In a recent blog post HERE, I referenced Trimm v. Kelly, No. 86734-2-I, 2025 Wash. App. LEXIS 2666 (Ct. App. Dec. 29, 2025) (unpublished), which adopted a new demand futility test for derivative claims under Washington law. A more thorough review of Trimm’s facts and analysis of Trimm is instructive for practitioners in assessing how to establish the “substantial likelihood of liability” prong when pleading demand futility in Washington derivative actions.
The Facts – a Derivative Claim Against Starbucks
In Trimm, plaintiffs filed a stockholder derivative complaint against Starbucks and 14 officers/directors. As the basis for the derivative suit, plaintiffs alleged that Starbucks’ directors and officers breached their fiduciary duty of loyalty by “utterly failing” to implement any oversight and reporting system concerning Starbucks’s labor management and by failing to abide by the National Labor Relations Act (NLRA), 29 U.S.C. §§ 151-169. Plaintiffs did not make a pre-suit demand on the board—instead, the plaintiffs argued that demand would be futile. After filing the complaint, the directors and officers of Starbucks moved to dismiss. The trial court denied the motion, and the directors and officers moved for discretionary review, which the Court of Appeals granted.
Trimm’s Analysis
In its analysis, the Court began with the new test for demand futility under United Food & Com. Workers Union & Participating Food Indus. Emps. TriState Pension Fund v. Zuckerberg, 262 A.3d 1034, 1058-59 (Del. 2021), which poses three questions regarding a director’s involvement in the complained-of transaction:
(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; and
(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.
The analysis in Trimm focused on the second question. The directors and officers argued that Starbucks’ charter provided a broad exculpatory provision that prohibits plaintiffs from showing a substantial likelihood of liability in the complaint. The charter provided the following:
To the full extent that the Washington Business Corporation Act, as it exists on the date hereof or may hereafter be amended, permits the limitation or elimination of the liability of directors, a director of the corporation shall not be liable to the corporation or its shareholders for monetary damages for his or her acts or omissions as a director.
According to the Court, this provision required plaintiffs to “allege with particularity that a majority of the directors faced a substantial likelihood of liability because those directors engaged in ‘intentional misconduct’ or ‘a knowing violation of law’ or face dismissal.” This referenced Washington law’s limitation on liability set forth in RCW 23B.08.320. The Court noted that rather than pointing to allegations in their complaint, plaintiffs pointed to case law to show why defendants faced a substantial likelihood of liability. However, this was not sufficient to satisfy the second question under United Food. The complaint needed to plead facts to show a substantial likelihood of liability, but the Court did not believe plaintiffs did so here. Accordingly, the Court reversed the trial court and ordered dismissal of the case (notably without prejudice).
Considerations for Practitioners
Trimm is useful in that it reminds practitioners that the most important part of satisfying demand futility is not necessarily the case law supporting the complaint’s causes of action, but the complaint’s factual allegations. Derivative complaints must plead facts with particularity that support a substantial likelihood of liability. Practitioners should never overlook the importance of a complaint’s factual allegations when it comes to asserting derivative claims in Washington.
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