Williamson v. Meyers (District of Del. (D. DEL) 2026)

Case details
Full caption
Williamson v. Meyers (derivatively on behalf of Equinix, Inc.)
Country
United States
Jurisdiction
Federal
Court
District of Delaware (D. DEL)
Decided
2026
Disposition
Motion Granted
Majority
United States District (J.) (unanimous Court)
IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWAREDEAN WILLIAMSON, derivatively on behalf of EQUINIX, INC.,Plaintiff,Civil Action No. 25-989-GBWCHARLES J. MEYERS, ADAIRE FOX­MARTIN, NANCI CALDWELL, GARY HROMADKO, THOMAS OLINGER, CHRISTOPHER PAISLEY, SANDRA RIVERA, FIDELMA RUSSO, PETER VAN CAMP, JEETU PATEL, THOMAS A. BARTLETT, KEITH D. TAYLOR, SCOTT G. KRIENS, WILLIAM K. LUBY, and IRVING LYONS, III,Defendants,-and-EQUINIX, INC.,Nominal Defendant.Stephen E. Jenkins, Tiffany Geyer Lydon, ASHBY & GEDDES, P.A., Wilmington, DE; Gregory Mark Nespole, Daniel Tepper, Correy A. Suk, LEVI & KORSINSKY, LLP, New York, NY; Howard T. Longman, LONGMAN LAW, P.C., Livingston, NJ.Counsel for PlaintiffKelly E. Faman, Blake Rohrbacher, Kevin M. Gallagher, RICHARDS LAYTON & FINGER, P.A., Wilmington, DE; Rory A. Leraris, Jaclyn Willner, DAVIS POLK & WARD WELL LLP, New York, NY; Vincent Barredo, Michael G. Mills, DAVIS POLK & WARDWELL LLP, Redwood City, CA.Counsel for DefendantsMEMORANDUM OPINIONMay 27, 2026Wilmington, Delaware
Hundreds of Millions” (the “Hindenburg Report”). Id. 115. The Hindenburg Report described instances of alleged “accounting manipulation by Equinix and its insiders.” Id. 16; see also fl 160-170. “In summary, the [Hindenburg] Report stated, ‘by reducing reported maintenance CapEx and inflating accounting metrics like AFFO, Equinix executives have ensured they personally benefit from their accounting manipulations.’” Id. , 170 (emphasis omitted).Five days later, on March 25, 2024, Equinix issued a press release announcing that Equinix’s board’s audit committee had commenced an investigation to review the allegations set forth in the Hindenburg Report. Id. 18. Equinix also announced that it had received a subpoena from the U.S. Attorney’s Office for the Northern District of California. Id. On May 2, 2024, a class action lawsuit was filed in the Northern District of California against Equinix, Meyers, and Taylor (the “Securities Action”). Id. 21. On May 8,2024, Equinix issued another press release, which announced that the investigation by the board’s audit committee was “substantially completed” and that the investigation “did not identify any accounting inconsistencies or errors requiring an adjustment to, or restatement of, previously issued financial statements or non-GAAP measures.” Id. If 19. On January 6, 2025, the court in the Securities Action granted-in-part and denied-in-part the defendants’ motion to dismiss the amended complaint. Id. |21; see also Uniformed Sanitationmen ’sAss ’n Comp. Accrual Fund v. Equinix, Inc., C.A. No. 24- 02656,2025 WL 39936 (N.D. Cal. Jan. 6, 2025).II. PROCEDURAL BACKGROUNDOn August 6, 2025, Plaintiff filed his Complaint, derivatively on behalf of Equinix. D.I. 2. The Complaint alleges the following causes of action: (1) violations of Section 14(a) of the Exchange Act and Rule 14a-9 by all Individual Defendants (“Count I”) (id. fl 234-242); (2) breaches of fiduciary duty by the Individual Defendants (“Count II”) (id. fl 243-251); (3) insider4
(3d Cir. 2008)). The “movant bears the burden of demonstrating that the complainant failed to state a claim upon which relief may be granted.” Abbott Diabetes Care, Inc. v. Dexcom, Inc., C.A. No. 23-239, 2024 WL 2804703, at *1 (D. Del. May 31, 2024) (citing Young v. West Coast Indus. Relations Ass’n, Inc., 763 F. Supp. 64, 67 (D. Del. 1991)).B. Rule 23.1 and Demand Futility“In a shareholder derivative suit, the plaintiff seeks to bring a claim that belongs to the corporation on the corporation’s behalf.” In re Cognizant Tech. Sols. Corp. Derivative Litig., 101 F.4th 250, 257 (3d Cir. 2024). “Accordingly, a plaintiff seeking to file a shareholder derivative suit must either (1) make a demand on the company’s board of directors to file the lawsuit itself, or (2) show that making such a demand would be ‘futile.’” Id. (citation omitted). “Federal Rule of Civil Procedure 23.1 requires that derivative complaints allege ‘with particularity’ either that a satisfactory pre-suit demand was presented to and refused by the board of directors or ‘the reasons for not obtaining the action or not making the effort.’” Id. (citing Fed. R. Civ. P. 23.1(b)(3)). Rule 23.1 sets forth the pleading standard; the law of the state of incorporation establishes the demand requirement and governs the substantive analysis. Id.In United Food & Com. Workers Union & Participating Food Indus. Emps. Tri-State Pension Fund v. Zuckerberg, the Delaware Supreme Court set forth a three-pronged inquiry for courts to follow when evaluating demand futility. 262 A.3d 1034, 1059 (Del. 2021). The three prongs are:(i) whether the director received a material personal benefit from the alleged misconduct that is the subject of the litigation demand;(ii) whether the director faces a substantial likelihood of liability on any of the claims that would be the subject of the litigation demand; and6
