In the

    United States Court of Appeals
                 For the Seventh Circuit
                     ____________________
No. 18‐1863
ROBERT LOWINGER, et al.,
                                              Plaintiffs‐Appellants,
                                 v.

DOUGLAS R. OBERHELMAN, et al.,
                                             Defendants‐Appellees.
                     ____________________

        Appeal from the United States District Court for the
                      Central District of Illinois.
      No. 1:15‐cv‐01109‐SLD‐JEH — Sara L. Darrow, Chief Judge.
                     ____________________

     ARGUED NOVEMBER 1, 2018 — DECIDED MAY 9, 2019
                ____________________

    Before WOOD, Chief Judge, and MANION and ROVNER, Cir‐
cuit Judges.
    WOOD, Chief Judge. In the fall of 2011 Caterpillar Inc. began
making serious inquiries about the possible acquisition of a
Chinese mining company, ERA Mining Machinery Ltd., and
its wholly‐owned subsidiary, Zhengzhou Siwei Mechanical &
Electrical Equipment Manufacturing Co., Ltd. (We refer to the
two companies as “Siwei” for simplicity.) Caterpillar com‐
pleted that acquisition in June 2012. Only after the closing did
2                                                  No. 18‐1863

Caterpillar gain access to Siwei’s physical inventory. What it
found was unsettling. An inspection of the inventory revealed
that Siwei had overstated its profits and improperly recog‐
nized revenue. As a result, Caterpillar took a $580 million
goodwill impairment charge just months after the acquisition
was completed. Plaintiffs Robert Lowinger and Issek Fuchs,
both Caterpillar shareholders, now bring this shareholder de‐
rivative suit alleging that several former Caterpillar officers
breached their fiduciary duties by failing to conduct an ade‐
quate investigation of the Siwei acquisition. (We call them the
Lowinger Plaintiffs.) That failure, they contend, caused Cater‐
pillar’s loss. The Lowinger Plaintiffs made a demand that the
Caterpillar Board bring this litigation; the Board refused; and
in this lawsuit, they argue that the Board’s refusal was im‐
proper.
   The district court granted the Officers’ motion to dismiss
the complaint for failure adequately to allege that the Board
wrongfully refused to pursue the Lowinger Plaintiffs’ claim,
FED. R. CIV. P. 23.1(b)(3); it then denied plaintiffs’ motion for
leave to amend. We affirm.
                               I
                               A
    In 2010 Caterpillar, a construction and mining equipment
manufacturer, was hoping to gain a greater foothold in the
Chinese market. According to the Lowinger Plaintiffs—
whose well pleaded allegations we must accept as true at this
stage—in August of that year defendant Douglas Ober‐
helman, Caterpillar’s then‐CEO, told investors that Caterpil‐
lar was “stepping up big time” in the Chinese market and that
“[W]e’re going to win. We will win in China.” Following this
No. 18‐1863                                                     3

proclamation, defendants Edward Rapp, Caterpillar’s CFO,
and Steven Wunning, Caterpillar’s Group President, began to
advocate for Caterpillar to purchase Siwei, a Chinese mining
company that manufactures hydraulic mining roof supports.
(We refer to the defendants collectively as the Officers unless
the context requires otherwise.)
    Caterpillar began its investigation of the Siwei acquisition
in October 2011. To perform the necessary financial analysis,
Caterpillar hired the accounting firm Ernst & Young (“E&Y”).
E&Y’s inquiry was limited, however, because Siwei’s auditors
refused to allow E&Y to review their audit work papers. In‐
stead E&Y was forced to rely on oral statements from those
auditors, along with Siwei’s publicly reported financial state‐
ments. Despite the limited scope of its review, E&Y’s report
raised several financial red flags: Siwei’s declining gross profit
margins; long‐aged accounts receivable; and working capital
and cash flow problems. In its report, E&Y recommended that
Caterpillar undertake additional investigation, but Caterpil‐
lar never did so. In addition to the issues identified by E&Y,
an examination performed by a recently acquired Caterpillar
subsidiary, Bucyrus International, Inc., suggested reasons for
concern. Bucyrus’s research, of which Caterpillar was aware,
suggested that Siwei might be plagued by a host of potential
fraud and anti‐corruption problems. At least in part for those
reasons, Bucyrus had scuttled its own attempted purchase of
Siwei.
   As the acquisition process continued, other headaches
emerged. Caterpillar discovered that Siwei needed an imme‐
diate $50 million loan; that Siwei’s customers were not paying
their bills on time; and that Siwei had engaged in several
4                                                 No. 18‐1863

