In Re Tyson Foods, Inc. Consolidated Shareholder Litigation

OPINION

Before me is a motion to dismiss a lengthy and complex complaint that includes almost a decade’s worth of challenged transactions. Plaintiffs level charges, more or less indiscriminately, at eighteen individual defendants, one partnership, and the company itself as a nominal defendant. Several allegations are leveled at clearly inappropriate directors or challenge actions well beyond the statute of limitations. Over six hundred pages of additional documents and briefs have been filed by one party or another in order to provide context for my decision. Although I do not grant defendants’ motion in its entirety, I may at this point winnow the grist of future proceedings from chaff that may be dismissed.

My decision is divided roughly into three parts. First, I describe in some detail the parties, the facts alleged in plaintiffs’ com *571 plaint (and any appropriate accompanying materials), and the parties’ primary contentions. Second, I describe the legal standards that are applicable across most counts in the complaint: the demand requirement and the statute of limitations. Finally, I evaluate each count of the consolidated complaint separately, highlighting the relevant legal issues and determining the extent to which a particular count may be limited or dismissed altogether.

In evaluating a motion to dismiss, I must accept as true all well-pleaded factual allegations. 1 Such facts must be asserted in the complaint, not merely in briefs or oral argument. 2 I must draw all reasonable inferences in favor of the non-moving party, and dismissal is inappropriate unless the “plaintiff would not be entitled to recover under any reasonably conceivable set of circumstances susceptible of proof.” 3

I. PARTIES AND PROCEDURAL HISTORY

This case arises from an unusually complex procedural history. Plaintiffs’ consolidated complaint is the fourth iteration arising from defendants’ challenged actions. Before delving into disputes spanning over a decade and the events that bring the parties before this Court, I pause briefly to describe the relevant players.

A. The Plaintiffs

An SEC investigation regarding the proper classification of executive perquisites aroused the suspicions of plaintiff Eric Meyer, a New Jersey resident and Tyson shareholder. He made a written demand for documents to the company pursuant to 8 Del. C. § 220 on August 26, 2004. After almost a year of wrangling over precisely which papers were and were not to be produced, Tyson handed over an agreed upon set of documents on July 21, 2005. Meyer then filed his initial lawsuit on September 12, 2005.

Meyer was not alone in his concerns. Plaintiff Amalgamated Bank, a New York-based banking institution, had begun its own investigation slightly earlier. 4 Its action, filed on February 16, 2005, included both class action and derivative complaints for breaches of fiduciary duty and proxy disclosure violations. Amalgamated’s complaint was later amended on July 1, 2005.

On September 21, 2005, this Court requested that counsel for the two plaintiffs confer and determine whether their actions could be consolidated. They agreed and filed the consolidated complaint on January 11, 2006.

B. Tyson Foods, Inc.

Tyson Foods, Inc., a Delaware corporation with its principal office in Springdale, Arkansas, provides more protein products to the world than any other firm. Founded in the 1930s, the Tyson family has at all times kept the company under its power and direction. Tyson’s share ownership structure ensures this: as of October 2, 2004, Tyson had 250,560,172 shares of Class A common stock and 101,625,548 shares of Class B common stock outstanding. Each Class A shareholder may cast *572 one vote per share on all matters subject to the shareholder franchise, while Class B shareholders may cast ten votes for each one of their Class B shares.

The Tyson Limited Partnership (“TLP”), a limited partnership organized in Delaware, owns 99.9% of the Class B stock, thus controlling over 80% of the company’s voting power. In turn, Don Tyson controls 99% of TLP, either directly or indirectly through the Randal W. Tyson Testamentary Trust. Tyson Limited Partnership is also a defendant in this matter.

C. Defendant Board Members

Defendant Don Tyson has served as a director since 1952, and as" Senior Chairman of the Board from 1995 to 2001. He has retired from that position, but remains employed as a consultant to the Tyson firm. He maintains his position as the managing general partner of TLP.

Defendant John Tyson, son of Don Tyson, joined the board in 1984 and was elevated to Chairman in 1998. In April 2000, he became Tyson’s Chief Executive Officer. Like his father, he is a general partner of TLP.

Defendant Barbara Tyson, the widow of Randal Tyson and the sister-in-law of Don Tyson, took her board position in 1998. Retiring from the company’s Vice Presidency in 2002, Ms. Tyson entered into a consultancy arrangement with the company. She remains a shareholder in the company and a general partner of TLP.

