for the Majority:

A stormwater pipe ruptured beneath a coal ash pond at Duke Energy Corporation’s Dan River Steam Station in North Carolina. The spill sent a slurry of coal ash and wastewater — containing lead, mercury, and arsenic — into the Dan River, fouling the river for many miles downstream. In May 2015, Duke Energy pled guilty to nine misdemeanor criminal violations of the Federal Clean Water Act and paid a fine exceeding $100 million. The plaintiffs, stockholders of Duke Energy, filed a derivative suit in the Court of Chancery against certain of Duke Energy’s directors and officers.1 On behalf of the Company, they sought to hold the directors — a majority of whom were outside directors and were not named in the criminal proceedings — personally liable for the damages the Company suffered from the spill.

The directors moved to dismiss the derivative complaint, claiming the plaintiffs were required under Court: of Chancery Rule 23.1 to make a demand on the board of directors before instituting litigation. The plaintiffs responded that demand was futile because the board’s mismanagement of the Company’s environmental concerns rose to the level of a Caremark2 violation, which posed a substantial risk'of the directors’ personal liability for damages caused by the spill and enforcement action. The Court of Chancery disagreed and dismissed the derivative complaint. According to the court, to hold directors personally liable for a Caremark violation, the plaintiffs must allege that the directors intentionally disregarded .their oversight responsibilities such that their dereliction of fiduciary duty rose to the level of bad faith. After giving the plaintiffs the benefit of all reasonable pleading inferences, the court held that the reports from management relied on by the board to address coal ash storage problems negated any reasonable pleading-stage inference of bad .faith conduct by the board.

We agree with the Court of Chancery that the plaintiffs did not sufficiently allege that the directors faced a substantial likelihood of personal liability for a Caremark violation. Instead, the directors at most faced the risk of an exculpated breach of the duty of care. Thus, the stockholders were required to make a..demand on the board to consider the claims before filing suit. We therefore affirm the Court of Chancery’s judgment dismissing the complaint.

I.

According to the allegations of the complaint, Duke Energy, a Delaware Corporation based in Charlotte, North Carolina, is the largest provider of electricity in the United States.3 Duke Energy’s coal-fired power plants generate a byproduct known as coal ash,, which contains toxic and carcinogenic substances.4 The plants dispose of the coal ash through wastewater treatment centers composed of unlined ponds where contaminants sink to the bottom and less-contaminated water stays at the top, to be discharged into adjacent rivers.

Under the Federal Clean Water Act (“CWA”),5 “the discharge of any pollutant by any person shall be unlawful,”6 unless granted a permit by the United Státes Environmental Protection Agency (“EPA”) or the applicable state regulatory body7— in this case, the North Carolina Department of Environmental and Natural Resources (“DENR”).8 'Primary enforcement authority lies with the regulatory body.9 If third parties wish to sue a company for violating the CWA, they must first file a notice of intent with the applicable regulatory bodies.10 If a notified regulator does not initiate enforcement within sixty days, the third party litigant may proceed with the suit.11 If, however, the state or federal regulatory party files suit within the sixty-day limit, the third parties lose standing to sue.12 Athough the third parties lose standing, they can move to intervene in the litigation between the regulator and the defendant,13 Further, a third party can regain standing if the regulator fails to “diligently prosecute” the alleged violator once suit is filed.14

In 2013, several citizens’ environmental groups filed a notice of intent to sue three of Duke Energy’s subsidiaries under the GWA for coal ash seepages at ponds in North Carolina.15 In response, the North Carolina Department of Environmental Quality (“DEQ”) filed an enforcement action, which preempted the suits.16 DEQ and Duke Energy negotiated a consent decree that would require Duke Energy to pay a $99,000 fíne and create a compliance schedule.17 The consent decree also required Duke Energy to “identify[ ] and charaeteriz[e] seeps” and conduct “[g]roundwater studies.”18 The Company planned to use the decree as a “model for resolving litigation” at twelve other sites,19 and estimated that enforcing the decree at all of its North Carolina locations would cost between $4 and $5 million.20 The consent decree was subject to a public comment period and court approval.21

