Del. Court Nixes Suit Over Ex-TripAdvisor Director's Pay

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By Michael Greene

April 14 — An investor can't proceed with a derivative lawsuit challenging certain stock compensation awarded to a former TripAdvisor Inc. director, the Delaware Chancery Court ruled April 13.

Vice Chancellor Tamika Montgomery-Reeves found that the investor hadn't shown that TripAdvisor's board wrongfully refused a pre-suit demand to take legal action.

The investor failed to plead allegations that called into question the board's refusal to take action, the court said. Instead, it found that documents obtained by the investor under a books and records request and other factors supported the board's refusal.

Under Delaware law, investors that file derivative lawsuits must show that they made a pre-suit demand on the board of the company on whose behalf the case is brought, unless doing so would be futile.

Compensation Dispute

The lawsuit stemmed from the investor challenging a decision to allow Expedia Inc. Chief Executive Officer Dara Khosrowshahi to retain and receive immediate vesting of restricted stock units (RSUs) upon his departure from the TripAdvisor board. Khosrowshahi became a TripAdvisor director after TripAdvisor was spun off from Expedia.

Khosrowshahi subsequently resigned from the TripAdvisor board after Expedia purchased a major equity stake in Trivago, a competitor. The investor claimed that under an agreement, Khosrowshahi wasn't entitled to the RSUs because he either voluntarily resigned or was terminated for cause from the board.

In response to the investor's demand to take action, the TripAdvisor board formed a special committee to investigate the allegations. The committee found that Khosrowshahi was terminated without cause due to the Expedia/Trivago transaction and recommended that the board not take action to rescind the challenged RSUs.

The court found no evidence that suggested that the board was grossly negligent in refusing the investor's demand. Citing a recent chancery court ruling—Ironworkers Dist. Council of Philadelphia & Vicinity Ret. & Pension Plan v. Andreotti , the court said that a mere disagreement with a committee's conclusion isn't sufficient to raise doubts as to whether the board acted in good faith and on an informed basis.

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To contact the editor responsible for this story: Yin Wilczek at

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