OPINION

RICHARD H. DINKINS, JUDGE.

Plaintiff in shareholder derivative action appeals the dismissal of his suit alleging breaches of fiduciary duty and other misconduct, including insider trading, by current and former officers and directors of corporation. Plaintiff filed suit without first making demand on the board of directors of the corporation that the directors initiate the lawsuit. Defendants moved to dismiss the suit on the ground that plaintiff failed to allege with requisite particularity that such demand would have been futile. We affirm the dismissal of the action.

This is an appeal of the dismissal of a shareholder derivative action brought on behalf of Healthways, Inc., a Delaware corporation headquartered in Tennessee. Plaintiff Roy T. Forrest is a Healthways shareholder who filed a shareholder derivative suit against Healthways on June 27, 2008 in Davidson County Chancery Court. On July 24, 2008, a second Healthways shareholder, Nikki Tran, filed a separate shareholder derivative suit, also in Davidson County Chancery Court. On August 19, 2008, an order consolidating the suits was entered and, on May 11, 2009, Mr. Forrest filed a "Consolidated Verified Shareholder Derivative Complaint," naming fifteen current or former officers or directors of Healthways as defendants.1 The action was filed without plaintiff first making demand on the board of directors of Healthways that the directors initiate the action.

Plaintiff asserted separate causes of action that all defendants breached their fiduciary duty to the corporation by disseminating false and misleading information, by failing to properly oversee and manage the company, and by failing to maintain adequate internal controls; plaintiff also asserted that all defendants unjustly enriched themselves and wasted corporate assets. Plaintiff asserted a further claim against certain of the defendants for breach of fiduciary duties based on insider selling and misappropriation of information. The action sought compensatory damages as well as equitable and injunctive relief.

Defendants moved to dismiss the case on the ground that the complaint failed to allege with requisite particularity that demand on the directors to initiate the action would have been futile. The trial court agreed and dismissed the action. The sole issue on appeal is whether the court erred in finding that Plaintiff failed to plead demand futility with requisite particularity.

I. Factual Allegations of the Complaint2

Healthways is a disease management company that "provides specialized, comprehensive Health and Care Support solutions to help people maintain or improve their health and, as a result, reduce overall healthcare costs." In 2005, Healthways began participating as a provider in the Medicare Health Support Pilot Program ("MHS Program"), an initiative of the Centers for Medicare & Medicaid Services of Health and Human Services ("CMS"). The MHS Program had two primary goals: to improve the quality of medical care received by Medicare and Medicaid beneficiaries who had multiple chronic conditions and to help the Medicare and Medicaid programs achieve cost savings targets.

The program was designed to consist of two phases, the first of which would last three years. During Phase I, CMS would evaluate the care that Medicare and Medicaid beneficiaries received, their satisfaction with the care received, and the cost savings achieved through the MHS Program. Once Phase I ended, CMS would decide whether to expand the MHS Program to a nationally rolled-out Phase II. At the outset of the program, CMS established a 5% cost savings target as a criteria for evaluating the success of Phase I. Under the terms of Healthways' contract with CMS, failure to meet the 5% per month cost savings target could obligate Healthways to reimburse CMS for millions of dollar in fees that CMS paid to Healthways in connection with the MHS Program; it would also make Healthways' participation in any potential Phase II of the program unlikely.

Plaintiff alleges that, during the period from October 17, 2007 to May 11, 2009, defendants received quarterly "ARC reports"3 from CMS which showed that Healthways was falling short of the 5% per month cost savings target but that, rather than disclose Healthways' inability to meet the Phase I savings target, "defendants instead began lobbying the CMS to lower the MHS Phase I savings targets." On January 7, 2008, Healthways filed a Form 8-K4 with the SEC stating that the Office and Management and Budget had approved a request from CMS to lower the savings target for the MHS Program "from 5% net savings to budget neutrality (savings greater than or equal to fees)."5 Plaintiff asserted that, after this announcement, Healthways stock increased from $64.50 to $67.21 per share, but that "[t]he price was artificially inflated, as not only were defendants specifically aware that the Company had been failing to meet the 5% cost savings target all along, but also that the Company could not meet the modified break-even savings target." Plaintiff further alleged that on February 26, 2008, Healthways issued a press release announcing that the Company was lowering its financial guidance for fiscal 2008 from a range of $782—815 million to $720-740 million and its earnings guidance per share from a range of $1.77—1.86 to $1.50-1.55 and that, as a result, Healthways stock fell to $31.54, representing a near 30% one-day loss and a decrease of more than 53% since January 7.