suspicious transactions with closely related parties, including
its parent company’s directors and its former CEO.
    Notwithstanding these alerts, Caterpillar entered into an
acquisition agreement with Siwei in November 2011. Bad
news was not far behind. In March 2012, before the acquisi‐
tion was completed, Siwei informed Caterpillar that instead
of the $16 million profit it was expected to report in 2011, it
would record a $2 million loss. In its 2011 Annual Report, Si‐
wei disclosed not only this loss, but numerous other troubles.
For example, its accounts receivable had grown from 320 to
371 days outstanding, its “allowances for bad and doubtful
debts” had increased over 450%, and its debt had ballooned.
Siwei explained many of these issues as results of its aggres‐
sive attempts to gain market share at the expense of other met‐
rics. Despite everything, on June 6, 2012, Caterpillar com‐
pleted its tender offer to acquire Siwei for approximately $690
million.
    With the acquisition complete, Caterpillar gained access to
Siwei’s physical inventory. Only then did Caterpillar realize
that discrepancies existed between Siwei’s physical inventory
and the inventories it recorded in its accounting records. The
resulting investigation uncovered inappropriate accounting
practices that led to overstated profit and early or unsup‐
ported revenue recognition. As a result, Caterpillar deter‐
mined that it would have to recognize a $580 million loss in
the form of a goodwill impairment charge. It announced this
step publicly in January 2013. At the same time, Caterpillar’s
Board approved the departure of Luis de Leon, Caterpillar’s
mining product vice president, at least in part because of his
role in the Siwei acquisition.
No. 18‐1863                                                     5

    After recording the $580 million goodwill impairment
charge, Caterpillar retained the law firm Sidley Austin LLP to
investigate the Siwei acquisition. In July 2013, Sidley pro‐
vided a report to Caterpillar’s board and audit committee de‐
tailing its findings. The Board then imposed financial penal‐
ties on some Caterpillar executives, including Oberhelman.
Neither the amount nor the existence of these penalties, how‐
ever, was ever disclosed in Caterpillar’s public filings.
    Shortly after this, several major corporate news outlets, in‐
cluding Forbes, Reuters, and the Financial Times, ran articles de‐
tailing the story of the acquisition and chiding Caterpillar and
its board for what those outlets viewed as insufficient investi‐
gation and oversight. Several months after these stories ran,
Caterpillar settled with Siwei’s former directors and control‐
ling shareholders, releasing them from claims in exchange for
a settlement that benefitted Caterpillar by $135 million for its
2013 second quarter results.
                                B
     Litigation soon followed. First, a group of shareholders
brought a derivative action based on a theory that the Board
was conflicted and so it was futile to ask the Board to sue Cat‐
erpillar’s officers and directors (the “Demand Futility Ac‐
tion”). On June 25, 2014, while the Demand Futility Action
was pending, the Lowinger Plaintiffs made a demand on the
Board. They called on the Board to begin litigation against the
Officers, or any other responsible party, with respect to the
losses Caterpillar suffered because of the acquisition. The
Board declined to respond formally to this demand, because
if the Demand Futility Action was successful, shareholders
would not need first to make a demand on the Board to bring
litigation. It reasoned that any time or resources spent
6                                                  No. 18‐1863

