Rule 42’s “Exceptional Circumstances” Barrier: Delaware Supreme Court Refuses Interlocutory Review of Demand-Futility Rulings

1. Introduction

In John M. Turner, Jr. v. Katherine Richards Brewer (Del. Dec. 15, 2025), the Supreme Court of Delaware refused an interlocutory appeal from a Court of Chancery order that had partially denied a motion to dismiss a stockholder derivative complaint. The underlying case concerns Regions Financial Corporation and Regions Bank (“Regions”) and allegations that fiduciaries permitted or continued overdraft-fee practices later described by the Consumer Financial Protection Bureau (“CFPB”) as “manipulative processing methodologies” used to increase overdraft revenue.

The derivative plaintiff, Katherine Richards Brewer, sued on behalf of Regions seeking to recover $191 million in fines and penalties paid pursuant to a CFPB consent order. The defendants—directors and certain officers—moved to dismiss on demand-futility grounds (Court of Chancery Rule 23.1) and for failure to state a claim. The Court of Chancery denied dismissal as to the directors who served during the relevant period (the “Remaining Defendants”), finding demand excused based on a “red flags” theory tied to oversight liability principles.

The key issue before the Delaware Supreme Court was not the ultimate viability of the oversight claims, but whether the case presented “exceptional circumstances” justifying interlocutory review under Supreme Court Rule 42.

2. Summary of the Opinion

The Delaware Supreme Court refused the interlocutory appeal. While acknowledging that the Court of Chancery had found the underlying demand-futility ruling to involve “substantial issues of material importance” (a threshold consideration under Rule 42), the Supreme Court agreed that the Rule 42(b) framework was not satisfied.

The Court emphasized that interlocutory appeals are disfavored, require “exceptional circumstances,” and should be granted only when the likely benefits outweigh the inefficiency, disruption, and costs of piecemeal review. Here, those conditions were not met.

3. Analysis

3.1. Precedents Cited

In re Caremark International Inc. Derivative Litigation

The plaintiff’s core theory relied on In re Caremark International Inc. Derivative Litigation, 698 A.2d 959 (Del. Ch. 1996), the foundational Delaware decision on board oversight liability. Although the Supreme Court’s order did not reach the merits of the oversight claim, the case’s procedural posture—and the defendants’ request for interlocutory review—arose because the Court of Chancery concluded the complaint pleaded a viable Caremark-type “red flags” oversight theory sufficient to excuse demand as futile.

In re Massey Energy Co.

The complaint also asserted a claim under In re Massey Energy Co., 2011 WL 2176479 (Del. Ch. May 31, 2011), which is often invoked for the proposition that fiduciaries may face loyalty-based consequences where they knowingly cause the corporation to engage in unlawful conduct or fail to address legal compliance risks.

A critical factor in denying certification below—and supporting refusal of interlocutory review—was the Court of Chancery’s statement that even if the Supreme Court reversed on the Caremark demand-futility analysis, the litigation might not end because the trial court had “declined to address” the Massey claim and anticipated “significant” analysis on remand. That undermined the defendants’ argument that interlocutory review could terminate the litigation, a consideration relevant under Rule 42(b)(iii).

Rales [v. Blasband, 634 A.2d 927 (Del. 1993)]

The Supreme Court order recounts the Court of Chancery’s view that the opinion correctly applied demand-futility pleading requirements, including its interpretation of the “have some merit” language of Rales [v. Blasband, 634 A.2d 927 (Del. 1993)]. The Court of Chancery explained that it interpreted Rales to require application of a Rule 12(b)(6)-type assessment of the underlying claim’s viability, but “based on particularized facts” as required by Rule 23.1.

Notably, the Supreme Court did not resolve whether this articulation is definitively mandated; it instead held that the case did not warrant interlocutory review under Rule 42’s strict standards.

Brewer v. Turner (Court of Chancery decisions)

The Supreme Court’s order describes and relies on the procedural reasoning in two Court of Chancery rulings:

Brewer v. Turner, 2025 WL 2769895 (Del. Ch. Sept. 29, 2025) (the “Opinion”) (demand excused as futile; motion to dismiss denied in part).
Brewer v. Turner, 2025 WL 3048942 (Del. Ch. Oct. 30, 2025) (denying certification of interlocutory appeal).

These decisions frame the Supreme Court’s refusal: the Court deferred to the trial court’s Rule 42 analysis and found no “exceptional circumstances” to justify immediate review.