(iii) whether the director lacks independence from someone who received a material personal benefit from the alleged misconduct that would be the subject of the litigation demand or who would face a substantial likelihood of liability on any of the claims that are the subject of the litigation demand.Id. (cleaned up). “If the answer to any of the questions is ‘yes’ for at least half of the members of the demand board, then demand is excused as futile.” Id. The Zuckerberg test is “consistent with” the Delaware Supreme Court’s previous tests set forth Aronson and Rales’, thus, “cases properly construing Aronson, Rales, and their progeny remain good law.” Id. at 1059. In addition to proceeding on a “director-by-director” basis, demand futility analysis proceeds on a “claim-by- claim” basis. Kiger v. Mollenkopf, C.A. No. 21-409-RGA, 2021 WL 5299581, at *6 (D. Del. Nov. 15, 2021) (citations omitted).C. Section 14(a) and Rule 14a-9“Section 14(a) makes it ‘unlawful for any person ... to solicit... any proxy’ in violation of the Rules promulgated under the Exchange Act.” Deangelis v. Hees, No. 24-05687, 2025 WL 3712280, at *14 (D.N.J. Dec. 23, 2025) (quoting 15 U.S.C. § 78n(a)(l)). “Rule 14a-9 prohibits proxy statements from ‘containing any statement which, at the time and in the light of the circumstances under which it is made, is false or misleading with respect to any material fact, or which omits to state any material fact necessary in order to make the statements therein not false or misleading.’” Id. (quoting 17 C.F.R. § 240.14a-9(a)). “To state a claim under Section 14(a), a plaintiff must allege that: ‘(1) a proxy statement contained a material misrepresentation or omission which (2) caused the plaintiff injury and (3) that the proxy solicitation itself, rather than the particular defect in the solicitation materials, was an essential link in the accomplishment of the transaction.’” Heritage Found, v. Airbnb, Inc., C.A. No. 25-676-GBW, 2026 WL 395797, at7
1.Demand Futility under Rule 23.1 and ZuckerbergPlaintiff chose not to make a pre-suit demand on Equinix’s board. D.I. 2 25. Moreover, the parties agree that Delaware law governs the demand futility analysis. D.I. 27 at 8 n.7; D.I. 38 at 11. Thus, “[u]nder Rule 23.1 and the Delaware Supreme Court’s Zuckerberg test, Plaintiff]] must ‘state with particularity’ facts showing that making a demand on the board would be futile.” Cognizant, 101 F.4th at 262 (citation omitted).As relevant here, “[wjhen the certificate of incorporation exempts directors from liability, the risk of liability does not disable them from considering a demand fairly unless particularized pleading permits the court to conclude that there is a substantial likelihood that their conduct falls outside the exemption.” City of Detroit Police & Fire Ret. Sys. on Behalf of NiSource Inc. v. Hamrock, C.A. No. 20-577-LPS, 2021 WL 877720, at *5 (D. Del. Mar. 9, 2021) (quoting In re Baxter Inti, Inc. S’holders Litig., 654 A.2d 1268, 1270 (Del. Ch. 1995)). In the present action, Equinix’s certificate of incorporation contains such a provision generally exculpating director conduct. See D.I. 29-4, Ex. N at 3.3 “Delaware law is clear that this type of exculpatory provision extends to all breaches of fiduciary [duty] except those arising from the duty of loyalty or for bad faith or intentional breaches.” Hamrock, 2021 WL 877720, at *5 (citing 8 Del. C. § 102(b)(7)).3 “On a motion to dismiss, the Court may take judicial notice of matters of public record, including a certificate of incorporation.” Kiger, 2021 WL 5299581, at *6 n.6 (citation omitted). In pertinent part, Equinix’s certificate of incorporation provides that its directors “shall not be personally liable to [Equinix] or its stockholders for monetary damages for breach of fiduciary duty as a director,” with exceptions for breaches of the duty of loyalty, good faith, or a knowing violation of the law. D.I. 29-4, Ex. N, at 3.Plaintiff, in opposing Defendants’ Motion, repeatedly claims that Count I sounds in negligence. See, e.g., D.I. 38 at 3 (“Plaintiff adequately alleges negligence in the preparation of the 2023 Proxy ....”), 20-21 (“[T]he Section 14(a) claim is based on negligence, alleging that the9