responding to the Lowinger Plaintiffs’ demand would in that
case have been wasted. Also during this period, the Board de‐
clined to enter into any tolling agreements to suspend appli‐
cable statutes of limitation, as its counsel believed the De‐
mand Futility Action tolled the relevant limitations periods.
     The Board sought to stay this case while the Demand Fu‐
tility Action remained pending, but the district court denied
that request on March 28, 2016. At that point, the Board re‐
tained the law firm Jones Day to investigate the allegations in
the Lowinger Plaintiffs’ demand. On November 1, 2016, Cat‐
erpillar provided the Lowinger Plaintiffs with a redacted ver‐
sion of Jones Day’s report. That report, based on interviews
with 17 current and former Caterpillar employees and a con‐
sultation with a Jones Day partner with expertise in Chinese
acquisitions, detailed Jones Day’s investigation into the Siwei
acquisition. The report also contained analyses of the compet‐
ing benefits and risks of bringing litigation, including the
chance of success of a lawsuit against any Caterpillar officers
or external advisors involved in the Siwei acquisition.
    Jones Day ultimately concluded that the likelihood of suc‐
cess in litigation was slim, and that any potential success was
likely to be undercut by Caterpillar’s duty to indemnify its
former officers in most scenarios, as well as by business con‐
siderations (such as the hit to corporate morale that litigation
might cause). Based on Jones Day’s report and recommenda‐
tion, the Board refused the Lowinger Plaintiffs’ demand. The
Lowinger Plaintiffs filed their complaint against the Officers
in March 2015.
   Rather than amending their complaint to reflect that re‐
fusal, the Lowinger Plaintiffs continued to argue that the
Board’s initial delay in responding to their demand was
No. 18‐1863                                                    7

sufficient by itself to allow them to pursue this litigation. The
district court granted the Officers’ motion to dismiss that
complaint, holding that the Board’s decision to delay was pro‐
tected by the business judgment rule, but it gave the Lowinger
Plaintiffs leave to amend. They did so, this time alleging that
the Board’s refusal to accede to their demand was wrongful
because Jones Day was not an independent investigator and
its report had numerous fatal flaws. The Officers again moved
to dismiss. This time the district court granted their motion
and dismissed the action with prejudice. This timely appeal
followed.
                               II
    Under Federal Rule of Civil Procedure 23.1(b)(3), a share‐
holder plaintiff must “state with particularity” his efforts to
obtain his desired action from the company’s directors, and
“the reasons for not obtaining the action or not making the
effort.” 

(B). We review de novo the district
court’s determination whether a plaintiff has met this stand‐
ard. Westmoreland Cnty. Emp. Ret. Sys. v. Parkinson, 

, 724 (7th Cir. 2013). Though federal law determines
whether a plaintiff has stated the facts with sufficient detail,
state law determines whether a plaintiff’s stated reasons are
sufficient as a matter of substantive law. See 

We
must look first to Illinois’s choice‐of‐law rules, both sides
agree; those rules direct us to the law of Delaware, Caterpil‐
lar’s state of incorporation. See CDX Liquidating Trust v. Ven‐
rock Assocs., 

, 212 (7th Cir. 2011).
    Under Delaware law, where a plaintiff makes a litigation
demand on the board, she effectively concedes that the board
is independent and able to respond. The board’s decision to
refuse that demand is thus protected by the business
8                                                    No. 18‐1863

judgment rule. See Spiegel v. Buntrock, 

, 775–76
(Del. 1990). “The business judgment rule is a presumption
that in making a business decision … the directors of a corpo‐
ration acted on an informed basis, in good faith and in the
honest belief that the action taken was in the best interests of
the company.” 

    The combination of a heightened pleading standard and
Delaware’s business judgment rule puts plaintiffs in this kind
of case between the proverbial rock and a hard place. See Bre‐
salier v. Good, 

, 1052 (D. Del. 2017) (“The
combination of Rule 23.1 and Delaware law places on plain‐
tiffs whose demand has been refused [a] ‘heavy’ burden ….”)
(quoting Ironworkers Dist. Council of Philadelphia & Vicinity Ret.
& Pension Plan v. Andreotti, C.A. No. 9714–VCG, 

, at *24 (Del. Ch. May 8, 2015)). We should note in this
connection that, unlike many jurisdictions, Delaware permits
the citation of unpublished decisions of the Delaware courts
as precedent. See New Castle Cnty. v. Goodman, 

,
1013 (Del. 1983) (“[L]itigants before this Court may cite Or‐
ders as precedent ….”); see also Issa v. Delaware State Univ.,

, 631 n.1 (D. Del. 2017) (noting that Good‐
man remains good law despite a change in the Delaware Su‐
preme Court’s rule allowing citations to non‐precedential de‐
cisions).
    The only way that a shareholder plaintiff can walk this
tightrope and overcome the business judgment rule’s pre‐
sumption is to allege particularized facts that create a reason‐
able doubt about “the good faith and reasonableness of [the
board’s] investigation.” 