DEQ withdrew from the proposed consent order when on February 2, 2014, a stormwater pipe ruptured beneath a coal ash containment pond at Duke Energy’s Dan River Steam Station in Eden, North Carolina, releasing' twenty-seven million gallons of coal ash slurry and wastewater into the Dan River.22 Duke Energy had never inspected the pipe, although a Duke Energy station manager recommended the company pay $20,000 for camera inspections in both 2011 and 2012.23 Upon investigation, federal and- state regulators found. that had Duke Energy completed a camera inspection, it likely would have discovered the corroded pipe.24 The three subsidiaries pled guilty to nine misdemeanor violations25 of the CWA, paid $102 million in fines, and agreed to restitution, community service, and mitigation.26 All counts were negligence-based, and none of the defendants in this appeal were alleged to have any knowledge of the violations in the criminal proceedings.27 ' ’

Duke Energy spent roughly $24 million to clean up the spill and acknowledged responsibility for future costs, including regulatory directives, damage to natural resources, and any additional litigation.28 It paid a $2.5 million fine to Virginia for damages to the downriver City of Danville and a $6.8 million fine to DEQ,29 and incurred additional costs to comply with environmental regulations newly enacted by North Carolina and the EPA30 — regulations that could result in the closure of coal ash ponds for an estimated cost of $4.5 billion.31

On April 22, 2016, the plaintiffs filed derivative suits in the Court of Chancery,32 alleging that the directors breached their fiduciary duties because they knew of and disregarded Duke Energy’s CWA violations and allowed Duke Energy to collude with DEQ to evade compliance with environmental regulations.33 The plaintiffs sought damages on behalf of the Company of (1) $102 million for the fine resulting from the guilty pleas, (2) $24 million for repairs and remediation of the Dan River spill, (3) $12 million for the fines to North Carolina and Virginia, (4) $7 million for the fine to DEQ, and (5) additional costs associated with environmental litigation filed as a result of the spill.34

The directors moved to dismiss the complaint for failure to plead demand futility, claiming that the plaintiffs did not allege the particularized facts required by Court of Chancery Rule 23.1 to show that the directors faced a substantial likelihood of personal liability. The Court of Chancery agreed and found the facts alleged in the complaint did not lead to the reasonable inference that the directors consciously disregarded environmental problems at the site or improperly colluded with regulators to avoid remediating environmental problems.35 The court dismissed the complaint under Court of Chancery Rule 23.1 for failure to make a demand on the board. This appeal followed. We review the Court of Chancery’s dismissal of a stockholder derivative complaint de novo.36

II.

The board of directors, exercising its statutory authority to manage the business and affairs of the corporation, ordinarily decides whether to initiate a lawsuit on behalf of the corporation.37 Stockholders cannot shortcut the board’s control over the corporation’s litigation decisions without first complying with Court of Chancery Rule 23.1. Before stockholders can assert a claim belonging to the corporation, they must first demand that the directors pursue the claim and, if the directors decline, attempt to demonstrate that the directors wrongfully refused the demand. Alternatively, stockholders can allege with sufficient particularity that demand is futile and should be excused due to a disabling conflict by a majority of the directors to consider the demand.38

For alleged violations of the board’s oversight duties under Caremark, the test articulated in Rales v. Blasband applies to assess demand futility.39 Under Rales, the plaintiffs must plead particularized facts raising “reasonable doubt of the board’s independence and disinterestedness when the demand would reveal board inaction of a nature that would expose the board to ‘a substantial likelihood’ of personal liability.”40

When, like here, the directors are protected from liability for due care violations under § 102(b)(7) of-the Delaware General Corporation Law, the plaintiff must allege with particularity that the directors acted with scienter, meaning “they had ‘actual or constructive knowledge’ that their conduct was legally improper.”41 In other words, the stockholders must allege “that a director acted inconsistent with his fiduciary duties and, most importantly, that the director knew he was so acting.”42 This is because a Caremark claim “is rooted in concepts of bad faith; indeed, a showing of bad faith is a necessary condition to director oversight liability.”43 A specific example of bad faith is when the director engages in an “intentional dereliction of duty” or “conscious disregard for one’s responsibilities,”44 or acted “with the intent to violate applicable positive law.”45 Because of the difficulties in proving bad faith director action, a Caremark claim is “possibly the most difficult theory in corporation law upon which a plaintiff might hope to win a judgment.”46

