As noted, Plaintiff’s claims here allege harm suffered by New
    Senior. The claims, therefore, belong to the Company and the decision whether or
    Pl.’s Answering Br. 62 (arguing that Defendants “cannot establish entire fairness on a
    139
    motion to dismiss”).
    140
    Aronson, 
    473 A.2d at 811
    .
    30
    not to pursue them typically would rest with the Board.141 A board of directors does
    not stand alone, however, in its authority to initiate litigation on behalf of the
    corporation.       In certain circumstances, stockholders may pursue litigation
    derivatively on behalf of the corporation as a matter of equity to “redress the conduct
    of a torpid or unfaithful management . . . where those in control of the company
    refused to assert a claim belonging to it.”142
    Because the derivative plaintiff who elects not to make a demand “seeks to
    displace the board’s authority,” it is appropriate to require that he plead
    particularized facts that “create a reasonable doubt” as to whether the board is fit to
    consider the demand.143 When the complaint challenges a business decision of the
    board, Aronson instructs that the derivative plaintiff meets his burden to plead
    demand futility by pleading particularized facts that create either (1) a reasonable
    doubt that the board of directors that would respond to the demand was disinterested
    and independent or (2) a reasonable doubt that “the challenged transaction was
    141
    White v. Panic, 
    783 A.2d 543
    , 550 (Del. 2001) (stating that “[i]n most situations, the
    board of directors has sole authority to initiate or to refrain from initiating legal actions
    asserting rights held by the corporation”).
    142
    Aronson, 
    473 A.2d at 811
    .
    La. Mun. Police Empls.’ Ret. Sys. v. Pyott, 
    46 A.3d 313
    , 351 (Del. Ch. 2012) (citation
    143
    omitted), rev’d on other grounds, Pyott v. La. Mun. Police Empls.’ Ret. Sys., 
    74 A.3d 612
    (Del. 2013).
    31
    otherwise the product of a valid exercise of business judgment.”144 The “reasonable
    doubt” standard articulated in Aronson is not the same as the burden of proof
    imposed upon the prosecution in a criminal case.145 It is, instead, a more literal
    distillation of the phrase meaning simply “that there is reason to doubt.”146
    Rule 23.1 places a heightened pleading burden on the plaintiff to meet
    “stringent requirements of factual particularity that differ substantially from the
    permissive notice pleadings” embodied in Court of Chancery Rule 8 and that
    animate Court of Chancery Rule 12(b)(6).147 Even so, the court is still “bound to
    draw all reasonable inferences from those particularized facts in favor of the
    plaintiff, not the defendant, when dismissal of a derivative complaint is sought.”148
    144
    Aronson, 
    473 A.2d at 814
    .
    145
    Grimes v. Donald, 
    673 A.2d 1207
    , 1217 (Del. 1996).
    146
    
    Id.
     Grimes explains that another way to construe Aronson’s “reasonable doubt”
    standard is to inquire whether the stockholder has articulated “a ‘reasonable belief’
    (objectively) that the board lacks independence or that the transaction was not protected by
    the business judgment rule.” 
    Id.
     The standard is “sufficiently flexible and workable to
    provide the stockholder with the ‘keys to the courthouse’ in an appropriate case where the
    claim is not based on mere suspicions or stated solely in conclusory terms.” 
    Id.
    147
    Brehm, 
    746 A.2d at 254
    .
    148
    Del. Cty. Empls. Ret. Fund v. Sanchez, 
    124 A.3d 1017
    , 1022 (Del. 2015); Pyott, 
    46 A.3d at 351
     (explaining that the “requirement of factual particularity does not entitle a court to
    discredit or weigh the persuasiveness of well-pled allegations” and that Plaintiff must only
    plead specific facts and is not required to plead evidence or “facts sufficient to sustain a
    ‘judicial finding.’”).
    32
    Plaintiff did not make a demand on the Board. Therefore, as he must, he has
    endeavored to plead demand futility. While he need only do so under either of
    Aronson’s prongs, Plaintiff contends that he has pled demand futility under both.
    Because I find that the Complaint pleads futility under the first prong, I need not and
    decline to reach Plaintiff’s arguments that he has satisfied the second prong as well.
    In order to plead futility under Aronson’s first prong, the complaint must raise
    a reasonable doubt that a majority of the directors could have evaluated a demand
    independently and without self-interest.149           When determining whether the
    complaint pleads director interest or lack of independence, the court does not
    consider the pled facts in isolation but instead considers them in totality.150
    The court will deem a director “interested” for purposes of this analysis when
    he stood on both sides of the transaction at issue or stood to receive a material benefit
    that was not to be received by others.151 A material benefit is one that is “significant
    enough in the context of the director’s economic circumstances, as to have made it
    149
    Brehm, 
    746 A.2d at
    256–57.
    150
    See Sanchez, 
    124 A.3d at 1019
     (“it is important that the trial court consider all the
    particularized facts pled by the plaintiffs about the relationships between the director and
    the interested party in their totality and not in isolation from each other, and draw all
    reasonable inferences from the totality of those facts in favor of the plaintiffs”).
    151
    Chester Cty. Empls.’ Ret. Fund v. New Residential Inv. Corp., 
    2016 WL 5865004
    , at *9
    (Del. Ch. Oct. 7, 2016); Robotti & Co. v. Liddell, 
    2010 WL 157474
    , at *12 (Del. Ch.
    Jan. 14, 2010).
    33
    improbable that the director could perform her fiduciary duties.”152 A pleading of
    materiality, however, is only required “in the absence of self-dealing.”153
    The inquiry for director independence is contextual and asks whether a
    director’s decision was “based on the merits of the subject before the board rather
    than on extraneous considerations or influences.”154 “To show lack of independence,
    the plaintiff must allege that a director is so beholden to an interested director that
    his or her discretion would be sterilized.”155 Specifically, the relationship between
    the challenged director and the interested director must be “so close that one could
    infer that the non-interested director would be more willing to risk his or her
    reputation than risk the relationship with the interested director.”156
    The parties agree that the members of the New Senior Board that would have
    considered Plaintiff’s demand (if he had made one) comprised directors Savage,
    Edens, Givens, Malone, Van der Hoof Holstein, Colbert and McFarland. The
    152
    Robotti, 
    2010 WL 157474
    , at *12; Cinerama, Inc. v. Technicolor, Inc., 
    663 A.2d 1134
    ,
    1151 (Del. Ch. 1994) (“not every financial interest in a transaction that is not shared with
    shareholders [is] sufficient”).
    153
    Cambridge Ret. Sys. v. Bosnjak, 
    2014 WL 2930869
    , at *5 (Del. Ch. June 26, 2014)
    (internal quotation omitted).
    154
    Chester Cty., 
    2016 WL 5865004
    , at *9; Orman v. Cullman, 
    794 A.2d 5
    , 25 n.50 (Del.
    Ch. 2002).
    155
    Chester Cty., 
    2016 WL 5865004
    , at *9.
    156
    Robotti, 
    2010 WL 157474
    , at *12.
    34
    Court’s function now is to “count heads.”157 By requesting books and records from
    New Senior prior to filing his Complaint, Cumming has done what our courts have
    long counseled plaintiffs to do: he has utilized the tools provided by our law to gain
    access to documents that allowed him to plead specific facts that support his
    allegations of interest and lack of independence.158
    1. Savage
    Plaintiff does not challenge the independence or disinterestedness of Savage
    who joined the Board after the Challenged Transactions. In this regard, Savage
    stands alone.
    2. Edens
    Plaintiff contends that Edens is interested in the Challenged Transactions and
    lacks independence from Fortress. Defendants do not seriously dispute Edens’
    157
    In re Ezcorp, Inc. Consulting Agmt. Deriv. Litig., 
    2016 WL 301245
    , at *34 (Del. Ch.
    Jan. 25, 2016); 
    id.
     (“If the board of directors lacks a majority comprising independent and
    disinterested directors, then demand is futile.”).
    158
    See, e.g., Sandys v. Pincus, 
    152 A.3d 124
    , 128–29 (Del. 2016) (“For many years, this
    Court and the Court of Chancery have advised derivative plaintiffs to take seriously their
    obligations to plead particularized facts justifying demand excusal. This case presents the
    unusual situation where a plaintiff who sought books and records to plead his complaint
    somehow only asked for records relating to the transaction he sought to redress and did not
    seek any books and records bearing on the independence of the board. . . . As a result of
    the plaintiff’s failure, he made the task of the Court of Chancery more difficult than was
    necessary and hazarded an adverse result for those he seeks to represent.”); Brehm, 
    746 A.2d at
    266–67 (describing the “tools at hand” available to a stockholder to assist in
    pleading particular facts to demonstrate demand futility).
    35
    conflicts, nor could they. Edens is Fortress’ founder, one of its principals and the
    co-chairman of its board of directors.159 He is Fortress’ largest stockholder and is
    responsible for Fortress’ private equity and publicly traded alternative investment
    businesses (including Holiday and New Senior).160 Additionally, while it appears
    that Edens recused himself from voting on the Acquisition, he was one of two
    members on the Pricing Committee that set the terms and pricing for the Secondary
    Offering used to finance the Acquisition and under which both FIG and Edens
    himself received share options. Thus, Plaintiff has adequately pled facts raising a
    reasonable doubt that Edens could have independently considered a demand
    challenging these transactions.
    3. Givens
    Here again, Defendants do not earnestly dispute Givens’ lack of independence
    and disinterest for purposes of the Rule 23.1 analysis.161 Givens was the second
    member of the Pricing Committee setting the terms for the Secondary Offering and
    she also received options under the Secondary Offering.          Moreover, she was
    employed by Fortress and yet was New Senior’s lead negotiator for the
    159
    Compl. ¶ 37.
    160
    Compl. ¶¶ 37–38; Defs.’ Opening Br. 24 n.10.
    161
    Tr. 44:9–14.
    36
    Acquisition.162 Because she stood on both sides of the Challenged Transactions, it
    is reasonable to infer on that basis alone that she was interested in the Challenged
    Transactions. Accordingly, Plaintiff has satisfied his burden to raise a reasonable
    doubt regarding Givens’ ability objectively to consider a demand.
    4. Malone
    Plaintiff challenges Malone’s fitness to consider a demand on both interest
    and independence grounds. Malone is alleged to be interested in the Challenged
    Transactions because, as a director of both Walker & Dunlop, which stood to lend
    $464.7 million to New Senior to help fund the Acquisition, and the borrower, New
    Senior, Malone also stood on both sides of the transaction.163 The Complaint alleges
    that Walker & Dunlop has provided financing to New Senior in the past and that
    New Senior’s loans “constituted approximately 17.4% of [Walker & Dunlop’s]
    Freddie Mac loan origination volume in 2015.”164 It goes on to allege that, in April
    2015, Walker & Dunlop “closed on the largest deal in its 77 year history—
    originating $670 million in loans to New Senior.”165 Finally, the Complaint alleges
    162
    It is also alleged that Givens was further motivated to favor the Challenged Transactions
    because she holds stock in the Fortress funds that own Holiday. Compl. ¶ 41.
    163
    Compl. ¶ 50; Pl.’s Answering Br. 26.
    164
    Compl. ¶ 49.
    165
    Compl. ¶ 48.
    37
    that Walker & Dunlop expected to enjoy a continuing relationship with New Senior
    that would lead to further lucrative investments.166              Viewing these pled facts
    together, it is reasonably conceivable that Walker & Dunlop had a material interest
    in providing the $464.7 million loan to finance the Acquisition.167 Thus, Plaintiff
    has raised a reasonable doubt as to whether Malone, as a director of Walker &
    Dunlop, was disinterested in the Challenged Transactions. Malone was a dual
    fiduciary here and the interests of the beneficiaries he served (lender vs. borrower)
    were not aligned.168 Accordingly, Plaintiff has adequately pled that Malone was
    “interested” for demand futility purposes.169
    166
    Compl. ¶¶ 48–49.
    167
    Plaintiff also points to other conflicts affecting Malone that relate principally to his prior
    service on the Fortress board of directors and as a managing director for Fortress, his
    current ownership of substantial Fortress stock and the substantial, material director fees
    he earns from Fortress board placements. Compl. ¶¶ 44, 50; Pl.’s Answering Br. 30.
    Although I need not take up these alleged conflicts given my findings relating to Malone’s
    service on the Walker & Dunlop board, I do note that, in totality, the weight of the pled
    facts regarding these conflicts is substantial.
    168
    See Chester Cty., 
    2016 WL 5865004
    , at *10 (“Plaintiff has alleged particularized facts
    sufficient to create a reasonable doubt as to Edens, Jacobs, and Nierenberg’s
    disinterestedness in the HLSS transactions because of their dual fiduciary positions at
    Fortress and New Residential.”); Chen v. Howard-Anderson, 
    87 A.3d 648
    , 670 (Del. Ch.
    2014) (“If the interests of the beneficiaries to whom the dual fiduciary owes duties diverge,
    the fiduciary faces an inherent conflict of interest.”); In re Nine Sys. Corp. S’holders Litig.,
    