Defendant Lloyd V. Hackley came to the board in 1992. Hackley beneficially owns at least 18,510 shares of Tyson Class A common stock and serves as Chairman of the Governance Committee.

Defendant Jim Kever, besides serving on Tyson’s board, also owns twelve percent of the shares of DigiScript, Inc., a company in which John Tyson made an indirect investment in 2008. He serves as the Chairman of the Audit Committee and sits on the Governance Committee. Kever owns at least 2,621 shares of Tyson Class A common stock.

Defendant David A. Jones joined the board in 2000, beneficially owns 2,492 shares of Tyson Class A stock, and served on the Compensation and Audit Committees. He resigned from the Tyson board in 2005, shortly after this action was filed.

Defendant Richard L. Bond, Tyson’s President and Chief Operating Officer, also sits on the board of directors. He owns at least 1,523,288 shares of Tyson Class A common stock as well as significant quantities of restricted stock. He serves as an officer under a contract that extends through February 2008.

Defendant Jo Ann R. Smith joined the Tyson board in 2001 and remains a director. She is president of Smith Associates, an agricultural marketing business. Chairperson of the Compensation Committee and a member of the Audit and Governance Committees, she is also the beneficial owner of 6,932 shares of Tyson Class A common stock.

Defendant Leland E. Tollett has been a board member since 1984. He served as the Chairman of the Board and Chief Executive Officer from 1995 to 1998. After retiring in 1998, he signed a ten-year consulting contract which provided for payments of $310,000 per year for the first five years and $125,000 per year for the remainder of the term, as well as providing for the vesting of Tollett’s outstanding options and continuing health insurance. He is a general partner of TLP and the beneficial owner of 3,398,034 shares of Tyson Class A common stock.

Defendant Wayne B. Britt sat on the Tyson board from 1998 to 2000. He served as Chief Executive Officer from 1998 until *573 2000, as Executive Vice President and Chief Financial Officer from 1996 to 1998, as Senior Vice President, International Division from 1994 to 1996, as Vice President, Wholesale Club Sales and Marketing from 1992 to 1994, and in a variety of positions before 1992.

Defendant Joe F. Starr served on the Tyson board from 1969 until 1992. He also served as Vice President until 1996.

Defendant Neely E. Cassady participated in the board’s Audit and Compensation Committees from 1994 to 2000 and was a member of the Special Committee from 1997 to 2000. He started on the board in 1974 and left in 2000.

Defendant Fred Vorsanger held a board position from 1977 until 2000. During his tenure he served on the Audit, Compensation, and Special Committees.

Tyson elected defendant Shelby D. Massey to the board in 1985, where he remained until 2002. He served as Senior Vice Chairman from 1985 until 1988. He was a member of the Compensation Committee (approximately 1994 to 2002), Special Committee (1997 to 2002) and Governance Committee (2002).

Defendant Donald E. Wray was a board member from 1994 to 2002. He also held the positions of President from April 1995 until 2000 and Chief Operating Officer from 1991 until 1999. Wray currently holds a Senior Executive Employment Agreement that extends until 2008.

Defendant Gerald M. Johnston served on the board from 1996 until 2002. From 1981 to 1996, he served as Executive Vice President of Finance, after which he stepped down and became a consultant for Tyson.

Défendant Barbara Allen served on the board between 2000 and 2002. She was selected at various times to participate on the Compensation and Audit Committees as well as the Compensation Subcommittee.

Defendant Albert C. Zapanta is President and CEO of the United States-Mexico Chamber of Commerce. He joined the board in May 2004 and sits on the Compensation and Governance committees.

II. FACTUAL BACKGROUND

A. The Herhets Action and the Formation of the Special Committee

Many of the defendants do not find themselves before this Court for the first time answering challenges to their duty of loyalty. In February 1997, this Court entered an order pursuant to a settlement agreement in Herhets v. Don Tyson and, thus, resolved an earlier long-running dispute between the Tyson family and minority shareholders. 5 As is typical in such settlements, no defendant admitted to any wrongdoing whatsoever. 6 Nevertheless, as part of the settlement, Tyson Foods consented to create a “Special Committee” consisting of outside directors to annually review “the terms and fairness of all transactions between the company, on the one hand, and its directors, officers or their affiliates, on the other, which are required *574 to be disclosed in the company’s proxy statements pursuant to Securities and Exchange Commission regulations.” 7 Further, the Special Committee was to “review the reasonableness of Don Tyson’s requests for expense reimbursements annually.” 8

The Special Committee consisted of defendants Massey, Jones, Kever, and Hack-ley (who served as Chairman), although it is unclear who served at which times. The Herbets settlement required this committee to make its determinations once a year, and plaintiffs concede that it “held ... one meeting annually from 1999 to 2002....” 9 According to plaintiffs, the Committee did not review all of the related-party transactions or Don Tyson’s requests for expenses, despite the annual meetings. Plaintiffs allege that the committee’s limited review ignored recommendations of outside consultants and approved transactions without regard to their fairness to Tyson.