Plaintiff charged that communications issued by defendants relative to Healthways' participation in the MHS program were false and misleading6 as were components of the fiscal 2008 guidance which allegedly failed to disclose that major Healthways customers, including Blue Cross of Minnesota, Blue Cross of Massachusetts, and WellPoint were cancelling programs and/or requiring Healthways to provide more services for the same or less money with a resulting negative impact on profits.

Plaintiff also alleged that between October 29, 2007 and January 9, 2008 certain of the defendants, whom plaintiff referred to as the "insider trading defendants," sold a total of 288,824 Heathways shares while in possession of material, adverse non-public information and otherwise in violation of the company's Code of Conduct.

II. Applicable Law

Healthways is chartered under Delaware law and, at the time this action was initiated, was headquartered in Nashville, Tennessee; the parties do not contest the exercise of jurisdiction by the Tennessee courts or venue in Davidson County.

Tennessee adheres to the "internal affairs" doctrine, under which matters involving the internal affairs of a foreign corporation are deemed substantive in nature and "should be resolved in accordance with the law of the state of incorporation." Hicks ex rel. Union Pac. Corp. v. Lewis, 148 S.W.3d 80, 84 (Tenn. Ct. App. 2003) (citing Bayberry Assocs. v. Jones, No. 87-261-II, 1988 WL 137181, at *4 (Tenn. Ct. App. Nov. 9, 1988), vacated on other grounds, 783 S.W.2d 553 (Tenn.1990); Amberjack, Ltd. v. Thompson, No. 02A0-19512-CV0-0281, 1997 WL 613676, at *8—9 (Tenn. Ct. App. Oct. 7, 1997). As noted earlier, the sole issue presented in this appeal is whether the complaint alleged facts sufficient to excuse plaintiff from making a pre-suit demand on the Healthways board of directors. In Kamen v. Kemper Financial Services, Inc., 500 U.S. 90 (1991), the United States Supreme Court explained that, in a shareholder derivative suit, any demand requirement or exception thereto, is deemed a matter of substantive law;7 thus, we apply Delaware law to resolve the substantive issues.

Procedural matters, however, including the standard of review, are governed by Tennessee law. State ex rel. Smith v. Early, 934 S.W.2d 655 (Tenn. Ct. App. 1996); accord 16 AM. JUR. 2D CONFLICT OF LAWS §§ 134—35 ("Matters of procedure . . . are governed by the law of the forum"). Because this appeal is from the grant of a motion to dismiss and involves a question of law, the scope of our review is de novo with no presumption of correctness. Coulter v. Hendricks, 918 S.W.2d 424, 426 (Tenn. Ct. App. 1995).

III. Analysis

A. Pre-Filing Demand

Pursuant to Delaware law, before a shareholder may initiate a derivative action, the shareholder must present the allegation to the corporation's directors and request that the board bring the suit. Del. Ch. R. 23.1;8 Stone v. Ritter, 911 A.2d 362, 366—67 (Del. 2006). If the directors refuse to pursue the action, the shareholder may initiate the suit by showing that the board wrongfully refused to do so. Id. However, when demand has not been made, as is the case here, the complaint is subject to dismissal unless the plaintiff can plead with requisite particularity why it would be futile to make a demand upon the board of directors. Wood v. Baum, 953 A.2d 136, 140 (Del. 2008); see also Stone, 911 A.2d at 366—67.

In order to excuse demand under Del. Ch. R. 23.1, the complaint must plead "particularized facts" creating a reasonable doubt that "the directors are disinterested and independent" or that "the challenged transaction was otherwise the product of a valid exercise of business judgment." Brehm v. Eisner, 746 A.2d 244, 256 (Del. 2000) (quoting Aronson v. Lewis, 473 A.2d 805, 814 (Del. 1984)).9 Where the subject of the derivative suit is a business decision of the board of directors, demand futility must be established pursuant to the standard articulated in Aronson v. Lewis. Rales v. Blasband, 634 A.2d 927, 934 (Del. 1993.) However, where a specific business decision of the board is not being challenged,10 as in the present case, we determine the issue of demand futility by applying the standard set forth in Rales.