    2014 WL 4383127
    , at *29–30 (Del. Ch. Sept. 4, 2014) (describing the so-called “dual-
    fiduciary problem”); Weinberger v. UOP, Inc., 
    457 A.2d 701
    , 710 (Del. 1983) (“There is
    no ‘safe harbor’ for such divided loyalties in Delaware.”).
    169
    See Chester Cty., 
    2016 WL 5865004
    , at *9 (“When a director of a corporation owes
    fiduciary duties as a director or officer of another corporation, the director is conflicted for
    purposes of the first prong of Aronson. . . .”); Kahn v. Portnoy, 
    2008 WL 5197164
    , at *7
    38
    5. Van der Hoof Holstein
    Plaintiff challenges Van der Hoof Holstein’s fitness to consider a demand
    based on her especially close ties to Edens. Van der Hoof Holstein is employed in
    a leadership position at PIH, a non-profit organization where Edens’ wife has for
    many years served on the board of directors and to which the Edens family makes
    substantial financial and other contributions.170 To illustrate the close connection,
    Plaintiff points to the fact that Edens’ daughter wore her self-described “lucky” PIH
    pin while appearing on national television at the NBA draft as a representative of
    her father (and the NBA team he owns). He also highlights Edens’ hands-on support
    of PIH’s relief efforts in Haiti; support that was praised by Van der Hoof Holstein’s
    immediate supervisor in several publications.171 These close ties are further revealed
    (Del. Ch. Dec. 11, 2008) (“Portnoy, as a director of HPT and TA, is therefore bound to act
    in the best interest of both companies. Thus, when Portnoy acted on behalf of TA in
    approving the transaction, his loyalties as an HPT director raise at least a reasonable doubt
    as to whether he was acting in the best interest of TA.”).
    Compl. ¶¶ 53–54. The Complaint alleges that “[t]he Edens family has donated between
    170
    $100,000 and $1,000,000 to PIH every fiscal year from 2008–2012 and in 2015.”
    Compl. ¶ 54.
    171
    Compl. ¶¶ 55–58. Van der Hoof Holstein’s direct supervisor is Dr. Paul Farmer, the
    founder of PIH. Compl. ¶ 56. The recognition in a Van der Hoof Holstein-edited book
    was with respect to Edens’ connection to GHDP. Compl. ¶ 58. “GHDP is a partnership
    between [the Department of Global Health and Social Medicine] and PIH that trains
    healthcare professionals to deliver medical care to destitute populations worldwide.”
    Compl. ¶ 57. Van der Hoof Holstein is not listed as an employee on the GHDP website
    (Dr. Farmer is) but her connection to and position as Associate Director of GHDP does not
    appear to be contested. See Klein Aff. Ex. 4 (2015 Proxy Statement), at 8. The Complaint
    further supports the claim of strong ties by reference to a comment by Chelsea Clinton in
    39
    in the fact that Van der Hoof Holstein serves alongside Edens on several boards,
    including A&K (an organization founded by Fortress).172 The compensation for her
    board service, as facilitated by Edens, amounts to at least half of her annual
    income.173
    This court has considered on several occasions the extent to which charitable
    donations to a cause associated with a director made by an interested individual or
    entity might serve as a basis to reasonably doubt whether the director was beholden
    to the interested donor. Defendants rely primarily on this court’s analysis of the
    issue in In re Goldman Sachs174 and In re J.P. Morgan Chase175 to support their
    argument that Edens’ charitable contributions to PIH do not raise a reasonable doubt
    regarding Van der Hoof Holstein’s independence. In Goldman Sachs, a member of
    2015 acknowledging that the “Edens’[] extraordinary support for PIH’s work in Haiti,
    include[ed] traveling to Haiti with Dr. Paul Farmer (PIH’s founder and [Van der] Hoof
    Holstein’s boss) and Clinton.” Compl. ¶ 56.
    172
    Compl. ¶ 59.
    173
    Compl. ¶ 59. “According to PIH’s publicly available Form 990 tax returns, Hoof
    Holstein earned $72,500 from PIH in 2013, $106,002 from PIH in 2014, and $149,855
    from PIH in 2015, for working 60 hours a week. Hoof Holstein therefore receives at least
    half of her income from her New Senior Board service. It is also reasonable to infer that
    Hoof Holstein receives similar compensation from A&K Global Health, which means that
    the vast majority of her compensation comes through her service on Fortress-affiliated
    boards with Edens.” 
    Id.
    174
    
    2011 WL 4826104
     (Del. Ch. Oct. 12, 2011).
    175
    In re J.P. Morgan Chase & Co. S’holder Litig., 
    906 A.2d 808
     (Del. Ch. 2005).
    40
    the company’s board was also the chair of a $100 million renovation campaign for
    a charitable organization and a trustee of the University of Chicago where part of his
    responsibilities also included raising money.176 The plaintiffs alleged that the
    company made contributions to the renovation campaign as well as to the
    university.177 The court determined that the allegations failed to raise a reasonable
    doubt regarding the director’s independence when
    nothing more can be inferred from the complaint than the facts that the
    Goldman Foundation made donations to a charity that Bryan served as
    trustee, that part of Bryan’s role as a trustee was to raise money, and
    that Goldman made donations to another charity where Bryan chaired
    a renovation campaign. The Plaintiffs do not allege that Bryan received
    a salary for either of his philanthropic roles, that the donations made by
    the Goldman Foundation or Goldman were the result of active
    solicitation by Bryan, or that Bryan had other substantial dealings with
    Goldman or the Goldman Foundation. The Plaintiffs do not provide the
    ratios of the amounts donated by Goldman, or the Goldman Foundation,
    to overall donations, or any other information demonstrating that the
    amount would be material to the charity. Crucially, the Plaintiffs fail to
    provide any information on how the amounts given influenced Bryan’s
    decision-making process.178
    In J.P. Morgan, the court found the allegations of conflict similarly lacking.
    The plaintiff there challenged several directors’ independence based on the
    defendant company’s donations to two organizations (the American Natural History
    176
    