. In other
words, a shareholder plaintiff must create reasonable doubt
that the board upheld its duties of care and loyalty by making
No. 18‐1863                                                     9

an informed decision and acting in good faith. See Andreotti,

, at *24. We thus turn to the question whether
the Lowinger Plaintiffs have overcome that presumption
here.
                                A
    The question we face is a narrow one. It is not whether the
Siwei acquisition was good or bad for Caterpillar. Nor are we
concerned with whether Caterpillar’s board made the right
decision by not bringing litigation against its former officers.
Instead, our review is confined to whether the Board’s deci‐
sion not to litigate is protected by the wide bounds of the busi‐
ness judgment rule, or if the Lowinger Plaintiffs have man‐
aged to allege with particularity facts suggesting that the
Board’s decision was irrational or the result of a grossly neg‐
ligent process. The plaintiffs can meet their burden by plead‐
ing facts that show that the Board’s decision “cannot be at‐
tributed to a rational business purpose” or that the Board
reached its “decision by a grossly negligent process that in‐
cludes the failure to consider all material facts reasonably
available.” Brehm v. Eisner, 

, 264 n.66 (Del. 2000).
    The Lowinger Plaintiffs’ most serious allegation is that
Jones Day could not independently evaluate Caterpillar’s
claims because that firm also represented E&Y and Citigroup,
two of the possible defendants in any litigation about the Si‐
wei acquisition. Moreover, plaintiffs note, Jones Day also re‐
lied on Sidley’s investigation of the Siwei acquisition, but
Sidley was conflicted because it represented the corporate of‐
ficers in both this case and the Demand Futility Action.
  It is true that conflicts can undermine the business judg‐
ment rule. In Stepak v. Addison, 

(11th Cir. 1994), for
10                                                    No. 18‐1863

example, the Eleventh Circuit found an impermissible conflict
when a firm “actually represented the alleged wrongdoers in
proceedings related to the very subject matter that the law
firm is now asked to neutrally investigate.” 

The Il‐
linois Rules of Professional Conduct similarly forbid concur‐
rent representation when a lawyer’s representation will be
“directly adverse to another client” or where the relationship
to a current or past client “will materially interfere with the
lawyer’s independent professional judgment.” Ill. R. Prof’l
Conduct R. 1.7 & cmt. 8 (2010); see also 

(discussing
duties owed to former clients).
    But these plaintiffs have not alleged with particularity any
potentially disqualifying conflicts. Their only reference to
Jones Day’s representation of E&Y and Citigroup is that Jones
Day “regularly represents and works together with both of
those entities.” This is not enough to give us the information
that we would need to decide whether Jones Day was actually
conflicted. The mere fact that a law firm represented a client
on some other matter does not automatically disqualify the
firm whenever that client may be involved as an opposing
party in future litigation. See, e.g., Watkins v. Trans Union, LLC,

, 519–23 (7th Cir. 2017) (holding that the Indiana
Rules of Professional Conduct did not disqualify a lawyer
from working adversely to a former client). Without more de‐
tailed allegations, we are missing critical facts: did Jones
Day’s representations of E&Y and Citigroup occur in “the
same or a substantially related matter,” as required by Illinois
Rule of Professional Conduct 1.9; how did that representation
“materially limit[]” Jones Day’s advice for Caterpillar, Rule
1.7; was the representation of E&Y and Citigroup ongoing or
wholly in the past? Compare 

(“Conflict of Interest:
Current Clients”) with 

(“Duties to Former Clients”).
No. 18‐1863                                                     11