At the pleading stage, the court must accept particularized allegations of fact as true, and all reasonable inferences must be drawn in the plaintiffs’ favor.47 But, under Rule 23.1, the plaintiffs have “a heightened burden to plead particularized facts establishing a “reasonable doubt that ... the board of directors could have properly exercised its independent and disinterested business judgment in responding to a demand.”48 “[Inferences that are not objectively reasonable cannot be drawn in the plaintiffs favor.”49

On appeal, the plaintiffs argue the court erred in finding the complaint lacked sufficient facts to establish a substantial likelihood that the individual directors would be personally liable for allowing Duke Energy to "violate environmental laws, thus excusing demand. The plaintiffs focus their claims of error on two central points: first, the court improperly discredited the plaintiffs’ interpretation of board presentations and minutes, which, according to the plaintiffs, showed Duke Energy was violating environmental laws and avoiding remediation; and second, when considering the plaintiffs’ allegation that Duke Energy was exploiting its relationship with a “captive” regulator, the Court of Chancery failed to draw the proper inferences from evidence of what the plaintiffs characterize as collusion between Duke Energy and its regulator.50 We address each of these arguments in ton.

A.

The Board Presentations

The Court of Chancery reviewed' the board presentations addressing thé ash ponds at Duke Energy’s power generation sites, and concluded that the board" was both “aware of environmental problems [and] what the company was doing to attempt to address those situations.”51 According to the court, the directors did not consciously disregard the environmental problems. Rather, the presentations informed the board that Duke Energy was working with DEQ “to" achieve regulatory compliance in a cost-effective way with limited liability,”52 The court found the board presentations an-insufficient basis to raise a reasonable inference of bad faith by the board,

On appeal, the plaintiffs challenge the Court of Chancery’s conclusion, pointing to specific information in the board presentations and minutes that they argue suggested longstanding knowledge and disregard of environmental violations.53 The plaintiffs first highlight the December 12, 2012 Coal Combustion Residuals presentation, which stated that “[s]ome metals have leached to groundwater from unlined landfills and surface impoundments.”54 Thus, the plaintiffs argue, the board knew Duke Energy was violating the law but did nothing to remedy it.

The plaintiffs unfairly describe the overall presentation, which we are not required to accept on a motion to dismiss. Jeff Lyash, Executive Vice President of Energy Supply, presented to the board’s Regulatory Policy and Operations Committee on the Company’s exposure (liability) from coal combustion residuals (“CCR’s”), which are different kinds of coal ash. Lyash informed the committee that CCR’s were “classified currently as non-hazardous” but the regulatory environment was changing.55 Although informed that metals had leached into groundwater, the board committee was also informed there was “no indication that drinking water is being impacted.”56 Further, the purpose of the presentation was to chart a future course for addressing proposed EPA regulations governing CCR pollution. The board committee was informed that the EPA had proposed eliminating “wet ash management and un-lined CCR storage.”57 After inventorying Duke Energy’s CCR storage sites, and estimating the financial impact of the proposed regulations, Lyash informed the board committee of Duke Energy’s work underway to mitigate risks:

• Dry Ash Handling — Converted to dry fly ash handling at most large base load coal units that will operate past 2015. Projects budgeted over next few years to convert bottom ash transport, to dry systems.

• Groundwater Monitoring — Voluntarily groundwater monitoring of NC ash basins for several years, providing data to the state. Now a requirement of NC wastewater permits in 2011. No indication that drinking water is being impacted.

• Closure Design — Currently utilizing anticipated closure design that incorporates synthetic/plastic membrane cap and drainage layers.- Geo-membrane cap design minimizes rain and surface water in-leakage and resultant leaching.

• Regulatory Engagement — Continuing to advocate effort? to shape the final regulation. Currently closing some basins at Gibson under agreement with' [the Indiana Department of Environmental Management], Evaluating closures at’ small retired or retiring sites as a part of decommissioning work.58

The presentation is fairly described as a status update to the board committee, of the proposed EPA regulations’ impact on Duke Energy’s ash disposal practices, and its “work underway” for “risk mitigation.” 59 As the. Court of Chancery found, the board was not only informed of environmental problems, but also the steps being taken to address them. It does not support plaintiffs’ central theory that a majority of the board consciously ignored or intentionally violated positive law.