for breaching their fiduciary duties to [Equinix],” citing their “oversight responsibilities,” id. 224. Plaintiff contends that these three members face a substantial likelihood of liability under Zuckerberg's second prong due to alleged violations of their oversight duties pursuant to In re CaremarkInt 7 Inc. Derivative Litig., 698 A.2d 959 (Del. Ch. 1996) (“Caremark"). See D.I. 38 at 17. The Court disagrees with Plaintiff.As the Delaware Supreme Court explained in Stone ex rel. AmSouth Bancorporation v. Ritter Stone"), Caremark provides two routes for showing director oversight liability: (1) where “directors utterly failed to implement any reporting or information system or controls”; or (2) where directors, “having implemented such a system or controls, consciously failed to monitor or oversee its operations thus disabling themselves from being informed of risks or problems requiring their attention.” 911 A.2d 362, 370 (Del. 2006). “Oversight liability ‘is possibly the most difficult theory in corporation law upon which a plaintiff might hope to win a judgment.’” In re Camping World Holdings, Inc. S’holder Derivative Litig., Consol. C.A. No. 2019-0179- LWW, 2022 WL 288152, at *16 (Del. Ch. Jan. 31, 2022), aff'd, 285 A.3d 1204 (Del. 2022) (quoting Caremark, 698 A.2d at 967). “Under either [Caremark] prong, ‘a showing of bad faith conduct... is essential to establish director oversight liability.’” Id. (quoting Stone, 911 A.2d at 370). “Only a sustained or systemic failure of the board to exercise oversight... will establish the lack of good faith that is a necessary condition to liability.” Id. (quoting Caremark, 698 A.2d at 971).Plaintiff asserts that the allegations of the Complaint satisfy Caremark's second prong with respect to Paisley, Olinger, and Russo. D.I. 38 at 17.5 This theory has been described as a “red-5 Plaintiff’s briefing contains two subheadings that address demand futility with respect to Paisley, Olinger, and Russo, together. See D.I. 38 at 16-20. These subheadings do not explicitly13
flag claim” in Caremark's progeny. See In re Plug Power Inc. S’holder Derivative Litig., No. 2022-0569-KSJM, 2025 WL 1277166, at *11 (Del. Ch. May 2, 2025). Stripped of rhetoric, Plaintiffs theory is as follows: Paisley, Olinger, and Russo attended many meetings where financial metrics, including the AFFO figures, were discussed; during these meetings, “red flags” emerged; and yet Paisley, Olinger, and Russo “remained silent or complicit” by permitting the issuance of allegedly misleading proxy statements. See D.I. 38 at 17-18.* * * 6 Ultimately, this theory fails for a couple of reasons.indicate which cause of action they are addressing. In the interest of providing a fulsome analysis,the Court assumes without deciding that these subsections address demand futility with respect toCount I.6 The Court notes the internal inconsistency of Plaintiffs theories. On one hand, when addressing the potential application of a heightened pleading standard, Plaintiff asserts that Count I is predicated on the Individual Defendants’ negligent failure to prepare proxy statements and sounds in negligence. See, e.g., D.I. 38 at 20-21. However, when addressing demand futility elsewhere within the same brief, Plaintiff asserts that Paisley, Olinger, and Russo demonstrated conscious disregard for their duties in connection with the issuance of the proxy statements. See, e.g., id. at 19.First, Plaintiff has not adequately alleged that Paisley, Olinger, and Russo were presented with and yet consciously disregarded “red flags” that relate to compliance with law. “A Caremark prong two claim requires a plaintiff to plead that directors were presented with ‘red flags related to compliance with law and consciously disregarded’ them.” Clem v. Skinner, C.A. No. 2021- 0240-LWW, 2024 WL 668523, at *8 (Del. Ch. Feb. 19, 2024) (citations omitted). “Under Delaware law, red flags ‘are only useful when they are either waved in one’s face or displayed so that they are visible to the careful observer.’” Wood, 953 A.2d at 143 (citation omitted). Plaintiffs theory hinges on Plaintiffs conclusory allegation that Equinix’s “books and records ... contain numerous red flags ... .” D.I. 2 H 82. According to Plaintiff, these “red flags” include low14