3.2. Legal Reasoning

(a) Rule 42’s structure: threshold plus balancing

The Supreme Court’s analysis tracks Rule 42’s design. Even assuming a “substantial issue of material importance” exists (Rule 42(b)(i)), certification still requires more: “exceptional circumstances” (Rule 42(b)(ii)) and a showing that the Rule 42(b)(iii) factors, on balance, favor interlocutory review.

(b) No demonstrated conflict warranting immediate review

The Remaining Defendants argued the Court of Chancery’s demand-futility ruling conflicted with other trial court decisions. The Court of Chancery rejected this, emphasizing that it had applied the “plead with particularity” standard under Rule 23.1 and the presumption of good faith owed to board action, and that defendants failed to identify an actual conflicting case. The Supreme Court agreed with that assessment.

(c) Interlocutory review would not necessarily end the case

A common basis for interlocutory review is that reversal would terminate the litigation. The Court of Chancery concluded this case did not fit that mold because the Massey claim remained unaddressed and would require substantial further analysis, reducing the efficiency gains of an immediate appeal. That reasoning supported denial of certification and, in turn, the Supreme Court’s refusal.

(d) “Considerations of justice” were insufficient here

The Court of Chancery acknowledged that the Supreme Court “has not expressly stated” that, to show a substantial likelihood of liability, a plaintiff must meet the Rule 12(b)(6) standard based on particularized facts, and that presenting that issue “could be viewed” as serving justice. But it characterized this as only “soft support” and insufficient under Rule 42(b)(iii) overall. The Supreme Court likewise concluded the “strict standards” for interlocutory review were not met.

(e) Discretion, deference, and institutional preference against piecemeal appeals

The Supreme Court emphasized that interlocutory review is discretionary and that the “potential benefits” must outweigh the “inefficiency, disruption, and probable costs” of interlocutory appeals. By refusing the appeal, the Court reinforced that demand-futility determinations—though often case-dispositive—are not automatically candidates for immediate Supreme Court review.

3.3. Impact

(a) A practical message: demand-futility denials usually proceed to merits-phase litigation

The most immediate impact is procedural: defendants should expect that a denial of a motion to dismiss for failure to plead demand futility—even in high-stakes Caremark cases—will usually not be reviewed immediately. The decision thus preserves the Court of Chancery’s central role in managing derivative litigation through discovery and later dispositive motions before Supreme Court review.

(b) Continued uncertainty on the precise “Rule 12(b)(6) based on particularized facts” formulation

The Supreme Court did not use this case to clarify whether the “substantial likelihood of liability” inquiry for demand futility must mirror Rule 12(b)(6) while being supported by Rule 23.1 particularized pleading. Practically, the order leaves trial-level approaches intact and signals that the Court will not necessarily intervene midstream to harmonize phrasing unless Rule 42’s demanding criteria are clearly satisfied.

(c) Leverage and settlement dynamics

By limiting interlocutory off-ramps, the refusal may affect settlement leverage in oversight cases: plaintiffs who survive demand-futility dismissal are more likely to obtain discovery before any Supreme Court merits review, while defendants may need to focus on later stages (summary judgment, trial, or settlement) rather than early appellate reversal.

4. Complex Concepts Simplified

Derivative lawsuit: A suit brought by a stockholder on the corporation’s behalf to remedy harm to the corporation (not directly to the stockholder).
Demand (and demand futility): Before suing derivatively, a stockholder typically must ask the board to pursue the claim. If the stockholder pleads with particularity that the board cannot exercise independent, disinterested business judgment regarding the demand (often because directors face liability risk), demand is “excused” as futile.
Rule 23.1 “particularized facts”: A heightened pleading requirement in derivative cases; general allegations and conclusions are insufficient.
Caremark oversight claim / “red flags”: A theory that directors breached oversight duties by ignoring warning signs (red flags) of wrongdoing or compliance failures.
Interlocutory appeal: An appeal taken before the case ends. Delaware disfavors these because they interrupt trial-court proceedings.
Supreme Court Rule 42: The rule governing interlocutory appeals; it requires, among other things, “exceptional circumstances” and a showing that immediate review is justified despite inefficiency and disruption.

5. Conclusion

John M. Turner, Jr. v. Katherine Richards Brewer reinforces a procedural principle with significant real-world bite: even when a demand-futility ruling keeps a high-exposure oversight case alive, Delaware’s Supreme Court will not readily grant interlocutory review. By refusing the appeal, the Court reaffirmed Rule 42’s strict, exception-only approach, credited the Court of Chancery’s factor-by-factor analysis, and underscored the institutional preference to avoid piecemeal appellate intervention—leaving the parties to litigate forward in the trial court before any merits review.