The plaintiffs next point to the August 27, 2013 Environmental Review Presentation to the board of directors. In the twenty-two pages of slides, Keith Trent, Executive Vice President and Chief Operating Officer of Regulated Utilities, presented a comprehensive review of the history of coal ash ponds and environmental regulation, on-going litigation, and steps Duke Energy was taking to mitigate the financial and environmental risks posed by ash ponds at.various Duke Energy sites.60.

The plaintiffs focus on one line in a slide stating “[sleeps are unpermitted discharges; [groundwater] violations.”61 The statement they refer to, however, was reporting allegations against Duke Energy in pending lawsuits.62 But more to the point, the board was informed that Duke Energy:

• “Routinely inspected and] repaired]” ash dike stability;

• “[A]cted on all EPA [and] State inspection and recommendations”;

• Conducted “[g]uide monitoring,” and “review[ed] results with state agency”;

• Took action “especially where potential impacts exist with receptors”;

• “Advocated for] federal ‘non-hazardous’ legislation and regulations”;

• “Perform[ed] site-specific studies” ’;

• Submitted “an ash basin closure plan” to state regulators to “review for approval”;

• “Identified seeps to state” and found a “negligible impact to the overall surface water quality”; and

• “Based on routine assessments,” took “proactive actions ... to mitigate risks and potential impacts.”63

As to “Seepage,” the presentation informed the board that Duke Energy:

• Found that the “[v]olume of ash basin seepage ... is extremely small and has negligible impact to overall surface water quality”;

• “Routinely informed the state of seeps”; and

• Identified the seeps “in detail to state agencies during recent water permit renewals.”64

As to “Exceedances of groundwater standards,” the presentation informed the board that Duke Energy:

• Conducted groundwater monitoring “since 2007 or before with results submitted to state agencies”;

• Took “corrective action at three sites with receptors where there was a potential impact to neighbors”;

• Found “no indication of impacts at other receptor sites”;

• “Developed] and implement[ed] measures ([at] operating and retired sites) to address [groundwater] ex-ceedances, seeps and long-term water quality protection”; and

• Submitted groundwater assessment reports at North Carolina’s request.65

The August 27, 2013 Environmental Review Presentation is fairly characterized as another update on environmental problems associated with coal ash disposal sites, and steps Duke Energy was taking to address the environmental concerns. It does not lead to a reasonable inference of the board’s bad faith conduct by consciously ignoring environmental problems. .

The plaintiffs’ allegations here are like those in Stone v. Ritter.66 In Stone, this Court considered whether a board of directors failed to discharge its oversight duties regarding compliance with the Federal Bank Secrecy Act.67 Although “[n]either party dispute[d] that the lack of internal controls resulted in a huge fíne,” the reports to the board showed that the board “exercised oversight by relying on periodic reports” from the officers.68 Thus, the court found plaintiffs’ complaint unsuccessfully attempted “to equate a bad outcome with bad faith.”69 Similarly, the plaintiffs here conflate the bad outcome of the criminal proceedings with the actions of the board. As in Stone, the board “exercised oversight” by receiving management presentations on the status of environmental problems. The presentations identified issues with the coal-ash disposal ponds, but also informed- the board of the actions taken to address the regulatory concerns. Thus, we agree with the Vice Chancellor that the board preséntatibns do not lead to the inference that the board consciously disregarded its oversight responsibility by ignoring environmental concerns.70

B.

Collusion with Regulators

To overcome the motion to dismiss, plaintiffs concede that they must plead sufficient, facts showing that the board knew DEQ was a “captive regulator” with whom Duke Energy was “colluding.” 71 The Court of Chancery rejected this argument, finding it “a theory at once creative and unsustainable on the facts plead.”72 According to the court, even- if DEQls. prosecution of environmental violations, was “insufficiently rigorous, or even wholly inadequate,” it fell short of leading to a reasonable inference that Duke Energy , illegally colluded with regulators.73

On appeal, the plaintiffs claim the Court of Chancery made several errors.in reaching this conclusion. Before addressing the details of these arguments, however, it is important to keep in mind the target the plaintiffs must hit. to defeat the motion to dismiss. As the Court of Chancery found, it is not enough to allege cooperation with what plaintiffs describe as a too-friendly regulator. Instead, the plaintiffs must allege in sufficient detail that Duke Energy illegally colluded with a corrupt regulator.74 And then, plaintiffs must tie the improper conduct to an intentional oversight failure by the board. 75.The complaint falls short of these pleading requirements.