On August 2, 2002, the Special Committee was replaced by the Governance Committee. A charter provision required the Governance Committee to “review and approve” every “Covered Transaction,” which is in turn defined as “any transaction ... between the Company and any officer, director, or affiliate of the company that would be required under the Securities and Exchange Commission rules and regulations to be disclosed in the company’s annual proxy statement.” 10 Such reviews were to be annual, and were to include analyses of whether the terms of related-party transactions were fair to the company. Although the charter provides that the Governance Committee is to meet “ ‘normally ... four times per year,’ ” plaintiffs allege that it did not meet at all in 2002 and met only once in 2003 and once in 2004. 11 Plaintiffs identify defendants Hackley (Chairman), Massey, Kever, Jo Ann Smith and Albert Zapanta as former or current members of the Governance Committee.

B. Compensation and Regulation Before the SEC Investigation in 200k

Plaintiffs contend that the Herbets settlement did little to prevent the Tyson family’s abuse of the corporation and that the same managerial self-dealing complained of in 1997 continues to this day. *575 The complaint concentrates on three particular types of board malfeasance: (1) approval of consulting contracts that provided lucrative and undisclosed benefits to corporate insiders; (2) grants of “spring-loaded” stock options to insiders; and (3) acceptance of related-party transactions that favored insiders at the expense of shareholders.

1. The Don Tyson and Peterson Consulting Contracts

In 1998, John Tyson succeeded his father, Don Tyson, as Chairman of the Tyson Board of Directors and CEO. The elder Tyson remained until 2001 as Senior Chairman of the Board. Upon his retirement in October 2001, the board approved a pair of consulting contracts, one for Don Tyson and one for Robert Peterson, former Chairman of the Board and CEO of Iowa Beef Packers (“IBP”). 12 Both contracts provided that the former executives would “upon reasonable request, provide advisory services ... as follows: ... (b) [Employee] may be required to devote up to twenty (20) hours per month....” 13 In the event of the employee’s death before the expiration of the agreement, all payments and benefits were to go to designated survivors. Don Tyson’s consulting contract provided for an annual payment of $800,000 for ten years, and granted the right to personal perquisites and benefits, including “ ‘travel and entertainment costs ... consistent with past practices.’ ” 14 Peterson’s contract similarly entitled him to a payment of $400,000 per year for ten years plus personal perquisites and benefits.

Peterson died in May 2004, and his rights to salary and perquisites passed to his wife. Plaintiffs make much of the fact that Peterson rendered no services to the company after May 2004.

Plaintiffs also allege that defendants Tollett and Wray agreed to similar, if smaller, consulting contracts in 1999 and 1998 respectively. Both receive health insurance and the vesting of stock options throughout the terms of their agreements, in addition to annual payments ranging from $100,000 to $350,000 over ten years.

2. Stock Option Grants

In 2001, Tyson adopted a Stock Incentive Plan granting the board permission to award Class A shares, stock options, or other incentives to employees, officers, and directors of the company. Tyson gave the Compensation Committee and Compensation Subcommittee complete discretion as to when and to whom they would distribute these awards, but instructed that they were to consult with and receive recommendations from Tyson’s Chairman and Chief Executive Officer. Plaintiffs allege that, at all relevant times, the Plan required that the price of the option be no lower than the fair market value of the company’s stock on the day of the grant. 15

*576 Plaintiffs allege that the Compensation Committee, at the behest of several Defendant board members, “spring-loaded” these options. Days before Tyson would issue press releases that were very likely to drive stock prices higher, .the Compensation Committee would award options to key employees. 16 Around 2.8 million shares of Tyson stock bounced from the corporate vaults to various defendants in this manner. Plaintiffs specifically identify four instances of allegedly well-timed option grants.