Under Rales, the inquiry before the court is "whether or not the particularized factual allegations of a derivative stockholder complaint create a reasonable doubt that, as of the time the complaint is filed, the board of directors could have properly exercised its independent and disinterested business judgment in responding to a demand." Rales, 634 A.2d at 934.11 The question of whether demand would be futile is considered on a claim-by-claim basis. Beam ex rel. Martha Stewart Living Omnimedia, Inc. v. Stewart, 833 A.2d 961 (Del. Ch. 2003), aff'd. 845 A.2d 1040 (Del. Supr. 2004).

As a preliminary matter, we must determine the effect on our analysis of a provision of Healthways' certificate of incorporation which exculpates directors from liability under certain circumstances.12 Plaintiff contends that 8 Del. Ch. § 102(b)(7), which authorizes the exculpatory provision,13 does not exempt directors from liability for violations of the duties of loyalty and good faith14 and that, consequently, the provision has no application to the inquiry before this court because his claims are not grounded solely on the duty of care.

Where directors are protected by an exculpatory provision of the sort authorized by 8 Del. Ch. § 102(b)(7), the risk of liability is diminished; as a consequence, to excuse demand the complaint must contain particularized allegations of facts which allow the court to conclude that the challenged conduct falls outside the exemption. In re Baxter Int'l, Inc. Shareholders Litig., 654 A.2d 1268, 1270 (Del. Ch. 1995). Consistent with Delaware law, the practical effect of the exculpatory provision in Healthways' certificate is to require Plaintiff to allege conduct that rises to the level of bad faith, intentional misconduct, or a knowing violation of law. See id. Accordingly, we will not excuse demand if the complaint states claims that arise solely out of the duty of care, but may excuse demand where there are particularized allegations that the directors breached their duties of loyalty or good faith.

A. Allegations Related to Insider Trading and Misappropriation of Information

In order to excuse demand based on insider stock sales, a plaintiff must plead facts supporting the inference that directors "possessed material, nonpublic company information" and "used that information improperly by making trades because [they were] motivated, in whole or in part, by the substance of that information." In re Oracle Corp., 867 A.2d 904, 934 (Del. Ch. 2004). A complaint that alleges "directly and by imputation" that directors knew of the material information and made trades on that basis satisfies this standard. Zimmerman v. Braddock, 2005 WL 2266566, at *8 (Del. Ch. Sept. 8, 2005), rev'd on other grounds, 906 A.2d 776 (Del. 2006). However, "[m]ere notice pleading is insufficient to meet the plaintiffs' burden to show demand excusal in a derivative case," and a director will not be interested for purposes of demand futility based on the mere fact that he or she traded stocks. Guttman v. Huang, 823 A.2d 492, 499, 502 (Del. Ch. 2003). Further, directors are not "interested" simply because "a derivative plaintiff cursorily alleges that [the director] made sales of company stock in the market at a time when he possessed material, non-public information." Id. at 502. The key inquiry is: whether the plaintiffs have pled particularized facts regarding the directors that create a sufficient likelihood of personal liability because they have engaged in material trading activity at a time when (one can infer from particularized pled facts that) they knew material, non-public information about the company's financial condition.

Id. at 502 (Del. Ch. 2003). To proceed on an insider selling claim, a plaintiff must show "that each sale by each individual defendant was entered into and completed on the basis of, and because of, adverse material non-public information." Id. at 505 (quoting Stepak v. Ross, 1985 WL 21137, at *5 (Del. Ch. Sept. 5, 1985)).

The complaint identifies defendants Cigarran, Herr, and Lytle as "interested"15 current or former directors of Healthways who traded their stock and as to whom demand would have been futile. The complaint alleged that, as directors of Healthways, they owed a fiduciary duty to Healthways and possessed material, non-public information. The complaint alleges that Healthways was not succeeding in meeting the cost savings targets for the MHS Program; that Healthways' revenues and earnings would be negatively impacted once "the truth" of its progress within the MHS Program became known; that Cigarran, Herr, and Lytle were aware, contrary to the press releases and public statements of "the defendants," of Healthways true financial condition; and that they sold their stocks on the basis of this inside information. The allegations are sufficient to support an inference that Cigarran, Herr, and Lytle initiated and completed sales of their stock on the basis of adverse, material and non-public information. Inasmuch as the particularized allegations support a claim of insider trading, the exculpatory provision does not provide protection to Cigarran, Herr, and Lytle, since insider trading, if proven, constitutes a breach of the duty of loyalty and is a non-exculpable claim. Pfeiffer v. Toll, 989 A.2d 683, 691 (Del. Ch. 2010). Therefore, the complaint contains allegations of breach of the duty of loyalty by insider trading with sufficient particularity as to Cigarran, Herr, and Lytle to conclude that demand as to each of them on this particular claim would have been futile.