    2011 WL 4826104
    , at *8.
    177
    
    Id.
    178
    Id. at *9.
    41
    Museum and the United Negro College Fund) at which the directors held various
    positions, including president, trustee and CEO.179           The court found that the
    complaint lacked any indication that the contributions to the respective non-profits
    were of import to the directors or how the donations would affect the directors’
    decision making.180
    For his part, Plaintiff cites to In re Oracle181 and Delaware County Employees
    Retirement Fund v. Sanchez.182 In Oracle, then-Vice Chancellor Strine analyzed the
    independence of a two-person special litigation committee that had moved to dismiss
    a derivative action.183 The committee members were both tenured professors at
    Stanford who were tasked with investigating claims of insider trading against other
    directors on the company’s board. The court found the following ties to exist
    between the targets of the committee’s investigation and Stanford: one director was
    also a professor at Stanford who had taught one of the committee members; another
    was a Stanford alumnus who had directed millions of dollars of donations over the
    179
    
    906 A.2d at
    814–15.
    180
    
    Id.
     at 822–23.
    181
    
    824 A.2d 917
     (Del. Ch. 2003).
    182
    
    124 A.3d 1017
    , 1022 (Del. 2015) (finding a pleading sufficient to raise a reasonable
    doubt as to director independence when the pled facts alleged that the director had been
    friends with the interested director for over fifty years and that friendship had resulted in
    economic advantages (including full-time employment) for the director).
    183
    
    824 A.2d 917
    .
    42
    years to Stanford; and the third was the company’s CEO who donated millions of
    dollars to Stanford through a personal foundation.184 The court concluded that “the
    ties among the [committee], the Trading Defendants, and Stanford are so substantial
    that they cause reasonable doubt about the [committee]’s ability to impartially
    consider whether the Trading Defendants should face suit.”185 The court reached
    this conclusion by applying a “contextual approach,” explaining:
    Delaware law should not be based on a reductionist view of human
    nature that simplifies human motivations on the lines of the least
    sophisticated notions of the law and economics movement. Homo
    sapiens is not merely homo economicus. We may be thankful that an
    array of other motivations exist that influence human behavior; not all
    are any better than greed or avarice, think of envy, to name just one.
    But also think of motives like love, friendship, and collegiality, think
    of those among us who direct their behavior as best they can on a
    guiding creed or set of moral values.
    Nor should our law ignore the social nature of humans. To be direct,
    corporate directors are generally the sort of people deeply enmeshed in
    social institutions. Such institutions have norms, expectations that,
    explicitly and implicitly, influence and channel the behavior of those
    who participate in their operation.186
    In my view, Oracle is the more fitting and persuasive authority here. Plaintiff
    has pled that Van der Hoof Holstein is employed by, and has a leadership role in, a
    relief organization that clearly derives substantial support, both financial and
    184
    
    Id.
     at 920–21.
    185
    Id. at 942.
    186
    Id. at 938.
    43
    devotional, from the Edens family through considerable donations, aide in relief
    efforts and service on its board.        Plaintiff’s failure to quantify precisely the
    contributions made by the Edens family, as argued by Defendants, does not undercut
    the particularized pleading that their support is significant to PIH, Van der Hoof
    Holstein’s main employer, and to Van der Hoof Holstein.187 The fact that Plaintiff
    does not allege that Van der Hoof Holstein actually solicited the donations or the
    other support provided by the Edens family to PIH does not dilute their relevance to
    the “independence” analysis.188 When the Edens family’s ties to PIH are coupled
    with the substantial and clearly material director fees Van der Hoof Holstein receives
    from service on boards at the behest of Edens, I am satisfied that these allegations
    raise reasons to doubt Van der Hoof Holstein’s independence from Edens.
    187
    Defs.’ Opening Br. 27–28 (“Plaintiff has failed to allege how donations amounting to
    less than 1% of PIH’s annual revenue would affect the decision-making of Ms. van der
    Hoof Holstein.”).
    188
    Defs.’ Opening Br. 24, 28 (“Plaintiff has not alleged that Ms. van der Hoof Holstein’s
    role at PIH had anything to do with fundraising, let alone that she personally solicited the
    Edens family donations.”). See In re Limited, Inc., 
    2002 WL 537692
    , at *4 (Del. Ch.
    Mar. 27, 2002) (“The Court in ascertaining the sufficiency of a complaint challenging a
    director’s loyalty does not apply an objective reasonable director standard; instead, the
    Court must apply a subjective actual person test to determine whether a particular director
    lacks independence because he is controlled by another.”) (internal quotation omitted);
    McMullin v. Beran, 
    765 A.2d 910
    , 923 (Del. 2000) (“In assessing director independence,
    Delaware courts apply a subjective ‘actual person’ standard to determine whether a ‘given’
    director was likely to be affected in the same or similar circumstances.”).
    44
    With that conclusion, I have determined that a majority of the seven directors
    that would have considered a demand from Plaintiff are in some way conflicted.
    Thus, I could stop the Aronson analysis here. For the sake of completeness,
    however, I will address the independence of both Colbert and McFarland as well.
    6. Colbert
    The thrust of Plaintiff’s allegations with respect to Colbert is that there is
    reason to doubt his independence from Edens after Edens invited Colbert to join the
    Milwaukee Bucks ownership group, a unique, prestigious and lucrative opportunity
    available, by NBA rule, to no more than 750 people in the world.189 In return for
    this invitation, Colbert, through Partners for Community Impact, LLC, assisted
    Edens and the City of Milwaukee in their efforts to build a new arena in downtown
    Milwaukee.190 This connection, according to Plaintiff, creates such “a special and
    highly unusual financial and social relationship because of the prestige associated
    with an ownership stake” that Colbert could not be expected to act against Edens’
    189
    Compl. ¶¶ 60–61. According to the Complaint, NBA rules limit team ownership groups
    to 25 individuals, each of whom must own at least 1% of the team. Compl. ¶ 60. Thus, it
    is alleged that it is unlikely that Colbert would have the opportunity to “become an owner
    of another team if Edens, as the team’s dominant partner, decided to squeeze Colbert out
    of the [Bucks] ownership group.” Pl.’s Answering Br. 38.
    190
    Compl. ¶ 62.
    45
    interests, especially given that Colbert joined Edens’ Bucks ownership group around
    the same time he joined the New Senior Board.191
    Plaintiff likens the Bucks ownership connection between Edens and Colbert
    to the unique relationship at issue in Sandys v. Pincus.192 In Pincus, our Supreme
    Court found that a derivative plaintiff had raised a reasonable doubt regarding a
    director’s independence by pleading that the interested director’s family and the
    family of the challenged director owned a private plane together.193 The Court based
    its finding on the fact that “[c]o-ownership of a private plane involves a partnership
    in a personal asset that is not only expensive, but also requires close cooperation in
    use, which is suggestive of detailed planning indicative of a continuing, close
    personal friendship.”194 Such close relationships, the Court explained, would be
    expected “to heavily influence a human’s ability to exercise impartial judgment.”195
    191
    Compl. ¶ 61. The Complaint does not say much about the financial rewards Colbert has
    received or might expect to receive from his ownership interest in the Bucks. It only alleges
    that the “relationship is . . . lucrative” and that other investors have “reaped a 25-fold gain
    on [their] investment[s].” 
    Id.
     The real thrust of the Complaint, and Plaintiff’s futility
    argument, is that Edens invited Colbert to join an exclusive and highly rewarding “club”
    that Colbert likely would not have had access to but for Edens’ generosity. Compl. ¶ 62.
    192
    
