A friend sent along this question:
First- let's say that Ps think their company is proposing to make a remarkably overpriced acquisition, for instance for vanity-type reasons. (Think HP/Autonomy). There is no question of a loyalty or lack of independence. If there is evidence that the price is 'insane' (in the words of the not-so-lamented Crazy Eddie) - that it seems to be way higher than any rational analysis could justify-could we see demand excused under Aronson's second prong, and then injunctive relief? And, given the role of both officers and directors in the deal, would you see support for going after the officers too? (Might officers even be financially on the hook for this given that 102b7 doesn't help them?)
I think that the answer is no. "Courts do not measure, weigh or quantify directors' judgments. We do not even decide if they are reasonable in this context. Due care in the decisionmaking context is process due care only. Irrationality is the outer limit of the business judgment rule. Irrationality may be the functional equivalent of the waste test or it may tend to show that the decision is not made in good faith, which is a key ingredient of the business judgment rule.” Brehm v. Eisner, 746 A.2d 244, 264 (Del. 2000). I think In re J.P. Morgan Chase & Co. Shareholder Litig., 906 A.2d 808, 812 (Del. Ch. 2005), aff'd, 906 A.2d 766 (Del. 2006), in which the plaintiffs claimed that "the directors paid too much for the acquired bank” is on point. The court held demand was not excused under the second prong of Aronson.