The Compensation Committee (then Massey, Vorsanger, and Cassady) granted John Tyson, former-CEO Wayne Britt, and then-COO Greg Lee options on 150,-000 shares, 125,000 shares and 80,000 Class A shares, respectively, at $15 per share on September 28, 1999. The next day, Tyson informed the market that Smithfield Foods, Inc. had agreed to acquire Tyson’s Pork Group. The announcement propelled the price upwards to $16.53 per share in less than six days, and to $17.50 per share by December 1, 1999. 17

Once again, the Compensation Committee (then Massey, Hackley, and Allen) granted options on 200,000 Class A shares to John Tyson, 100,000 to Lee, and 50,000 to then-CFO Steven Hankins at $11.50 per share on March 29, 2001. A day later, Tyson publicly cancelled its $3.2 billion deal to acquire IBP, Inc. By the close of that day, the stock price had shot up to $13.47.

The Compensation Committee (then Hackley, Allen, and Massey) granted options on 200,000 Class A shares to John Tyson, 60,000 to Lee, and 15,000 to Hankins sometime in October 2001. Within two weeks, Tyson publicly announced its 2001 fourth-quarter earnings would be more than double those expected by analysts, catapulting the stock price to $11.90 by the end of November.

The Compensation Committee (then Smith, Jones, and Hackley) granted stock options to a number of executives and directors, including 500,000 to John Tyson, 280,000 to Bond, and 160,000 to Lee, at $13.33 per share on September 19, 2003. On September 23, 2003, Tyson publicly announced that earnings were to exceed Wall Street’s expectations, propelling the price to $14.25.

3. Related Party Transactions

Proxy statements reveal that Tyson engaged in a total of $163 million in related-party transactions between 1998 and 2004, over ten percent of Tyson’s $1.6 billion net earnings. Plaintiffs allege that the terms of these contracts have been consistently kept from minority shareholders, with defendants simply disclosing in each year’s proxy statement the aggregate amounts paid to related entities in the previous fiscal year and a cursory description of the *577 nature of the transactions. According to plaintiffs, these transactions were unfair to the corporation, sexwing to enrich corporate insiders who made sure that the proxies wei'e too misleading, incomplete, and cursory to constitute any real disclosure.

The consolidated complaint lists a motley of typical related-party transactions, including gi'ow-out opportunities, farm leases, and other research and development contracts with insidei’s. 18 Plaintiffs allege that Tyson has never disclosed the prices at which it bought back livestock from coi’porate insiders through the grow-out pi’ograms. 19 Additionally, Tyson leased farms from various corporate insiders with a total value averaging over $2 million per year between 2001 and 2003.

A very liberal trade existed between directors (and ex-directors) and the company, of which the complaint provides many specific examples. Perhaps the most x’elevant involves defendants Shelby and Massey. After Massey’s retfrement in 2002, Tyson purchased over $10 million worth of cattle per year in 2002 and 2003 from Shelby Massey farms. Similarly, for the three years between 2001 and 2003 Tollett i’eceived $624,077 per year for breeder hen research and development.

Plaintiffs and defendants disagree vehemently on how many of the related-party transactions have actually been reviewed by the Special Committee. Meyer attempted to use his demand for records to verify that the Special Committee had approved all related-pai’ty transactions. But Meyer only requested documentation concerning a limited list of related-party transactions. Meyer alleges that he received documentation l’elating to further related-party transactions (including summary reports), and that from this the Court should conclude that the Committee considered only the transactions indicated by documents in the § 220 request. Of the $163 million in related-pai’ty transactions from 1998 through 2004, Meyer could only verify that the Committees had reviewed $69 million, or less than 42% of the total transactions by value. Specifically, plaintiff Meyer did not observe any evidence that the Committees had reviewed the swine grow-out program, the poultry grow-out program, cattle purchases from Massey, a lease of cold storage facilities partially owned by Johnston, or certain individual farm leases.

Defendants contend that I may not infer from these documents that the transactions were not in fact reviewed, notwithstanding the high degree of deference to which a plaintiff is entitled on a 12(b)(6) motion. Defendants point out that the documents requested in Meyer’s § 220 demand did not cover all the transactions alleged in the complaint, and that the proxy statements repeatedly state that all transactions were reviewed.

It is true that a very strong negative inference is required for me to suppose *578 from the facts alleged that the appropriate board committees did not review these transactions, yet two aspects of the complaint lead me to conclude that a negative inference is warranted. First, plaintiffs made a § 220 request to defendants who knew the crux of plaintiffs’ complaint. Even if the request was in fact narrow, defendants had the opportunity to widen the scope of documents granted in order to exculpate themselves. 20 While they were, of course, not required to do so, it is more reasonable to infer that exculpatory documents would be provided than to believe the opposite: that such documents existed and yet were inexplicably withheld.