    152 A.3d 124
     (Del. 2016).
    193
    Id. at 130.
    194
    Id.
    195
    Id.
    46
    Defendants argue that the relationship Plaintiff has proffered here is nothing
    like the one presented in Pincus. Colbert is a co-owner of a sports team with Edens,
    along with several others. According to Defendants, this business relationship does
    not evidence the kind of close friendship or personal relationship that can reasonably
    be inferred when individuals own a private plane together.
    I agree with Defendants that the relationship dynamics are different. There is
    likely little or no planning required between Edens and Colbert to ensure that the
    Bucks continue to operate successfully as an NBA franchise.196 But that does not
    mean the dynamics of joining together to own a professional sports team are any less
    revealing of a unique, close personal relationship. Edens invited Colbert to join him
    in a relatively small group of investors who would own a highly unique and
    personally rewarding asset. In return, Colbert assisted Edens in the effort to build a
    new arena for the team they now co-owned. I am satisfied that this relationship
    creates a reason to believe that Colbert “may feel . . . beholden to [Edens].”197
    196
    Id. (emphasizing the planning and coordination required to own a private plane
    together). For example, I suspect that Colbert and Edens collectively have absolutely
    nothing to do with whether the “Greek freak” remains healthy, happy, productive and a
    major draw for Bucks fans. See http://www.espn.com/nba/player/_/id/3032977/giannis-
    antetokounmpo (a.k.a., the “Greek freak,” number 34 in your bucks program).
    197
    Pincus, 152 A.3d at 128.
    47
    7. McFarland
    As for the final director, McFarland, the Complaint alleges that he serves on
    the board of Drive Shack, where he was placed as a Fortress designee alongside
    Edens, and that he receives 60% of his publicly reported income from his service on
    Fortress-affiliated boards.198 The Complaint further characterizes as “telling” the
    fact that McFarland lists his address for purposes of investment activities as “C/O
    Fortress Investment Group.”199
    Plaintiff’s allegations concerning McFarland’s lack of independence are more
    scant than those pled regarding the other directors. As I review these allegations, I
    am reminded that, in Sanchez, our Supreme Court observed that “[d]etermining
    whether a plaintiff has pled facts supporting an inference that a director cannot act
    independently of an interested director for purposes of demand excusal . . . can be
    difficult.”200    While a close call, I am satisfied that there is reason to doubt
    McFarland’s independence. In so finding, I acknowledge that our law is settled that
    service on another board alongside the interested director, alone, is insufficient to
    Compl. ¶ 63. “Fortress and Edens, with and through their affiliates, own approximately
    198
    8% of Drive Shack’s outstanding stock, and Fortress is the manager of Drive Shack.” Id.
    199
    Compl. ¶ 63.
    200
    Sanchez, 
    124 A.3d at 1019
    .
    48
    raise a reasonable doubt as to a director’s independence,201 especially when the
    interested director does not control either company.202 But there is more pled here.
    McFarland is a director of New Senior and Drive Shack, both of which are
    managed by Fortress. He was placed on these boards by Fortress and serves on both
    of them alongside Edens. Based on public filings, McFarland receives 60% of his
    publicly reported income from Fortress-managed companies.203 And he lists his
    address on SEC Form 4s (for investments unrelated to Fortress) as “C/O Fortress.”
    Weighing the totality of these facts, there is reason to doubt whether McFarland’s
    material ties with Fortress and Edens would affect his ability independently to
    evaluate a demand to bring claims against them.204
    201
    See, e.g., Highland Legacy Ltd. v. Singer, 
    2006 WL 741939
    , at *5 (Del. Ch. Mar. 17,
    2006) (finding that allegations of service on the boards of different companies alongside
    one another only provides a “naked assertion of a previous business relationship [that] is
    not enough to overcome the presumption of a director’s independence”).
    202
    Compl. ¶ 63.
    203
    Compl. ¶ 63.
    204
    See, e.g., Portnoy, 
    2008 WL 5197164
    , at *8 (“The complaint alleges similar facts with
    respect to Gilmore and Donelan. Gilmore is a director of TA and FVE. For 2007, she was
    paid $89,480 in fees as a director of TA and $70,940 in fees as a director of FVE,
    compensation the complaint alleges is material to Gilmore because it exceeds the
    compensation from her position as a clerk in the United States Bankruptcy Court. Gilmore
    also worked at Sullivan & Worcester LLP from 1993 to 2000, during part of which time
    Portnoy was a partner and chairman of the firm. Donelan is a director of TA and a trustee
    of HRPT and the ILC. In 2007, Donelan was paid $88,980 in fees as a director of TA and
    $73,600 in fees as a trustee of HRPT.”); In re Ply Gem Indus., Inc. S’holders Litig., 
    2001 WL 1192206
    , at *1 (Del. Ch. Oct. 3, 2001) (“past benefits conferred . . . may establish an
    49
    *   *    *   *        *   *   *   *
    Plaintiff has pled sufficient facts to raise a reasonable doubt regarding the
    disinterestedness and independence of the majority of the New Senior Board such
    that demand would have been futile under the first prong of Aronson. I need not and
    decline to address Aronson’s second prong.205 The motion to dismiss under Court
    of Chancery Rule 23.1 is denied.
    B. Plaintiff Has Stated Viable Claims Against the Board and Givens as
    Officer
    Rule 12(b)(6) imposes a “less stringent” pleading standard than Rule 23.1.206
    “Thus, a complaint that survives a motion to dismiss pursuant to Rule 23.1 also will
    survive a 12(b)(6) motion to dismiss, ‘assuming that it otherwise contains sufficient
    facts to state a cognizable claim.’”207 “The standards governing a motion to dismiss
    for failure to state a claim are well settled: (i) all well-pleaded factual allegations are
    accepted as true; (ii) even vague allegations are ‘well-pleaded’ if they give the
    obligation or debt (a sense of ‘owingness’) upon which a reasonable doubt as to a director’s
    loyalty to a corporation may be premised”).
    205
    See Cambridge, 
    2014 WL 2930869
    , at *6 (finding demand futility under the first prong
    of Aronson and, therefore, declining to consider the second prong); TVI Corp. v. Gallagher,
    
    2013 WL 5809271
    , at *10 (Del. Ch. Oct. 28, 2013) (same); Limited, 
    2002 WL 537692
    , at
    *7 (same).
    206
    TVI Corp., 
    2013 WL 5809271
    , at *12.
    207
    
    Id.
    50
    opposing party notice of the claim; (iii) the Court must draw all reasonable
    inferences in favor of the non-moving party; and (iv) dismissal is inappropriate
    unless the plaintiff would not be entitled to recover under any reasonably
    conceivable set of circumstances susceptible of proof.”208
    Plaintiff’s claims sound in breach of fiduciary duties. As this court explained
    in Frederick Hsu:
    when determining whether directors breached their fiduciary duties,
    Delaware corporate law distinguishes between the standard of conduct
    and the standard of review. The standard of conduct describes what
    directors are expected to do and is defined by the content of the duties
    of loyalty and care. The standard of review is the test that a court
    applies when evaluating whether directors have met the standard of
    conduct.209
    With this distinction in mind, a logical approach to analyzing the breach of fiduciary
    duty claims is to “work[] through the standard of conduct, apply[] a standard of
    review, and then determin[e] whether the defendants have properly invoked any
    immunities or defenses, such as exculpation.”210 I follow that approach here.
    208
    Savor, Inc. v. FMR Corp., 
    812 A.2d 894
    , 896–97 (Del. 2002).
    209
    Frederick Hsu Living Tr. v. ODN Hldg. Corp., 
    2017 WL 1437308
    , at *15 (Del. Ch.
    Apr. 24, 2017).
    210
    
