Delaware Supreme Court Affirms Chancery Court’s Dismissal in Trade Desk Derivative Suit

Key Takeaways

• On November 6, the Delaware Supreme Court affirmed the Court of Chancery’s dismissal of a shareholder derivative action on behalf of The Trade Desk, Inc., for failure to adequately plead demand futility.
• Allegations that a company founder exerted outsized influence over the board were insufficient without particularized facts showing directors were unable to exercise independent judgment.
• The decision reinforces the high bar plaintiffs must meet to bypass the board in derivative litigation under Delaware law.
• Boards dominated by founders or executives with significant equity stakes should consider and employ robust governance practices and documentation of director independence.

On November 6, 2025, the Delaware Supreme Court affirmed the Court of Chancery’s dismissal of a shareholder derivative suit challenging a substantial stock option grant awarded to the co-founder and CEO of The Trade Desk, Inc., Jeff Green. The decision provides important guidance on the pleading standards for demand futility and the treatment of alleged corporate controllers under Delaware law.

Background

In October 2021, Jeff Green, who at the time controlled a majority of the Trade Desk’s voting stock, was awarded an incentive package worth up to $5.2 billion, contingent on certain stock performance milestones. The package was approved by the board of directors and was not submitted to a shareholder vote.

In challenging the compensation package, the plaintiffs alleged that Green exercised outsized influence over the board, rendering a majority of directors incapable of independently evaluating a shareholder demand. The plaintiffs contended that the directors were beholden to Green due to professional, financial, or personal relationships, and that Green’s presence at Compensation Committee meetings exerted undue influence. The plaintiffs further argued that the board minutes reflected a failure to meaningfully negotiate the terms of the package.

Applying the demand futility standards set forth in United Food & Commercial Workers Union v. Zuckerberg, 262 A.3d 1034 (Del. 2021), the Court of Chancery held that only one of the four disputed directors lacked independence due to his long personal and professional ties to Green. The court found that David R. Pickles—Trade Desk’s CTO and a director—was not independent because his relationship with Green dates back to 2007, when Green hired him at AdECN, and he has worked under Green’s supervision ever since. Pickles also derives his principal income from his position as CTO, which the court found to be material. Given these longstanding personal and financial ties, the court concluded that Pickles could not impartially consider a demand to sue Green over his compensation. For the remaining directors, the court considered the following alleged ties and found them insufficient to compromise independence:

• Director 2: Venture capital ties and an ongoing business relationship did not rise to the level of compromising independence, as there were no particularized allegations showing that the director’s service or financial interests were materially dependent on Green.
• Director 3: A prior consulting relationship with the company, director compensation, and listing Trade Desk as a reference for future consulting work were not sufficient to impugn the director’s independence, as the court found these connections were either too attenuated or not material enough to create reasonable doubt about her ability to consider a demand impartially.
• Director 4: A brief overlap at another company, significant stock holdings, and director fees did not undermine the director’s independence, as the court concluded there were no allegations that Green could affect her wealth or board positions, and her past business relationship with Green was too remote to raise reasonable doubt about her independence.

The court concluded that the plaintiffs did not meet the stringent requirements to show lack of independence of the remaining directors or that Green’s influence was so pervasive as to those directors to render the board unable to consider a demand impartially.

Under Delaware’s demand futility doctrine, a plaintiff must plead with particularity that a majority of the board is conflicted or lacks independence in order to proceed with a derivative suit. As set forth in Zuckerberg, demand is futile if at least half of the members of the board (1) receive a material personal benefit from the alleged misconduct, (2) face a substantial likelihood of liability on the claims that are the subject of the demand, or (3) lack independence from someone who received such a benefit or faces such a likelihood of liability. Because the Court of Chancery found that only one of the four challenged directors lacked independence, meaning there were independent directors who could have properly addressed the demand, the court dismissed the derivative complaint.

On appeal, the plaintiffs argued that the Court of Chancery failed to apply a holistic analysis to the remaining directors and improperly treated Green as a “regular CEO” rather than as a controller. The Delaware Supreme Court rejected those arguments and affirmed the dismissal, holding that the Court of Chancery properly applied Delaware’s demand futility standards and conducted a thorough review of each director’s independence.

The Supreme Court’s Affirmance

The Supreme Court agreed that:

• The plaintiffs failed to plead particularized facts showing that at least three of four remaining directors were conflicted or lacked independence;
• The Court of Chancery appropriately considered the nature of Green’s influence and did not err in its controller analysis; and
• The plaintiffs’ theory that Green’s influence created a “controlled mindset” or otherwise dominated the board was insufficient to plead demand futility.

Implications for Corporate Boards and Governance

The decision underscores the rigor of Delaware’s demand futility standard, namely that Plaintiffs must allege specific, detailed facts demonstrating each individual director’s conflicts or lack of independence to survive dismissal. The affirmance also highlights key takeaways for boards and companies:

• Document independence: Companies should maintain detailed records of director independence and deliberations, particularly in executive compensation decisions.
• Manage and Mitigate founder influence risks: Founder-led boards should evaluate potential governance risks and consider using independent committees or advisors for insider transactions.

The ruling comes amid heightened scrutiny in Delaware of corporate governance practices—especially in companies with dual-class stock structures (i.e., preferred and common) or those undergoing reincorporation. The decision reinforces Delaware courts’ deference to independent and disinterested boards, signaling continued judicial reluctance to second-guess boardroom judgments absent particularized allegations of control or conflict.

For more on this topic, please check out our limited series podcast, The Business Court Benches: Delaware and Texas Compared. This topical series, co-hosted by Akin litigation partners Scott Barnard and Stephanie Lindemuth, dives into the bold steps Texas has taken to rival Delaware as the go-to jurisdiction for corporate litigation.