In sum, Plaintiff has failed to sufficiently allege demand futility as to Caldwell, Fox- Martin, Rivera, Olinger, and Russo with respect to Count I. Together, these five directors constitute a majority of the Demand Board. “As a result, Plaintiff]] ha[s] failed to plead futility, the [] Complaint fails to reach the pleading requirement for derivative actions, and the Section 14(a) claim must be dismissed.�� In re Stem, Inc. Derivative Litig., C.A. No. 23-1011-MN, 2026 WL 880441, at *5 (D. Del. Mar. 31,2026) (citing Fed. R. Civ. P. 23.1(b)).2. Failure to State a ClaimThe dismissal of Count I is additionally warranted because Plaintiff has not properly pled transaction causation. As set forth above, a party bringing a claim under Section 14(a) must allege that “the proxy solicitation itself, rather than the particular defect in the solicitation materials, was an essential link in the accomplishment of the transaction.” Heritage, 2026 WL 395797, at *4 (citation omitted). This “essential link” requirement is sometimes referred to as “transaction causation.” See, e.g., Hamrock, 2021 WL 877720, at *6.In Gen. Elec. Co. by Levit v. Cathcart, the Third Circuit addressed a claim where the plaintiff contended that “the misleading proxy statements served as ‘an essential link’ in the transactions which caused [the company] to lose money; the proxy statements allowed the appellees to retain their positions on the board, thus ensuring that they could continue to mismanage the company.” 980 F.2d 927, 933 (3d Cir. 1992). The Third Circuit rejected this theory of transaction causation, reasoning that “the mere fact that omissions in proxy materials, by permitting directors to win re-election, indirectly lead to financial loss through mismanagement will not create a sufficient nexus with the alleged monetary loss.” Id. (emphasis in original). In so doing, the Third Circuit recognized that “damages are recoverable under Section 14(a) only when the votes for a specific corporate transaction requiring shareholder authorization, such as17
accomplishment of any specific corporate transaction requiring shareholder authorization. Ultimately, the Court finds that the harms alleged in the Complaint are indirect financial losses caused by the alleged mismanagement of Equinix by its directors, as in Cathcart and Hamrock, rather than any pecuniary injury directly caused by a specific transaction authorized by the shareholders. See Hamrock, 2021 WL 877720, at *7. Thus, Plaintiff fails to properly allege transaction causation.99 In their opening brief, Defendants contended that Plaintiff failed to meet this element, citing Hamrock, inter alia. See D.I. 27 at 19. In opposition, however, Plaintiff did not address this contention or Hamrock. See D.I. 38 at 21-22. Plaintiffs failure to develop any opposition otherwise waives any such argument. See Wyeth, 119 F.3d at 1076 n.6.* * *For the foregoing reasons, the Court grants Defendants’ Motion with respect to Count I.B. Counts II-IV are DismissedFederal district courts have subject matter jurisdiction over claims arising under federal law, such as Count I. See Stem, 2026 WL 880441, at *5; see also 28 U.S.C. § 1331. As stated above, the Complaint also alleges several causes of action under Delaware state law. Having dismissed the sole federal claim asserted in the Complaint, the Court declines to exercise supplemental jurisdiction over Plaintiffs state law causes of action. See Stem, 2026 WL 880441, at *5 (declining to exercise jurisdiction over pendent Delaware state law claims after dismissing a Section 14(a) claim for failing to plead demand futility); see also 28 U.S.C. § 1367(c)(3). Thus, the Court grants Defendants’ Motion with respect to Counts II-IV. Counts II-IV are dismissed without prejudice. See Hamrock, 2021 WL 877720, at *8 (dismissing state law claims without prejudice after dismissing Section 14(a) claim).19
V. CONCLUSION1010 In reviewing Plaintiffs briefing, the Court identified at least one existence where Plaintiff had cited to a non-existent authority and brought this issue to Plaintiffs attention. After investigating, Plaintiff conceded that this fictitious citation was most likely the result of artificial intelligence (“Al”). The Court has not considered any of Plaintiff s contentions, to the extent that they rely on fabricated authority, and will consider whether any other action is necessary.For the foregoing reasons, Defendants’ Motion (D.I. 26) is granted. Count I is dismissedwith prejudice and Counts II-IV are dismissed without prejudice.20
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