Second, the complaint contains detailed allegations that would lead me to infer that some transactions were not, in fact, reviewed. The SEC Order and the logo vendor transactions described below, for instance, suggest a board of directors that at the very least failed to pay sufficient attention to transactions with Don Tyson and his associates. It is not unreasonable to infer that a board which lets these transactions pass without scrutiny is not watching other related-party transactions with an eagle eye. Drawing every reasonable inference in favor of the plaintiffs, there is at least a suggestion that some transactions were not, in fact, reviewed.

In any event, plaintiffs allege that where an independent committee did review a transaction, such a review put little effort into considering whether the transactions simulated arms-length deals or whether bidding processes would have saved money. Three specific examples of improper reviews are alleged in the complaint: the Arnett Sow Complex, the Tyson Children’s Partnership Lease, and the Logo Vendor affair.

a.Arnett Sow Complex

In the spring of 2000, an independent consultant advised that the company was paying an inflated rate of return to the Arnett Sow Complex (partially owned by Don Tyson and Starr) despite the fact that the complex was reportedly in worse shape than other suitable sow farms. The Pork Group (a subsidiary of Tyson) proposed that lease rates with the complex be revised downwards by 85% to reflect poor conditions within the industry. Plaintiffs contend that the board ignored these recommendations, although they admit that the company did cut the lease rates half as much as recommended by the Pork Group.

b.Tyson Children’s Partnership Lease

Plaintiffs allege that the company leased a farm belonging to the Tyson Children’s Partnership at a much higher rate than would be expected in an arm’s length transaction. The ten-year lease required payments of $450,000 per year (plus all taxes, utility costs, and insurance and maintenance costs) for a farm whose appraised value stood at $2.8 million. Plaintiffs also allege that an independent auditor was of the opinion that the lease was not an arms-length market lease.

c.The Logo Vendor Affair

In addition to the Arnett Sow Complex and the Tyson Children’s Family Lease, plaintiffs also point to a transaction with a “supplier of logo merchandise” owned by a *579 close personal Mend of Don Tyson. Almost $5 million of product was purchased from the vendor without engaging in a bidding process. At the same time, the Compensation Committee was forced to cancel a company credit card that Don Tyson had given to the vendor without company authorization.

C. The 2004 SEC Investigation of Don Tyson’s Perquisites

In March 2004, the Securities and Exchange Commission (the “SEC”) conducted a formal, non-public investigation into the annual perquisites given to several board members and other executives that had been disclosed as “other annual compensation” in the footnotes of Tyson’s proxy statements. This “other annual compensation” category appeared every year since at least 1992, when only Don Tyson received such remuneration. In 1998, when John Tyson became Chairman of the Board, he too began receiving “other annual compensation.” Upon his ascension to the board in 2001, Richard Bond, Tyson’s then-President and Chief Operating Officer, started to benefit from “other annual compensation” as well. The proxy statement dated December 31, 2003 described this category of compensation as consisting of travel and entertainment costs, insurance premiums, reimbursements for income tax liability related to the travel and entertainment costs, and other such items.

The SEC investigation revealed that Tyson’s proxy statements were incomplete and misleading between 1997 to 2003, in that they included under “travel and entertainment costs” expenses that could not reasonably be considered either travel or entertainment. On August 16, 2004, the SEC notified Tyson that it intended to recommend a civil enforcement action against the company and a separate action against Don Tyson. Further, the SEC was considering a monetary penalty based on Tyson’s noncompliance with SEC regulations for the years 1997 through 2003. The noncompliance penalty would cover over $1.7 million of perquisites given to Don Tyson, the inadequacy of internal controls over the personal use of Tyson assets, and incomplete disclosure of perquisites and personal benefits.

Tyson consented to the SEC’s entry of an “Order Instituting Cease-and-Desist Proceedings, Making Findings, and Imposing Cease-and-Desist Order Pursuant to Section 21C of the Securities Exchange Act of 1934” (the “Order”). 21 In the Order, the SEC found that Tyson made misleading disclosure of perquisites and personal benefits provided to Don Tyson in proxy statements filed from 1997 to 2003. The Order described how Tyson had failed to disclose over $1 million in perquisites and improperly characterized many disclosed perquisites. Nearly $3 million worth of undisclosed or inadequately disclosed perquisites had been paid to Don Tyson, or to his family and Mends, including use of the Tyson corporate credit cards for personal expenditures such as antiques, vacations, a horse, and substantial additional purchases of clothing, jewelry, artwork, and theater tickets. Family and friends were also allegedly given virtually unlimited use of corporate aircraft and company-owned homes in England and Cabo San Lucas, Mexico, including the use of company-paid chauffeurs, cars, cooks, housekeepers, landscapers, telephones, and a boat crew.