Indeed, because Jones Day, E&Y, and Citigroup are all inter‐
national firms, it would be important to know on what conti‐
nents this work occurred; that information, too, is missing.
The Lowinger Plaintiffs simply have not provided enough in‐
formation about Jones Day’s representation of Citigroup and
E&Y to reveal with particularity any conflict that creates a rea‐
sonable doubt about the Board’s business judgment.
    Their allegation that Jones Day relied on Sidley’s investi‐
gative report is similarly flawed. The Lowinger Plaintiffs state
only that “Jones Day’s investigation lacked independence and
was compromised because it relied, in large part, on infor‐
mation provided by Sidley….” But they provide no details
suggesting how Jones Day relied on Sidley. More im‐
portantly, they allege nothing that would suggest that Jones
Day did not independently investigate and analyze every‐
thing discussed in its report.
    We are aware that the Lowinger Plaintiffs cite to pages 42
and 43 of Jones Day’s investigatory report as an example of
Jones Day’s “reliance” on Sidley. But the report’s only men‐
tion of Sidley on those pages states that Sidley investigated
claims against Siwei’s principals prior to Caterpillar’s settle‐
ment with those principals. As a result, Jones Day believed
that Caterpillar appeared to have considered the risks and
benefits of litigation against those principals. It is a stretch to
characterize that as “reliance” on Sidley. The report continues
that regardless of Sidley’s investigation, “any potential litiga‐
tion against these parties would be barred under the terms of
the settlement.” This conclusion has nothing to do with
Sidley. It can be interpreted only as the result of Jones Day’s
own legal analysis of the settlement. That is not enough to al‐
lege Jones Day’s conflict with the detail required by Rule 23.1.
12                                                  No. 18‐1863

                               B
   The Lowinger Plaintiffs’ other arguments fall into two
buckets: the Board’s allegedly improper lack of response to
their demand, and perceived inadequacies in Jones Day’s in‐
vestigation. The Board’s decision to delay responding to their
demand while the Demand Futility Action was pending does
not create a reasonable doubt with respect to the Board’s busi‐
ness judgment. If anything, that was a prudent business deci‐
sion. If the Demand Futility Action had been successful, then
the Board would be disqualified from responding to a de‐
mand, and so any resources spent responding to the
Lowinger Plaintiffs’ demand would have been wasted.
    The Lowinger Plaintiffs counter that the Board risked
making certain claims time‐barred by delaying a response.
They contend that the Board could have mitigated this risk by
entering into tolling agreements, but that it refused to do so.
That failure to mitigate, Lowinger Plaintiffs contend, raises a
reasonable doubt about their business judgment. But as the
Lowinger Plaintiffs’ complaint illustrates, they made this ar‐
gument about the statute of limitations to Sidley, the Board’s
counsel, and it disagreed. The only reasonable inference to
draw from this exchange is that the Board relied on its coun‐
sel’s legal advice when deciding to delay a response without
tolling agreements. That advice was not so erroneous that re‐
lying on it was grossly negligent. Indeed, the district court be‐
lieved that Sidley’s advice on the statute of limitations was
correct.
    The Board’s refusal to release the unredacted appendix to
Jones Day’s report and the documents underlying that report
also fails to create doubt about the Board’s judgment. Unlike
the defendants in the cases cited by the Lowinger Plaintiffs,
No. 18‐1863                                                   13

Caterpillar has not “effectively insulated its investigation
from any scrutiny.” City of Orlando Police Pension Fund v. Page,

, 1030 (N.D. Cal. 2013); see also Thorpe v.
CERBCO, Inc., 

, 11 (Del. Ch. 1991) (finding a reason‐
able doubt as to a board’s good faith where it refused to act
on a demand, refused to release the special committee’s report
prepared for the board, and the special committee members
on the board resigned after tendering their report). The Board
gave the plaintiffs the entirety of the report provided to the
Board except for four pages of redacted appendices that it
claimed were subject to attorney‐client privilege. This is a far
cry from City of Orlando, where the board provided plaintiff’s
counsel with nothing more than a copy of the report, and then
only for the limited purpose of preparing for settlement nego‐

–31.
    If the Lowinger Plaintiffs believed these documents were
vital to their claims, they should have made a books and rec‐
ords demand under 8 Delaware Code § 220 once their first
complaint was dismissed with leave to amend. See Andersen
v. Mattel, Inc., C.A. No. 11816–VCMR, 

, at *4
(Del. Ch. Jan. 19, 2017) (rejecting a shareholder’s argument
that a board kept its materials secret when that shareholder
had chosen not to make a section 220 demand). Their argu‐
ment that they could not make a section 220 demand once
they filed their initial complaint is inconsistent with the Dela‐
ware Supreme Court’s decision in King v. VeriFone Holdings,
Inc., 

(Del. 2011). King held that a section 220 ac‐
tion was available when a shareholder’s derivative action was
dismissed without prejudice for failure to plead particular‐
ized facts and the shareholder was given leave to amend. 