    Id.
    51
    1. The Standard of Conduct
    “In performing their duties the directors [of Delaware corporations] owe
    fundamental fiduciary duties of care and loyalty.”211          “[T]he duty of loyalty
    mandates that the best interest of the corporation and its shareholders takes
    precedence over any interest possessed by a director, officer or controlling
    shareholder and not shared by the stockholders generally.”212 Thus, “Delaware law
    is clear that the board of directors of a for-profit corporation . . . must, within the
    limits of its legal discretion, treat stockholder welfare as the only end, considering
    other interests only to the extent that doing so is rationally related to stockholder
    welfare.”213
    Plaintiff has alleged that the Board defendants caused New Senior to pay more
    than was reasonable for the Holiday Portfolio to advance the interests of Fortress
    and Edens at the expense of New Senior and its stockholders.214 Accepted as true,
    211
    Polk v. Good, 
    507 A.2d 531
    , 536 (Del. 1986).
    212
    Cede & Co. v. Technicolor, Inc., 
    634 A.2d 345
    , 361 (Del. 1993). Plaintiff alleges that
    the Board defendants breached both their duty of care and duty of loyalty. I focus on the
    duty of loyalty allegations, however, because, as discussed below, Defendants have
    invoked a Section 102(b)(7) defense that would exculpate them from liability for breaches
    of the duty of care.
    213
    Leo E. Strine, Jr., A Job Is Not a Hobby: The Judicial Revival of Corporate Paternalism
    and Its Problematic Implications, 
    41 J. Corp. L. 71
    , 107 (2015).
    214
    Compl. ¶¶ 4–10, 109, 111, 128, 150.
    52
    these allegations describe the kind of self-dealing transaction that gives rise to a
    classic breach of the duty of loyalty claim.215
    2. The Standard of Review
    As is often the case at the pleadings stage, much ink has been spilled by the
    parties to express their competing views regarding the applicable standard of
    review.216 Plaintiff argues that his claims implicate entire fairness review because
    the Challenged Transactions were interested transactions. Accordingly, given the
    heightened scrutiny with which the Court must review his claims, he maintains that
    the Court cannot adjudicate them on a motion to dismiss under Rule 12(b)(6).217
    Not surprisingly, Defendants argue that the Court should review Plaintiff’s
    claims under the business judgment rule. They maintain that the Complaint, at best,
    215
    See, e.g., Chen, 
    87 A.3d at 671
     (“Delaware cases recognize that liquidity is one benefit
    that may lead directors to breach their fiduciary duties, and stockholder directors may be
    found to have breached their duty of loyalty if a desire to gain liquidity caused them to
    manipulate the sale process and subordinate the best interests of the corporation and the
    stockholders as a whole.”) (internal quotation omitted); Rales v. Blasband, 
    634 A.2d 927
    ,
    935 (Del. 1993) (explaining that allegations that the company’s board decided to buy “junk
    bonds” for the sole benefit of two directors “who were acting in furtherance of their
    business relationship” with the company issuing the bonds would, if proven true, constitute
    a breach of the duty of loyalty); Carsanaro v. Bloodhound Technologies, Inc., 
    65 A.3d 618
    ,
    659 (Del. Ch. 2013) (finding a breach of the duty of loyalty alleged where directors had
    participated in financing rounds at favorable terms explaining that “each financing
    challenged in the complaint was a self-interested transaction implicating the duty of loyalty
    and raising an inference of expropriation”).
    216
    See Larkin v. Shah, 
    2016 WL 4485447
    , at *7 (Del. Ch. Aug. 25, 2016) (characterizing
    the determination of the appropriate standard of review as the “gating question”).
    217
    Pl.’s Answering Br. 62.
    53
    pleads facts that would allow a reasonable inference that only Edens, Givens and
    perhaps Malone were interested in the Challenged Transactions. Thus, because a
    majority of the Transaction Committee was disinterested, the Challenged
    Transactions fit within the safe harbor codified in 8 Del. C. § 144(a)(1) and,
    therefore, the business judgment rule applies. Moreover, they maintain that, even
    without the safe harbor, “[t]o invoke entire fairness [at the pleading stage], in the
    absence of a controlling shareholder, Plaintiff would need to allege that a majority
    of the board was interested in the [Challenged Transactions] or beholden to an
    interested party.”218 Since the Complaint pleads neither factual predicate (majority
    interest or lack of independence) for entire fairness review, the business judgment
    presumption must apply. I disagree on both counts.
    a. Section 144
    Defendants’ Section 144(a)(1) argument catenates along the following
    analytical tree: (i) under Supreme Court precedent, approval by a majority of
    disinterested directors under Section 144(a)(1) triggers review under the business
    judgment rule; (ii) for purposes of applying the safe harbor of Section 144(a)(1), the
    Court should consider only whether directors are interested in the transaction, and
    should not be concerned with whether the majority of the board is also independent;
    218
    Defs.’ Opening Br. 43 (citing Orman, 
    794 A.2d at 23
    ) (emphasis in the original).
    54
    and (iii) since Plaintiff has only challenged three directors on grounds they were
    interested in the Challenged Transactions, the majority of the Board met the
    requirements of Section 144(a)(1) and their decisions must, therefore, be protected
    as valid business judgments.219          In support of this argument, Defendants rely
    principally upon Benihana of Tokyo, Inc. v. Benihana, Inc., decided by our Supreme
    Court in 2006.220 There, applying Section 144(a)(1), the Court stated “[a]fter
    approval by disinterested directors, courts review the interested transaction under
    the business judgment rule . . . .”221
    Our case law interpreting Section 144(a)(1) is murky at best. A search of
    one’s favorite legal research site would yield cases that appear to support the view
    that Section 144(a)(1)’s safe harbor works as Defendants suggest.222 That same
    219
    Defs.’ Opening Br. 51 (“[R]egardless of whether any of the four directors who approved
    the Acquisition were not independent, they are disinterested in the Acquisition, and the
    Amended Complaint should be dismissed.”).
    220
    Benihana of Tokyo, Inc. v. Benihana, Inc., 
    906 A.2d 114
     (Del. 2006) (“Benihana II”).
    221
    
    Id. at 120
    .
    222
    See, e.g., Sutherland v. Sutherland, 
    2009 WL 857468
    , at *4 n.13 (Del. Ch. Mar. 23,
    2009) (“Notably, before the law related to Section 144 of the DGCL finally settled, see,
    e.g., Benihana II, 906 A.2d at 120 (stating that interested director transactions approved
    pursuant to the 144(a)(1) safe harbor are reviewed under the business judgment rule), it
    was frequently suggested that Section 144 . . . did no more than to remove a director’s
    disability to participate in a quorum to vote on an interested transaction, but did nothing to
    sanitize such a transaction if it was inherently unfair.”); Oberly v. Kirby, 
    592 A.2d 445
    ,
    466 (Del. 1991) (“The enactment of 8 Del. C. § 144 in 1967 limited the stockholders’
    power in two ways. First, section 144 allows a committee of disinterested directors to
    approve a transaction and bring it within the scope of the business judgment rule. Second,
    where an independent committee is not available, the stockholders may either ratify the
    55
    search, however, would yield several cases, even post-Benihana II, where our courts
    have viewed Section 144(a)(1) much more narrowly.223
    To put Benihana II in context, it is useful to review the decision of this court
    in Benihana I that was affirmed.                In clarifying the interaction between
    Section 144(a)(1) and the common law business judgment rule, this court explained:
    transaction or challenge its fairness in a judicial forum, but they lack the power
    automatically to nullify it. When a challenge to fairness is raised, the directors carry the
    burden of establishing the transaction’s entire fairness, sufficient to pass the test of careful
    scrutiny by the courts.”).
    223
    See Benihana of Tokyo, Inc. v. Benihana, Inc., 
    891 A.2d 150
    , 185 (Del. Ch. 2005)
    (“Benihana I”), aff’d, 
    906 A.2d 114
     (Del. 2006) (“While I find that the Benihana Board’s
    approval of the BFC Transaction meets the requirements of 8 Del. C. § 144(a)(1), that
    section merely protects against invalidation of a transaction “solely” because it is an
    interested one. . . . Because BOT also contends that the Director Defendants breached their
    fiduciary duties of loyalty and care, my analysis does not end with the “safe harbor”
    provisions of § 144(a).”); Khanna v. McMinn, 
    2006 WL 1388744
    , at *25 n.201 (Del. Ch.
    May 9, 2006) (same); Cinemara, 662 A.2d at 1169 (same); Valeant Pharm. Int’l v. Jerney,
    