The Order found that Tyson made false or inadequate disclosures regarding the perquisites and personal benefits paid to Don Tyson pursuant to his 2001 consult *580 ing agreement. The SEC further faulted Tyson for violating proxy solicitation and reporting provisions required by federal securities laws and failing to implement internal accounting controls over personal use of assets sufficient to detect, prevent, or account properly for Don Tyson’s and his family’s and friends’ use of company assets. The Compensation Committee conducted its own investigation in light of the SEC findings and determined that Don Tyson should reimburse the company for improper compensation and perquisites.

Unsurprisingly, the 2004 proxy statement read quite differently from those of earlier years. First, it disclosed that Don Tyson had agreed to pay the company over $1.5 million as reimbursement for certain perquisites and personal benefits received during fiscal years 1997 through 2003, and that he had also agreed to pay an additional $200,000 for improper expenses. Second, Tyson disclosed that on July 30, 2004, it had approved an increase in Don Tyson’s annual compensation pursuant to his consulting contract from $800,000 to $1.2 million annually, with the consideration to be paid, in the event of his death, to his three children until the termination of the contract in 2011. 22 The proxy statement further disclosed that the Governance Committee had approved the purchase by Tyson of over 1 million shares of Don Tyson’s Class A common stock at a purchase price of $15.11 per share. 23

III. CONTENTIONS

From these facts, plaintiffs make nine separate claims, each of them against various defendants. In Counts I-IV, plaintiffs contend that the board violated its fiduciary duties by approving the Peterson and Don Tyson consulting contracts in 2001 and the amended Don Tyson consulting contract in 2004 (Count I); the awards of “Other Annual Compensation” between 2001 and 2003 (Count II); the “spring-loaded” options of 1999 to 2003 (Count III); and related-party transactions occurring since 1997 (Count IV). Count V, which is brought against every individual director, alleges a “pattern and practice of failing to investigate and disclose self-dealing payments,” which plaintiffs contend not only wasted assets but also brought SEC investigations and fines against the company. 24 In the next two counts (VI and VII), plaintiffs contend that the defendant directors not only breached their contractual duties (Count VI) but also violated an order of this Court (Count VII) by failing to act in accordance with the Her-béis settlement. Count VIII, a class action but not a derivative claim, maintains that the defendant directors materially misrepresented facts in the company’s 2004 proxy statement such that the election of directors in that year should be held to be invalid. Finally, plaintiffs assert (Count IX) that the related-party transactions, spring-loaded options, consulting contracts and payments in the “other annual compensation” category amount to unjust enrichment of certain individual defendants, entitling the company to, among other things, a disgorgement of benefits from the unjustly enriched individual defendants.

*581 Defendants raise their own chorus of objections in support of their motion to dismiss. First, many of the claims (they say) are barred by the statute of limitations. Second, many claims are raised against directors who had little or nothing to do with the challenged decisions. Third, in some cases plaintiffs have brought deiivative actions where demand was not excused. Finally, where the proper directors have been named in the complaint and the action itself is not time-barred, defendants assert that plaintiffs have not stated a claim for which relief can be granted.

IV. DEMAND, INTERESTEDNESS AND INDEPENDENCE

Before addressing the morass of plaintiffs’ various legal theories, it will be helpful to consider in detail two legal doctrines implicated in almost every count: the standards for demand excusal and the process by which the Delaware statute of limitations runs and is tolled.

The first hurdle facing any derivative complaint is Rule 23. 1, which requires that the complaint “allege with particularity the efforts, if any, made by the plaintiff to obtain the action the plaintiff desires from the directors ... and the reasons for the plaintiffs failure to obtain the action or for not making the effort.” 25 Rule 23.1 stands for the proposition in Delaware corporate law that the business and affairs of a corporation, absent exceptional circumstances, are to be managed by its board of directors. 26 To this end, Rule 23.1 requires that a plaintiff who asserts that demand would be futile must “comply with stringent requirements of factual particularity that differ substantially from the permissive notice pleadings” normally governed by Rule 8(a). 27 Vague or conclusory allegations do not suffice to upset the presumption of a director’s capacity to consider demand. 28 As famously explained in Aronson v. Lewis, plaintiffs may establish that demand was futile by showing that there is a reason to doubt either (a) the disinterestedness and independence of a majority of the board upon whom demand would be made, or (b) the possibility that the transaction could have been an exercise of business judgment. 29