Applying this pleading standard to the remaining directors, we conclude that the complaint does not contain particularized factual allegations of insider trading and misappropriation of information sufficient to establish interest or lack of independence which would excuse demand as to those directors.16 See Pedroli ex rel. Microtune, Inc. v. Bartek, 564 F.Supp.2d 683, 695 (E.D. Tex. 2008) (holding that, under Delaware law, conclusory allegations regarding the directors as a group are insufficient to demonstrate demand futility).

Our determination that demand would have been futile as to three of the eleven directors is insufficient to establish demand futility of a majority of the board. See Rales, 634 A.2d at 937 ("[T]he appropriate inquiry is whether [the] amended complaint raises a reasonable doubt regarding the ability of a majority of the Board to exercise properly its business judgment in a decision on a demand had one been made at the time this action was filed."). Consequently, demand was not excused as to the claim of insider trading and misappropriation of information.

B. Allegations Relating to Members of the Governance Committee

The complaint alleges that the Governance Committee is charged with, inter alia, the responsibility to review compliance by officers and directors with Healthways' Code of Conduct and to recommend to the entire board "any remedial actions deemed necessary" on the basis of such review. It is further alleged that the insider sales violated the Code of Conduct17 which prohibited trading in Healthways stock if a "Healthways colleague" is in possession of material, non-public information. In his brief on appeal, plaintiff further asserts that sales of stock by defendant Hunter on January 7, 2008 and by Lytle on January 9, 2008 violated the Code of Conduct because they were made within three days of the filing of the January 7 Form 8-K. As members of the Governance Committee, defendants O'Neil, Wickens, Ballantine, England, and Taunton-Rigby, are alleged to have permitted the improper sales to occur and failed to take remedial measures. Plaintiff claims that the actions and inactions of the Governance Committee members violated the duties of due care, loyalty and good faith thereby subjecting them to a substantial likelihood of liability and excusing demand as to those defendants.

Consistent with our holding relative to the application of the exculpatory provision in Healthways' certificate of incorporation, to the extent plaintiff alleges that the actions or inactions of the members of the Governance Committee violated the duty of due care, they are not subjected to a substantial likelihood of liability and, consequently, demand is not excused. See In re Baxter, 654 A.2d at 1270.

With respect to the contention that the Governance Committee members violated the duty of good faith, the complaint alleges that Governance Committee members had a duty to review whether stock sales by persons covered by the Code of Conduct violated the code and to recommend remedial action to the Board of Directors. The Complaint, however, does not allege that any members of the committee had knowledge of the trades at issue or that the trades were brought to the attention of the members of the committee so that any appropriate remedial measures could be recommended. To the extent plaintiff contends that the allegations support a claim of breach of the duty of good faith, they do not suffice. See In re Caremark Int'l Inc. Derivative Litig., 698 A.2d 959, 971 (Del. Ch. 1996).18

The duty of loyalty under Delaware law has been defined as:

Guth v. Loft, Inc., 5 A.2d 503, 510 (Del. 1939). The complaint does not contain particularized factual allegations sufficient to support an inference that the members of the Governance Committee violated the duty of loyalty as defined by applicable law with respect to the insider stock sales.

We find that the specific allegations of the complaint relative to the Governance Committee members do not meet the high standard under Delaware law to excuse demand. The Governance Committee defendants were not subjected to a substantial likelihood of liability and, as a consequence, demand was not futile.

C. Allegations Relating to Members of the Audit Committee

The complaint asserts causes of action against all defendants and, particularly, the members of the Audit Committee for breach of fiduciary duty for disseminating false and misleading information and for failing to maintain adequate internal controls.19 Del. Ch. R. 23.1 requires that the complaint allege the plaintiff's reasons for failure to make demand on the directors that they pursue the action. The complaint does not allege that demand was futile on the part of board members who were not members of the Audit Committee relative to the causes of action for breach of fiduciary duty for disseminating false and misleading information and failure to maintain adequate internal controls.20 The complaint thus fails to satisfy the requirements of Rule 23.1 as respects the non-Audit Committee directors. In re Abbott Laboratories Derivative Litigation 325 F.3d 795, 804 (7th Cir. 2003) ("The shareholder must state with particularity why a demand would have been futile.") (citing Starrels v. First National Bank of Chicago, 870 F.2d 1168, 1170 (7th Cir. 1989). For this reason, we only consider the specific allegations of the complaint relative to the futility of demand on the members of the Audit Committee.