    921 A.2d 732
    , 745 (Del. Ch. 2007) (“Before the 1967 enactment of 8 Del. C. § 144, a
    corporation’s stockholders had the right to nullify an interested transaction. To ameliorate
    this potentially harsh result, section 144 as presently enacted provides three safe harbors to
    prevent nullification of potentially beneficial transactions simply because of director self-
    interest. First, section 144 allows a committee of disinterested directors to approve a
    transaction and, at least potentially, bring it within the scope of the business judgment
    rule.”); Zimmerman v. Crothall, 
    2012 WL 707238
    , at *18 (Del. Ch. Mar. 5, 2012) (“As the
    Delaware Supreme Court observed in Fliegler v. Lawrence, § 144 ‘merely removes an
    interested director cloud when its terms are met and provides against invalidation of an
    agreement solely because such a director . . . is involved.’ That is, the statute only
    addresses the void or voidable issue presented by the common law before the 1967
    amendments to the Delaware General Corporation Law. Thus, it does not appear that
    either 8 Del. C. § 144 or § 6.13 of the Operating Agreement, which is based on § 144, was
    intended to address the common law rules for liability for breach of fiduciary duty.
    Therefore, even if Defendants have complied with § 6.13, that would not operate as a safe
    harbor against review of the challenged transactions under the entire fairness standard.”)
    (internal citation omitted).
    56
    Satisfying the requirements of § 144 only means that the BFC
    Transaction is not void or voidable solely because of the conflict of
    interest.
    While non-compliance with §§ 144(a)(1), (2)’s disclosure requirement
    by definition triggers fairness review rather than business judgment rule
    review, the satisfaction of §§ 144(a)(1) or (a)(2) alone does not always
    have the opposite effect of invoking business judgment rule review.
    Rather, satisfaction of §§ 144(a)(1) or (a)(2) simply protects against
    invalidation of the transaction “solely” because it is an interested one.
    As such, § 144 is best seen as establishing a floor for board conduct but
    not a ceiling. Thus, equitable common law rules requiring the
    application of the entire fairness standard on grounds other than a
    director’s interest still apply.
    After determining that the defendant board members had guided the interested
    transaction into Section 144(a)(1)’s safe harbor, and that the transaction, therefore,
    would not be voided, Vice Chancellor Parsons proceeded to address the plaintiff’s
    allegations that the directors breached their fiduciary duties by applying common
    law standards. He ultimately concluded that none of the directors had breached their
    duty of loyalty because the majority of the directors that approved the transaction
    were disinterested and independent and the Board did not enter into the transaction
    for an improper purpose.224
    Several commentators and judges, post-Benihana II, have similarly
    articulated the difference between the oft-confused Section 144(a) safe harbors and
    the common law our courts apply to determine the appropriate standard of review
    224
    Benihana I, 
    891 A.2d at 191
    .
    57
    by which to adjudicate a challenge to an interested transaction. A particularly cogent
    expression of the distinction (and the confusion) can be found in Finding Safe
    Harbor: Clarifying the Limited Application of Section 144, where the authors
    explain:
    section 144(a)(1) provides that a covered transaction will not be void
    or voidable solely as a result of the offending interest if it is approved
    by an informed majority of the disinterested directors, even though the
    disinterested directors be less than a quorum. Under the section 144
    statutory analysis, so long as there is one informed, disinterested
    director on the board, and so long as he or she approves the transaction
    in good faith, the transaction will not be presumptively voidable due to
    the offending interest. In other words, a nine-member board with a
    single disinterested director may approve a covered transaction and
    reap the benefits of the section 144 safe harbor.
    Under the common law, however, the factor is somewhat different;
    approval must be by a disinterested majority of the entire board. That
    is, a plaintiff may rebut the presumption of the business judgment rule
    by showing that a majority of the individual directors were interested
    or beholden. In the common-law analysis, therefore, a transaction
    approved by the nine-member board discussed above (with the single
    disinterested director) will be subject to the entire-fairness standard.
    The standards are phrased similarly for the statutory and common-law
    analyses, but they are in fact quite different.225
    225
    Blake Rohrbacher, John Mark Zeberkiewicz & Thomas A. Uebler, Finding Safe
    Harbor: Clarifying the Limited Application of Section, 144, 
    33 Del. J. Corp. L. 719
    , 737–
    38 (2008). See also R. Franklin Balotti & Jesse A. Finkelstein, The Delaware Law of
    Corporations and Business Organizations, § 4.16 (3d ed. 2018) (“Apart from the statutory
    safe-harbor analysis, the courts also scrutinize interested-director transactions under a
    common-law fiduciary review. This fiduciary review involves factors similar—though not
    quite identical—to those under Section 144. That is, approval by a disinterested majority
    of the board or disinterested stockholders may revive the presumptions of the business
    judgment rule. Otherwise, the courts will use the entire-fairness standard to scrutinize the
    transaction.”); Leo E. Strine, Jr., Lawrence A. Hamermesh, R. Franklin Balotti &
    Jeffrey M. Gorris, Loyalty’s Core Demand: The Defining Role of Good Faith in
    58
    Based on the plain language of the statute,226 and my reading of the persuasive
    authority on the subject, I am satisfied that compliance with Section 144(a)(1) does
    not necessarily invoke business judgment review of an interested transaction. The
    Court must still adhere to settled common law principles when fixing the appropriate
    standard of review by which fiduciary conduct should be measured.227
    Corporation Law, 98 Geo. J.L. 629, 656–57 & n.85 (2010) (“The question of whether
    section 144 was intended to create a safe harbor from equitable review if its provisions
    obviating a statutory fairness burden were met is controversial. . . . To date, the Delaware
    courts have generally read the statute more narrowly, while drawing on it in crafting rulings
    in equity.”) (citing In re Cox Commc’ns, Inc. S’holders Litig., 
    879 A.2d 604
    , 614–15 (Del.
    Ch. 2005)); Zimmerman, 
    2012 WL 70723
    , at *18; Valeant, 
    921 A.2d at 745
    .
    226
    8 Del. C. § 144:
    (a) No contract or transaction between a corporation and 1 or more of its
    directors or officers, or between a corporation and any other corporation,
    partnership, association, or other organization in which 1 or more of its
    directors or officers, are directors or officers, or have a financial interest,
    shall be void or voidable solely for this reason, or solely because the
    director or officer is present at or participates in the meeting of the board
    or committee which authorizes the contract or transaction, or solely
    because any such director’s or officer’s votes are counted for such
    purpose, if. . . .
    (emphasis supplied).
    227
    Benihana I, 
    891 A.2d at 191
     (“No safe-harbor exists for divided loyalties in Delaware.”).
    I acknowledge that some read our case law as holding that compliance with Section 144
    safe harbors justifies a burden-shift in the entire fairness analysis. While I cannot say that
    I share that view of our law, I need not weigh in on that issue at this stage of the
    proceedings. See Edward P. Welch, Robert S. Saunders, Allison L. Land & Jennifer C.
    Voss, Folk on the Delaware General Corporation Law, § 144.02 (6th ed. 2018) (citing
    Cooke v. Oolie, 
    1997 WL 367034
    , at *9 (Del. Ch. June 23, 1997) (“It is now clear that even
    if a board’s action falls within the safe harbor of Section 144, the board is not entitled to
    59
    b. The Majority of the Board Was Interested In the Challenged
    Transactions or Not Independent
    In Orman v. Cullman, Chancellor Chandler succinctly laid out the pathway to
    overcoming the business judgment presumption at the pleading stage by alleging
    that the Board acted out of self-interest or with allegiance to interests other than the
    stockholders’:
    As a general matter, the business judgment rule presumption that a
    board acted loyally can be rebutted by alleging facts which, if accepted
    as true, establish that the board was either interested in the outcome of
    the transaction or lacked the independence to consider objectively
    whether the transaction was in the best interest of its company and all
    of its shareholders. To establish that a board was interested or lacked
    independence, a plaintiff must allege facts as to the interest and lack of
    independence of the individual members of that board. To rebut
    successfully business judgment presumptions in this manner, thereby
    leading to the application of the entire fairness standard, a plaintiff must
    normally plead facts demonstrating that a majority of the director
    defendants have a financial interest in the transaction or were
    dominated or controlled by a materially interested director.228
    “If a director-by-director analysis leaves insufficient [independent] directors to make
    up a board majority, then the court will review the board’s decision for entire
    fairness.”229
    receive the protection of the business judgment rule. Compliance with Section 144 merely
    shifts the burden to the plaintiffs to demonstrate that the transaction was unfair.”)).
    228
    Orman, 
    794 A.2d at
    22–23 (later explaining that interest can also be shown by a director
    standing on both sides of a transaction).
    229
    Frederick Hsu, 
    2017 WL 1437308
    , at *26.
    60
    As noted, the Complaint alleges that a majority of the New Senior directors
    approved the self-dealing Acquisition at an excessive price, allowed New Senior to
    issue stock to finance the Acquisition at an unreasonable discount, declined to
    exercise their independent judgment when making those decisions and let Givens
    (and Edens), who stood on both sides of the deal, control the negotiation and sale
    process.230 According to Plaintiff, these pled facts make “[t]his [an] entire fairness
    case.”231 I agree.
    Following Edens’ and Givens’ abstention from the vote, the Acquisition was
    approved by the Board members who served on the Transaction Committee—
    Malone, Van der Hoof Holstein, Colbert and McFarland. Since the test for director
    interest and independence is generally the same for purposes of this analysis as the