There are two ways that a plaintiff can show that a director is unable to act objectively with respect to a pre-suit demand. Most obviously, a plaintiff can assert facts that demonstrate that a given director is personally interested in the outcome of litigation, in that the director will personally benefit or suffer as a result of the lawsuit in a manner that differs from shareholders generally. 30 A plaintiff may also challenge a director’s independence by alleging facts illustrating that a given director is dominated through a “close personal or familial relationship or through force of will,” 31 or is so beholden to an interested director that his or her “disere *582 tion would be sterilized.” 32 Plaintiffs must show that the beholden director receives a benefit “upon which the director is so dependent or is of such subjective material importance that its threatened loss might create a reason to question whether the director is able to consider the corporate merits of the challenged transaction objectively.” 33

Frequent confusion arises because the Aronson test for demand futility closely resembles the test for determining whether a duty of loyalty claim survives a motion to dismiss under Rule 12(b)(6). In both cases plaintiffs raise a reason to doubt the independence or interestedness of a majority — or even half — of a board of directors. 34 Given the fact that most claims involving the duty of loyalty are derivative, both analyses often appear in the same case. 35 The inquiries differ, however, in the level of detail demanded of the plaintiffs’ allegations and the directors at whom the inquiry is directed. In the context of a motion to dismiss under Rule 23.1, the Court considers the directors in office at the time a plaintiff brings a complaint, and plaintiffs may not rely upon the notice pleading standards of Rule 8(a). In the context of a motion to dismiss for failure to state a claim, on the other hand, the directors relevant to the Court’s decision will usually be those in office at the time the challenged decision was made, and the standard, while perhaps more rigorous in derivative cases than in some others, 36 does not reach so high a bar as Rule 23.1. In both cases this Court must make all inferences in favor of plaintiffs, but in the Rule 23.1 context such inferences may only be drawn from particularized facts, while in the former case I may draw from general, if not conclusory, allegations.

The distinction between the two processes is critical in sorting through the plaintiffs’ complaint for two reasons. First, because the consolidated complaint challenges transactions going back almost a decade, 37 this case presents the relatively rare scenario in which the board members who may be liable for a given breach of fiduciary duty are significantly different from those upon whom demand is required. Second, plaintiffs have scattered their shot unevenly across their chosen targets: some defendant directors are alleged to be sufficiently entangled to be *583 lacking independence for 12(b)(6) purposes, but would be given the benefit of the doubt under the stricter standard of Rule 23.1.

With that in mind, I turn to consider the sufficiency of plaintiffs’ allegations against Tyson’s directors. There is little doubt that Don Tyson is directly interested in almost all of the transactions questioned in the consolidated complaint. The sole objection raised by defendants involves related-party transactions benefiting directors who are not members of the Tyson family, such as Tollett’s breeder hen research, Johnston’s cold storage lease, or Massey’s cattle purchases. At the time the complaint was filed, only Tollett was currently a director of the company. Defendants insist that demand is not excused with respect to these transactions because the complaint provides no reason to suspect that the Tyson family directors lacked independence from Massey, Tollett or, indeed, any director outside of the Tyson family.

Here defendants rely upon a formalistic and spiritless reading of past precedent to divide Delaware law from an obvious reality. 38 The Tyson family defendants focus upon their undoubted independence, when the issue is actually whether they “will receive a personal financial benefit from a transaction that is not equally shared by the stockholders” 39 — in other words, are the Tyson family directors interested in such transactions? Plaintiffs’ complaint in the present case presents a conspiracy-style theory of related-party transactions: the Tyson family’s perquisites are alleged to be granted by other favored directors in exchange for their own favorable related-party transactions. Defendants ask us to believe that, despite the allegation that unearned benefits to non-Tyson family directors are the quid pro quo for approval of perquisites to the Tyson family, the latter would quite readily pursue a claim against the former. 40 Such an assertion goes against human nature and flies in the face of common sense. If the allegations in the complaint are true, then the Tyson family is interested in every related-party transaction, as these are the currency through which they in turn ensure their advantages.