In relevant part, the complaint states as follows:

In support of these causes of action, the complaint alleges that on July 5, 2007 a press release was issued by "the defendants" relative to Healthways' third quarter 2007 results which contained statements of defendant Leedle, who also participated in an investor conference call and question and answer session that same day. It is alleged that on October 17, 2007 and December 19, 2007, press releases were issued and investor conference calls with question and answer sessions held in which defendant Leedle participated21 relative to Healthways' fourth quarter fiscal year 2007 and first quarter 2008 results, respectively. The complaint further alleges that another press release was issued on January 7, 2008 with respect to the filing of the Form 8-K. The complaint contains quotes and statements from the various press releases and excerpts from the conference calls attributed to defendants Leedle and Chaput. After recounting these press releases and calls, the complaint alleges:

The particular allegations relating to the members of the Audit Committee are contained in the portion of the complaint addressing demand futility, which states:

Plaintiff contends that the trial court "erred in analyzing whether demand was required on the members of the Audit Committee under the so-called `Caremark' standard."22 In Caremark, the Delaware Chancery Court held that "a director's obligation includes a duty to attempt in good faith to assure that a corporate information and reporting system, which the board concludes is adequate, exists, and that failure to do so under some circumstances may, in theory at least, render a director liable for losses caused by non-compliance with applicable legal standards." In re Caremark, 698 A.2d at 970. The court wrote that "it is important that the board exercise a good faith judgment that the corporation's information and reporting system is in concept and design adequate to assure the board that appropriate information will come to its attention in a timely manner as a matter of ordinary operations, so that it may satisfy its responsibility." Id. Various courts have interpreted Caremark as "articulat[ing] a standard for liability for failures of oversight that requires a showing that the directors breached their duty of loyalty by failing to attend to their duties in good faith," which is premised on "showing that the directors were conscious of the fact that they were not doing their jobs." Guttman, 823 A.2d at 506; see also In re VistaCare, Inc., Derivative Litig., CIV.04-1739-PHX RCB, 2007 WL 2460610, at *10, n.3 (D. Ariz. Aug. 23, 2007); In re Forest Labs. Inc. Deriv. Litig., 450 F.Supp.2d 379, 395 (S.D.N.Y. 2006). Considering the allegations of the complaint and the applicable law, we agree that Caremark sets forth the appropriate standard for our analysis of liability.

While Caremark governs the potential liability of directors for breach of fiduciary duty, it does not set forth the standard for determining demand futility. As noted supra, § III A, in determining demand futility we apply the pleading standard set forth in Rales and consider whether there is a substantial likelihood of liability on the part of the directors. If, based on particularized allegations, there is a substantial likelihood of liability, demand is excused.23

1. Adequacy of Internal Controls

The complaint includes the specific responsibilities of the Audit Committee as set forth in the restated charter of the committee; however,24 there are no particularized allegations that the members of the committee consciously failed to perform their responsibilities under the charter in good faith or otherwise comply with the standards set forth in Caremark for oversight or maintenance of an adequate information and reporting system. The specific information which the complaint alleges that all directors received were monthly ARC reports from CMS and information of the cancellation or renegotiation of Healthways contracts with various of its customers.25 The complaint does not allege, other than reference to the charter of the committee, what the charge to or responsibilities of the members of the Audit Committee were; neither does it allege with requisite particularity the failures of the committee members relative to the receipt of information or deficiencies in the internal processing of information once received. The complaint fails to set forth sufficient allegations to conclude that the members of Audit Committee members faced a substantial likelihood of liability for breach of their fiduciary duty of good faith by failing to maintain adequate internal controls. As a consequence, demand was not futile and cannot be excused.

2. Dissemination of False and Misleading Information

Plaintiff alleges Healthways issued press releases and financial statements which contained false and misleading information; it further alleges that the directors on the Audit Committee "were responsible for overseeing and directly participating in the company's internal controls, accounting practices, and financial reporting process." Applying the pleading standards of Rales and Ryan v. Gifford, 918 A.2d 341 (Del. Ch. 2007), the allegations of fact in the complaint relative to the dissemination of false and misleading information are insufficient to demonstrate that the Audit Committee members faced a substantial likelihood of liability for breach of the fiduciary duties of loyalty and good faith.