    test under the first prong of Aronson,232 for the same reasons I determined those
    directors were interested or not independent under Aronson, I find that Plaintiff has
    230
    Compl. ¶ 150.
    231
    Pl.’s Answering Br. 1.
    232
    TVI Corp., 
    2013 WL 5809271
    , at *14. I note, for the sake of clarity, that finding a
    director is either interested or not independent under the first prong of Aronson will not
    always translate to a finding of interest or lack of independence in the fiduciary duty
    analysis. Under the first prong of Aronson, the focus is on whether the director’s interest
    or conflict creates a reasonable doubt that the director could objectively consider a demand.
    In the fiduciary duty context, the focus is on whether the director’s interest or conflict
    caused the director to do or not do something that has harmed the corporation. While the
    inquiries are different, and do not necessarily overlap, they lead to the same answer here,
    at least as alleged in the Complaint. See id. at *12.
    61
    well-pled that each of those directors was interested or not independent with respect
    to the Challenged Transactions.233
    Additionally, the Complaint alleges that Edens and Givens were the sole
    members of the Pricing Committee, setting the terms of the Secondary Offering
    under which they both (along with FIG) received share options. The Complaint also
    alleges that Givens, who works for Fortress, negotiated the Holiday Management
    Agreement with her employer’s affiliate. Those allegations are sufficient to raise a
    reasonable inference that Edens and Givens were interested in the Challenged
    Transactions. Because the Complaint adequately pleads that no independent and
    disinterested Board majority approved the Transactions, the standard of review, for
    now, is entire fairness.
    I note that “[t]he applicability of the entire fairness standard ‘normally will
    preclude a dismissal of a complaint on a Rule 12(b)(6) motion to dismiss.’”234
    233
    See also Limited, 
    2002 WL 537692
    , at *7 (“For the reasons set forth [in the Rule 23.1
    analysis], I am satisfied that the Complaint states a claim for breach of the duty of loyalty.
    The challenged transactions were approved by a unanimous board of twelve; six of those
    directors were either interested or subject to disqualifying doubts about their independence.
    As set forth below, the challenged transactions, while perhaps not constituting corporate
    waste, appear unfair to the stockholders. Thus, because the challenged transactions were
    not approved by a majority of independent and disinterested directors, the Complaint states
    a loyalty claim that survives a challenge under Court of Chancery Rule 12(b)(6).”).
    234
    In re Riverstone Nat’l, Inc. S’holder Litig., 
    2016 WL 4045411
    , at *15 (Del. Ch. July 28,
    2016) (“Once a plaintiff rebuts the business judgment rule, the burden shifts to the
    defendant to establish that the [transaction] was the product of both fair dealing and fair
    price.”).
    62
    Nevertheless, I review briefly the pled facts and find that the Complaint adequately
    alleges that the Challenged Transactions were not entirely fair.
    Entire fairness review asks whether the transaction (i) was the product of “fair
    dealing,” and (ii) reflected a “fair price.”235 I address both elements, albeit in reverse
    order. As for unfair price, Plaintiff argues that unfair price is revealed by the
    following pled facts: (i) the market reacted poorly to the Acquisition (“New Senior’s
    stock price plummeted”)236; (ii) only New Senior submitted a final bid for the
    Holiday Portfolio237; (iii) Givens failed to leverage the fact that New Senior was the
    only serious bidder and justified her adjustment to the initial bid by drawing a
    comparison to a transaction that was very different from the Acquisition involving a
    company that elected not to bid for the Holiday Portfolio 238; (iv) Givens and the
    Transaction Committee allowed New Senior to enter into a no-bid management
    agreement with Holiday at above-market rates239; (v) Edens and Givens caused the
    Kahn v. Lynch Commc’n Sys., Inc., 
    638 A.2d 1110
    , 1115 (Del. 1994) (internal citations
    235
    omitted).
    236
    Pl.’s Answering Br. 53. See also Compl. ¶¶ 18, 124, 126.
    237
    Compl. ¶ 83.
    238
    Compl. ¶¶ 83–85, Klein Aff. Ex. 11 (June 1, 2015 Committee Minutes), at
    SNR00000241 (“Ms. Givens explained that the reduced purchase price was derived by
    applying the capitalization rate implied by the purchase price for the last portfolio marketed
    by Holiday and sold to Northstar, which was 6.1%.”).
    239
    Compl. ¶¶ 95–96.
    63
    Board to approve a Secondary Offering that generated substantial fees for
    Fortress240; and (vi) the Secondary Offering was at a grossly discounted price that
    benefited Fortress, Givens and Edens but harmed New Senior by causing a sudden
    loss in market capitalization amounting to approximately $100 million.241 These
    facts more than adequately allow for a reasonable inference of unfair price.
    Allegations revealing unfair dealing should focus on “when the transaction
    was timed, how it was initiated, structured, negotiated, disclosed to the directors, and
    how the approvals of the directors and the stockholders were obtained.” 242 With
    these elements clearly in mind, Plaintiff alleges the following facts that allow a
    reasonable inference of an unfair process: (i) Fortress, Edens, and Givens stood on
    both sides of the deal, and then initiated, structured, and negotiated each element of
    the Challenged Transactions243; (ii) the Transaction Committee was flawed in its
    composition, led by a Chairman who sat on the board of the primary lender for the
    transaction, and ineffective in its execution, inter alia, by allowing Givens to
    negotiate exclusively on behalf of New Senior “against” her employer (Fortress)244;
    240
    Compl. ¶¶ 104, 109–113.
    241
    Compl. ¶¶ 102, 110–111, 115, 121–122.
    242
    Lynch, 
    638 A.2d at 1115
    .
    243
    Compl. ¶¶ 73–74, 151.
    244
    Compl. ¶¶ 42, 82.
    64
    (iii) the Transaction Committee allowed Givens to make her bids without direction
    from, or even consultation with, the Transaction Committee and without the benefit
    of advice from the Committee’s financial advisor (Greenhill)245; (iv) Givens
    provided Greenhill with flawed data to use in its fairness opinion relating to the
    Acquisition246; (v) the Transaction Committee did not seek a fairness opinion with
    respect to the Secondary Offering or the Holiday Management Agreement247;
    (vi) even though there were no other bidders, the Transaction Committee allowed
    Givens to commit to an acquisition agreement with no financing contingency,
    thereby ensuring that the Company would have to go forward with the unfair
    Secondary Offering248; (vii) the Board allowed Givens and Edens alone to serve on
    the Pricing Committee even though they (and Fortress) stood to benefit personally
    from the offering (to the exclusion of other stockholders)249; and (viii) the Board
    approved the no-bid management agreement Givens offered to Holiday without even
    seeing the terms of Holiday’s incentive compensation.250 It can be reasonably
    245
    Compl. ¶¶ 73, 77, 83, 86–87, 100–101.
    246
    Compl. ¶¶ 89–94.
    247
    Compl. ¶ 112.
    248
    Compl. ¶ 102.
    249
    Compl. ¶¶ 109, 111.
    250
    Compl. ¶ 97.
    65
    inferred from these allegations that New Senior’s directors engaged in an unfair
    process when negotiating and approving the Challenged Transactions.251
    3. The Exculpatory Charter Provision
    Contrary to Plaintiff’s assertion, the application of entire fairness review does
    not necessarily result in denial of the motion to dismiss with respect to each
    individual defendant.252      New Senior’s certificate of incorporation contains a
    Section 102(b)(7) exculpatory provision at Article Six, which exculpates New
    Senior’s directors from liability to the fullest extent permitted by Delaware law.253
    251
    Defendants maintain that Edens and Givens cannot be held liable because they both
    abstained from the Board vote approving the Challenged Transactions. Defs.’ Opening
    Br. 55. The argument ignores Givens’ nearly exclusive role in negotiating the Challenged
    Transactions, Givens and Edens’ role as sole members of the Pricing Committee and settled
    Delaware law that rejects the “Geronimo theory,” which posits that a director can avoid
    liability by “extricating himself from decision-making about something he knows is going
    to be bad [by] pull[ing] the ripcord” and abstaining from the vote. See Cambridge Ret. Sys.
    v. Decarlo, C.A. No. 10879-CB, at 14 (Del. Ch. June 16, 2016) (TRANSCRIPT). See also
    Gesoff v. IIC Indus., Inc., 
    902 A.2d 1130
     (Del. Ch. 2006) (rejecting argument that
    abstaining from the vote shields a director from liability); Valeant, 
    921 A.2d at 753
     (same);
    Frederick Hsu, 
    2017 WL 1437308
    , at *38 (same).
    252
    In re Cornerstone Therapeutics Inc., Stockholder Litig., 
    115 A.3d 1173
    , 1179 (Del.
    2015) (“We now resolve the question presented by these cases by determining that
    plaintiffs must plead a non-exculpated claim for breach of fiduciary duty against an
    independent director protected by an exculpatory charter provision, or that director will be
    entitled to be dismissed from the suit. That rule applies regardless of the underlying
    standard of review for the transaction.”).
    253
    Klein Aff. Ex. 36 (Amended and Restated Certificate of Incorporation of New Senior
    Investment Group Inc.), at 8.
    66
    Thus, only claims that, as a matter of law, cannot be exculpated by that provision
    can survive the motion to dismiss.254
    Breaches of the duty of loyalty are not exculpated under Delaware law.255
    I have already addressed the alleged breaches of the duty of loyalty by Edens,
    Givens, Malone, Van der Hoof Holstein, Colbert and McFarland (and found them to
    be adequately pled). Accepting the well-pled facts of the Complaint as true, they
    each were in a conflicted state when they negotiated and approved the Challenged
    Transactions and, in that state, acted in a manner that advanced either their own
    interests or the interests of those to whom they were beholden at the expense of the
    Company.256 These breach of loyalty claims cannot be extinguished at the pleading
    stage under Section 102(b)(7).
    254
    Cornerstone, 
    115 A.3d at 1180
     (“[T]he mere fact that a plaintiff is able to plead facts
    supporting the application of the entire fairness standard to the transaction, and can thus
    state a duty of loyalty claim against the interested fiduciaries, does not relieve the plaintiff
    of the responsibility to plead a non-exculpated claim against each director who moves for
    dismissal.”).
    255
    