While King dealt with the failure to plead facts sug‐
gesting demand futility, we see no reason that it would not
14                                                   No. 18‐1863

apply equally to the demand‐refusal context. In both scenar‐
ios, shareholder‐plaintiffs are seeking similar facts that would
allow them to meet Rule 23.1(b)’s “particularity” pleading
standard. See 

(approving of a section 220 de‐
mand made after a shareholder’s first complaint “failed to
plead particularized facts”).
   No Delaware case, statute, or rule expressly forecloses the
plaintiffs’ section 220 demand. For that reason, the district
court was correct not to excuse their failure to attempt such a
demand. Absent a failed section 220 action, the Board’s deci‐
sion not to release further investigation documents does not
create a reasonable doubt as to its judgment.
     The Lowinger Plaintiffs finally attempt to create doubt
about the Board’s judgment by attacking various parts of
Jones Day’s legal and factual analysis, and the choices it made
about whom and whom not to interview. But these arguments
all amount to “cavils about the types of documents reviewed,
or the choice of persons to be interviewed” that “will not sup‐
port a finding of gross negligence.” Zucker v. Hassell, C.A. No.
11625–VCG, 

, at *9 (Del. Ch. Nov. 30, 2016).
These plaintiffs might come to a different conclusion about
the strategic importance of the acquisition, the risk that litiga‐
tion might cause disruption and excessive cost for Caterpillar,
or the need to interview Siwei’s former CEO. But those types
of business and investigative choices are exactly what the
business judgment rule protects. See Andreotti, 

, at *25. More to the point, nothing about Jones Day’s
process, or its legal or factual analysis, was so egregiously de‐
ficient that the Board was grossly negligent to rely on it. And
it is egregiousness that Delaware requires to rebut the busi‐
ness judgment rule’s protections. See Belendiuk v. Carrion,
No. 18‐1863                                                     15

Civil Action No. 9026–ML, 

, at *7 (Del. Ch.
July 22, 2014) (discussing the few cases that “illustrate the
specificity of the allegations and the egregiousness of the con‐
duct that this Court has found rises to the level of wrongful
refusal”); see also Zucker, 

, at *10 & n.117.
                                III
    The Lowinger Plaintiffs contend that even if their com‐
plaint was properly dismissed, the district court should have
allowed them yet another opportunity to amend. Because
“district courts have broad discretion to deny leave to amend
where there is undue delay … [or] undue prejudice to the de‐
fendants,” the abuse of discretion standard applies. Arreola v.
Godinez, 

, 796 (7th Cir. 2008). We see no such
abuse here.
    The Lowinger Plaintiffs have not stated what they would
add or change in an amended complaint. They posit that they
could pursue a section 220 books and records action if they
must plead with greater particularity. But as we already have
discussed, they should have taken that step when the district
court allowed them leave to amend after dismissing their first
complaint. See 

. Their request for discov‐
ery in this case also falls flat. The district court stayed discov‐
ery pending adjudication of the Officers’ first motion to dis‐
miss. But once the district court granted that motion and gave
the plaintiffs leave to amend, they never attempted to re‐open
discovery to support their amended complaint. We can only
assume that the Lowinger Plaintiffs’ decisions not to attempt
a section 220 action or to move to re‐open discovery were stra‐
tegic, and so their attempts to take those steps now are una‐
vailing.
16                                                   No. 18‐1863

    Finally, as the district court noted, at the time it dismissed
this case, the litigation had been pending for three years. This
appeal has taken it into its fourth year. The district court did
not abuse its discretion in finding that the Officers would be
unduly prejudiced by allowing continued litigation under the
circumstances.
                                 ***
     We AFFIRM the judgment of the district court.