*584 For purposes of demand, I will therefore consider both family and non-family transactions to be on the same footing. As to the former, defendants have virtually conceded that demand is futile. Don Tyson, Barbara Tyson and John Tyson are all either interested in each transaction or can be considered to lack independence by reason of consanguinity or marriage. Tollett’s general partnership in the Tyson Family Partnership, as well as his alleged benefit from related-party transactions, suffices to create a reasonable doubt as to his independence, as does Bond’s service as CEO, essentially at the pleasure of the Tyson family. 41 Every derivative count implicates either a member of the Tyson family or Tollett or Bond and, hence, plaintiffs raise a reason to doubt the disinterestedness and independence of the board, justifying excusal of demand with regard to the entire consolidated complaint. 42

V. STATUTE OF LIMITATIONS

Equity follows the law and in appropriate circumstances will apply a statute of limitations by analogy. 43 A three-year statute of limitations applies to breaches of fiduciary duty, 44 and the matter is properly raised on a motion to dismiss. 45 The statute of limitations begins to run at the time that the cause of action accrues, which is generally when there has been a harmful act by a defendant. This is true even if the plaintiff is unaware of the cause of action or the harm. 46

Plaintiffs point to three justifications for tolling the statute of limitations that would allow me to consider an otherwise stale claim. Under the doctrine of inherently unknowable injuries, the statute will not run where it would be practically impossible for a plaintiff to discover the existence of a cause of action. No objective or observable factors may exist that might have put the plaintiffs on notice of *585 an injury, and the plaintiffs bear the burden to show that they were “blamelessly ignorant” of both the wrongful act and the resulting harm. 47 Similarly, the statute of limitations may be disregarded when a defendant has fraudulently concealed from a plaintiff the facts necessary to put him on notice of the truth. Under this doctrine, a plaintiff must allege an affirmative act of “actual artifice” by the defendant that either prevented the plaintiff from gaining knowledge of material facts or led the plaintiff away from the truth. 48 Finally, the doctrine of equitable tolling stops the statute from running while a plaintiff has reasonably relied upon the competence and good faith of a fiduciary. No evidence of actual concealment is necessary in such a case, but the statute is only tolled until the investor “knew or had reason to know of the facts constituting the wrong.” 49

Under any of these theories, a plaintiff bears the burden of showing that the statute was tolled, and relief from the statute extends only until the plaintiff is put on inquiry notice. That is to say, no theory will toll the statute beyond the point where the plaintiff was objectively aware, or should have been aware, of facts giving rise to the wrong. 50 Even where a defendant uses every fraudulent device at its disposal to mislead a victim or obfuscate the truth, no sanctuary from the statute will be offered to the dilatory plaintiff who was not or should not have been fooled.

One more complication emerges on a motion to dismiss an action as untimely: the evidence the Court is allowed to evaluate. If matters outside the complaint are to be considered by the Court, then this motion to dismiss is more properly treated as a motion for summary judgment, and the plaintiffs are entitled to conduct discovery. 51 Nevertheless, I may review two types of evidence, even if they are outside the four corners of the consolidated complaint, without converting the motion to one of summary judgment: (a) documents expressly referred to and relied upon in the complaint itself, and (b) documents that are required by law to be filed, and are actually filed, with federal or state officials. 52

VI. ANALYSIS

With these rules in mind, I turn to each of plaintiffs’ claims. Where defendants have raised an objection on the grounds of the statute of limitations, I consider that argument first, and then move to consideration of the substantive merits of each claim.

A. Count I: Consulting Contracts for Peterson and Don Tyson in 2001

1. Statute of Limitations

Defendants are entitled to the protection of the statute of limitations with *586 regard to the Tyson and Peterson contracts signed in 2001. 53 The company disclosed both contracts as part of SEC filings in December 2001. By waiting to file this action until February 16, 2005, plaintiffs have given up their right to all claims in Count I except those regarding the 2004 contract with Don Tyson.

Plaintiffs’ arguments for tolling fall far short of the required standard. They admit that the contracts were disclosed to the public in late 2001, but insist that (a) the contracts required no actual work on the part of the consultants and (b) the fact that no services were required of Tyson or Peterson could not have been known until either no services were rendered (for instance, when Peterson died) or when the SEC discovered that the company’s disclosures of Don Tyson’s perquisites were inadequate.

I can quickly dispense with the allegation that neither Don Tyson nor Peterson was “required” to do any work under their contracts. Plaintiffs ceaselessly complain of Tyson’s perfidy in describing the contracts as anything other than optional on the part of the consultants. They base this upon a single clause: “Executive may be required to devote up to twenty (20) hours per month to Employer.” 54 More