The complaint specifically excerpts comments allegedly made by defendant Leedle in the press releases and alleges, with regard to demand futility, that the Audit Committee "oversaw the preparation of improper financial statements and earnings press releases discussed herein that contained the false and/or misleading material information." Also excerpted are comments made by defendants Leedle and Chaput in investor conference calls. The complaint does not allege what, if any, actions were taken by the committee members relative to the financial statements, press releases or conference calls. Other than stating in conclusory language that the Audit Committee "oversaw" the preparation of these press releases and financial statements, there are no allegations that the Audit Committee members themselves disseminated false and misleading statements. We do not infer that each Audit Committee member, solely by the nature of his or her position,26 had knowledge of alleged false and misleading statements or actively participated in the dissemination of such information. Accordingly, the members of the Audit Committee, under the allegations of the complaint, did not face a substantial likelihood of liability for breach of the duty of loyalty, see Guth v. Loft, Inc., 5 A.2d 503 (Del. 1939); neither are the allegations of the complaint sufficient to subject defendants to substantial likelihood of liability for breach of the duty of good faith. See Malone v. Brincat, 722 A.2d 5 (Del. 1998).27 Accordingly, demand was not excused.

D. Allegation that Demand was Futile as to Defendants Leedle and Herr

Plaintiff argues that demand was futile as to defendants Leedle and Herr because of their employment with Healthways. The complaint states in pertinent part:

Assuming, arguendo, that Leedle and Herr were disabled from considering demand on all causes of action due to their employment with Healthways, we find that demand is not excused.

Under Rales, Plaintiff must "raise[] a reasonable doubt regarding the ability of a majority of the Board to exercise properly its business judgment in a decision on a demand had one been made at the time this action was filed." Rales, 634 A.2d at 937 (emphasis added). We have held that the complaint only demonstrates demand futility as to defendants Cigarran, Herr, and Lytle with respect to the claim for insider selling and misappropriation of information. We have not found a disabling interest or lack of independence with respect to any other member of the board on any other claim asserted. Therefore, a finding of demand futility with respect to Leedle and Herr would bring the total number of directors unable to consider demand on the insider selling and misappropriation of information claim to five. Because Healthways' board of directors was comprised of eleven members at the time this action was filed, plaintiff was required to raise a reasonable doubt that at least six members of the board were disinterested or independent in order to demonstrate demand futility.

E. Effect of Federal Court Ruling Denying Motion to Dismiss in Related Securities Class Action

Plaintiff asserts that the trial court erred in dismissing the derivative action "in light of the federal court's ruling on the challenged insider trades by Cigarran, Herr, and Lytle."28 Plaintiff claims that "many of the insider trades challenged by the plaintiffs to the Securities Action [the action pending in federal court] are the exact same sales that the Appellant challenged in the Derivative Action, including [Cigarran's, Herr's, and Lytle's insider sales]." Plaintiff characterizes the pleading standards applicable to this case as "far more favorable and relaxed" than the scienter standards imposed by the Private Securities Litigation Reform Act ("PSLRA") and argues that, since the federal court has denied a motion to dismiss, defendants' motion in this case should be denied as well. Defendants respond that denial of a motion to dismiss in a federal securities case is not enough to demonstrate that demand would have been futile with respect to insider trading allegations; they also cite numerous cases for the proposition that courts routinely grant motions to dismiss for failure to properly allege demand futility, notwithstanding denial of a motion to dismiss in a parallel federal securities class action.

The apparent holding in the securities litigation in federal court is not applicable in the manner urged by plaintiff. In In re Vistacare, Inc. Deriv Litig., the United States District Court for Arizona articulated the difference between the standard for pleading demand futility in Delaware and the standard a federal court applies when considering a motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure. The court opined:

In re VistaCare, Inc., Derivative Litig., CIV.04-1739-PHX RCB, 2007 WL 2460610, at *2 (D. Ariz. Aug. 23, 2007).

Plaintiff's burden in the instant case is to allege sufficient facts to support his contention that pre-filing demand in this derivative suit would have been futile as to a majority of Healthways' board of directors. This is a substantial burden which is not aided by the apparent holding in securities litigation that the claims against certain defendants were adequately alleged and could proceed. The inquiry as to whether the allegations of the complaint in the securities action stated a claim upon which the court could grant relief is separate and distinct from the inquiry before us.29

IV. Conclusion

Because Plaintiff has not demonstrated demand futility on a majority of Healthways directors on any of his causes of action, demand is not excused. Accordingly, the ruling of the Davidson County Chancery Court is AFFIRMED.