    Id.
     at 1179–80 (“When a director is protected by an exculpatory charter provision, a
    plaintiff can survive a motion to dismiss by that director defendant by pleading facts
    supporting a rational inference that the director harbored self-interest adverse to the
    stockholders’ interests, acted to advance the self-interest of an interested party from whom
    they could not be presumed to act independently, or acted in bad faith.”).
    256
    Guth v. Loft, 
    5 A.2d 503
    , 510 (Del. 1939) (holding that “[c]orporate officers and
    directors are not permitted to use their positions of confidence to further their private
    interests. . . . The rule that requires an undivided and unselfish loyalty to the corporation
    demands that there shall be no conflict between duty and self-interest.”).
    67
    In Count II, Plaintiff alleges that Givens is separately liable for breaches of
    her duty of care and duty of loyalty in her capacity as a New Senior officer.257 While
    Plaintiff has alleged similar breaches of the duty of care against all directors
    (including Givens in her capacity as director) under Count I,258 those claims fall
    directly within the exculpatory charter provision so I will not address them further.
    The exculpatory provision, however, does not cover Givens in her capacity as
    officer.259 Defendants acknowledge Givens’ exposure but argue that the due care
    claim against her must be dismissed because the Complaint does not adequately
    differentiate between Givens’ conduct as officer and her conduct as director.
    I disagree. Givens, as director, was not a member of the Transaction Committee and
    recused herself as director from Board level discussions and votes. Nevertheless, as
    officer, along with the remainder of her Fortress-based management team, she led
    all aspects of the negotiations and sale process, often without consulting or receiving
    direction from the Transaction Committee. Accordingly, Givens may be held liable
    257
    With respect to the duty of care, Plaintiff alleges, for instance, that Givens’ projections
    with respect to the rise of the Holiday Portfolio’s occupancy rate were “grossly negligent”
    and that Givens justified the size of New Senior’s bid by reference to a capitalization rate
    that she knew was not comparable to the acquisitions under consideration. Pl.’s Answering
    Br. 44–46; Compl. ¶¶ 89–93.
    258
    Pl.’s Answering Br. 42. See, e.g., Compl. ¶¶ 96–97 (“Therefore, the Board could not
    have been fully informed when it approved the Holiday Acquisition.”).
    259
    Gantler v. Stephens, 
    965 A.2d 695
    , 709 (Del. 2009).
    68
    for breaching her duties of care and loyalty to New Senior, to the extent such
    breaches are proven.260
    C. Plaintiff Has Stated a Viable Aiding and Abetting Claim
    Finally, at Count III, the Complaint alleges aiding and abetting breaches of
    fiduciary duty against Fortress, Holiday, FIG, FOE I and FIG Corp. To state a claim
    of aiding and abetting, a complaint must plead facts in support of four elements:
    (1) the existence of a fiduciary relationship, (2) a breach of a fiduciary duty,
    (3) defendant’s knowing participation in that breach and (4) damages proximately
    caused by the breach.261 The first two elements have been addressed in my findings
    above. Defendants do not attack the Complaint’s causation allegations. Thus, as is
    often the case in aiding and abetting litigation, given the Court’s finding that Plaintiff
    has pled breach claims, the focus turns to whether Plaintiff has adequately pled
    “knowing participation” by the alleged aiders and abettors.
    An adequate pleading of “knowing participation” requires a pleading of
    scienter.262 “To establish scienter, the plaintiff must demonstrate that the aider and
    260
    McPadden v. Sidhu, 
    964 A.2d 1262
    , 1275–76 (Del. Ch. 2008) (“Though an officer owes
    to the corporation identical fiduciary duties of care and loyalty as owed by directors, an
    officer does not benefit from the protections of a Section 102(b)(7) exculpatory provision,
    which are only available to directors. Thus, so long as plaintiff has alleged a violation of
    care or loyalty, the complaint proceeds against [the officer].”).
    261
    Malpiede v. Townson, 
    780 A.2d 1075
    , 1096 (Del. 2001).
    262
    See RBC Capital Mkts., LLC v. Jervis, 
    129 A.3d 816
    , 861–62 (Del. 2015) (quoting
    Malpiede, 
    780 A.2d at 1097
    ) (“As an example, this Court has said that ‘a bidder may be
    69
    abettor had actual or constructive knowledge that their conduct was legally
    improper,” and that he acted with “an illicit state of mind.”263 “[T]he requirement
    that the aider and abettor act with scienter makes an aiding and abetting claim among
    the most difficult to prove.”264 Difficult, but not impossible.
    Based on the well-pled facts in the Complaint, it is reasonably conceivable
    that all five of the alleged aiders and abettors knowingly participated in the directors’
    alleged breaches. Under Delaware law, “the knowledge of an agent acquired while
    acting within the scope of his or her authority [and the acts of agents in that scope]
    [are] imputed to the principal.”265 In In re Emerging Communications,266 applying
    this fundamental agency principle, the court held that two entities were “liable for
    having aided and abetted” an individual defendant where the entities were under the
    control of that defendant and “were the mechanisms through which” that defendant
    “accomplished” the challenged transaction.267 This same type of scheme is alleged
    liable to the target’s stockholders if the bidder attempts to create or exploit conflicts of
    interest in the board.’”).
    263
    Id. at 862 (internal quotation omitted).
    264
    Id.
    265
    Metro. Life Ins. Co. v. Tremont Gp. Hldgs., Inc., 
    2012 WL 6632681
    , at *19 (Del. Ch.
    Dec. 20, 2012).
    266
    In re Emerging Commc’ns, Inc. S’holders Litig., 
    2004 WL 1305745
     (Del. Ch. May 3,
    2004).
    267
    Id. at *38.
    70
    here—Givens and Edens are alleged to have facilitated the Challenged Transactions
    through the various Fortress subsidiaries named as aiders and abettors.268 Under
    basic principles of agency, all of their knowledge is imputed to the Fortress entities
    they served as agents.269
    Defendants lament that Plaintiff has failed to plead that any of the alleged
    aiders and abettors materially benefited from the Challenged Transactions.270 Even
    if allegations of materiality were required to support an aiding and abetting claim,
    and Defendants cite no authority imposing that requirement, the Complaint goes to
    significant lengths to allege how the aiders and abettors benefitted (materially) from
    the Challenged Transactions.271
    In their roles as director members of New Senior’s Pricing Committee, Givens
    and Edens alone set the terms of the Secondary Offering while also being employed
    by and otherwise affiliated with FIG. FIG, in turn, receives substantial management
    fees from New Senior based on New Senior’s gross equity.272 The allegedly unfair
    268
    Compl. ¶¶ 6–8, 28–33, 62, 73–82.
    269
    See Metro. Life, 
    2012 WL 6632681
    , at *19 (applying agency principals in aiding and
    abetting analysis); Quadrant Structured Prods. Co., Ltd. v. Vertin, 
    102 A.3d 155
    , 204 (Del.
    Ch. 2014) (same).
    270
    Defs.’ Opening Br. 59–60.
    271
    See, e.g., Compl. ¶¶ 65–72, 118–121.
    272
    Compl. ¶ 7.
    71
    Secondary Offering approved by Givens and Edens caused New Senior’s gross
    equity to increase substantially with resulting increases in FIG’s management
    fees.273     Givens and Edens also caused New Senior to issue “approximately
    $100 million in additional equity that New Senior did not need for the []
    Acquisition” and thereby increased FIG’s fees even more.274 And, of course, by
    pushing New Senior into the Secondary Offering, Givens and Edens saw to it that
    FIG would receive options to purchase over 2 million shares of New Senior stock
    (at the discounted price).275 Given these well-pled facts, it is reasonably conceivable
    that FIG knowingly participated in, and benefited from, the individual directors’
    breaches of their duty of loyalty or care.276
    The allegations are similarly compelling against Fortress. Plaintiff alleges
    that Fortress pushed the Acquisition in furtherance of a broader plan to shift its assets
    under management to publicly-traded companies that were externally managed by
    Fortress, such as New Senior, so it (through FIG) could charge higher management
    273
    Compl. ¶ 118.
    274
    Compl. ¶ 7.
    275
    Compl. ¶ 8.
    276
    Houseman v. Sagerman, 
    2014 WL 1478511
    , at *8 (Del. Ch. Apr. 16, 2014) (holding
    that Section 102(b)(7) does not apply to aiding and abetting claims, and collecting cases).
    72
    fees over longer periods of time.277 He further alleges that FHIF, Fortress’ private
    equity fund that is the majority owner of Holiday, pushed the Holiday sale to
    facilitate the “return of capital to its investors” in advance of its “maturity date of
    January 2017.”278 Those allegations, when coupled with the allegations that Givens
    ran the negotiations for New Senior and made bids for the Holiday Portfolio without
    any authorization from a Board comprised of members that were either interested in
    the Challenged Transactions or beholden to others who were, create a reasonably
    conceivable narrative that Fortress knowingly participated in the Board’s and
    Givens’ breaches.279
    To evaluate the sufficiency of the aiding and abetting claims pled against
    FOE I, FIG Corp and Holiday, one first needs to appreciate the close relationships
    of these entities within the Fortress network.280 FIG Corp. is the sole general partner
    277
    Compl. ¶ 9. Fortress has publically stated that it can generate between $375 million and
    $425 million of present market value for its shareholders from the fees it earns from
    managing $1 billion in a PCV. Compl. ¶ 118. As applied to the $266 million of invested
    capital generated by the Secondary Offering, Fortress can expect to generate between
    $99.75 million and $113.05 million in value, which is material to Fortress. 
    Id.
    278
    Compl. ¶ 4.
    279
    The Complaint also alleges that Fortress stood to gain from Holiday retaining the
    property management of the Holiday Portfolio. Compl. ¶ 10. Defendants take issue with
    this allegation because the property management fees would go to Holiday not Fortress.
    Defs.’ Opening Br. 60. While that is true, Plaintiff has sufficiently alleged the connections
    between Fortress and Holiday which lead to the reasonable inference that Fortress, the
    indirect owner of a majority of Holiday’s equity, would benefit from additional revenues
    collected by Holiday.
    280
    See appendix.
    73
    of FOE I and, together with Edens and the remaining two Fortress-principals, it owns
    all of FOE I’s limited partnership interests. FOE I, in turn, is the sole managing
    partner and sole owner of FIG, which is a subsidiary of Fortress and manages the
    Fortress private equity funds that own a majority of the Holiday interests. With the
    allegations outlined above pertaining to FIG and Fortress, just as in Emerging
    Communications, I am satisfied, for now, that Plaintiff has adequately pled that all
    of these networked entities were vehicles that aided and abetted the directors, and
    Givens as officer, in their alleged breaches of fiduciary duty.281
    III. CONCLUSION
    Based on the foregoing, Defendants’ motion to dismiss is DENIED.
    IT IS SO ORDERED.
    281
    Emerging, 
    2004 WL 1305745
    , at *38 (finding aiding and abetting pled for two
    companies based on the allegations with respect to the person that controlled them).
    74
    FHIF        Subsidiary                                                 o Wesley Edens
    Fortress                           o Peter L. Briger, Jr.
    Principals
    Majority                                                               o Randal A. Nardone
    owner
    Holiday
    Parent
     New Senior
     FHIF (and other                                          FIG
    funds that own       External
    Holiday)             manager
     Drive Shack
     Investment funds                                                     Sole managing
    that own                                                            member & 100%
    Nationstar                                                               owner
    FOE I
    100% of limited
    partnership interests                                    Sole general
    partner
       FIG Corp                                               FIG Corp.
       “Principals”
    o Wesley Edens
    o Peter L. Briger, Jr.
    o Randal A. Nardone
    75