1.

The Consent Decree

The plaintiffs first argue the consent decree negotiated with DEQ was a fig leaf because it only imposed a $99,000 fine and did not require remediation.76 They allege that the fine was a “meaningless amount” in light of Duke Energy’s.$2.5 billion yearly earnings77 and that remediation would not occur because the compliance schedule was not yet established, but was to be “further delineat[ed].”78

Like their characterization of the board presentations, the plaintiffs isolate one part of a much bigger picture. In addition to the fine, Duke Energy estimated spending $4 to $5 million to enforce the consent decree at all its North Carolina sites,79 $100,000 to identify and characterize seeps, and $300,000 to $500,000 to conduct groundwater studies and reroute flows or treatment.80 Duke Energy also expected to negotiate a compliance schedule with regulators. Further, the presentations show the EPA had still not finalized rules regulating OCR, and there were “[^Indications that final rule may be non-hazardous,”81 which would impact remediation costs. Regardless, even though DEQ imposed a relatively small fine and gave Duke Energy -time to establish a compliance schedule, which was not as aggressive as the., plaintiffs would have preferred, those facts do not lead to an inference that the board should have been alerted to corrupt activities between Duke Energy and its regulator. Nor does it lead to a reasonable inference that the board ignored evidence of alleged misconduct with a state regulator.82

Finally, the collusion argument loses its force when another undisputed fact is considered — the consent decree was subject to approval by the North Carolina court.83 The public and environmental groups who intervened in-the enforcement action had the opportunity to comment on and object to the consent decree before a court gave it the force of law. Thus, if the consent decree was as deficient as the plaintiffs claim and resulted from improper collusion with regulatory authorities, the court was in a position to make that judgment, and refuse to approve it.

2.

La¾ Environmental Law Enforcement

Next, plaintiffs argue that the board should have known DEQ was a captive regulator because DEQ was not a “particularly vigorous enforcer of environmental laws,” and became “particularly friendly” when Patrick McCrory was elected .governor.84 The Court of Chancery labelled this conclusion a non sequitur, finding it was “belied by the fact that part of the actions and interactions with DEQ ... predate the McCrory administration.”85 On appeal, plaintiffs argue that the Court of Chancery gave insufficient weight to their allegations that DEQ “effectively abandoned its role of pursuing enforcement against polluters,” 86 as evidenced by agency employees threatened with job loss if they enforced regulations.87

Although the plaintiffs have alleged that DEQ in general did not aggressively enforce environmental laws, DEQ’s lack of aggressiveness does not lead to án inference in this case that Duke Energy illegally colluded with DEQ, and that the board was complicit in such illegal activities. We agree with the Court of Chancery that general allegations regarding a regulator’s business-friendly policies are insufficient to lead to an inference that the board knew Duke Energy was colluding with a corrupt regulator.

In the Court of Chancery, the plaintiffs also pointed to Duke Energy’s goal to preempt the citizens’ suits, which allegedly leads to the conclusion that the board should have known Duke Energy would collude with DEQ in bad faith.88 The court found this conclusion unsustainable, explaining that the facts showed that Duke Energy was working with- DEQ “to minimize .its liability and maximize the time it had to bring its facilities in[to] compliance with environmental regulations,”89 which was a reasonable business decision devoid of bad faith.90

On appeal, plaintiffs challenge this conclusion, arguing that DEQ’s prosecution “was not undertaken in good faith for the purpose of crafting a regulatory solution,” but was rather undertaken to' “avoid remediation.”91 To support this contention, Plaintiffs first point to a May 1, 2013 Regulated Utilities Update Presentation, which states:

[North Carolina] has initiated enforcement action against Asheville, which ordinarily deprives environmental groups of right to sue: We will be working with NC to resolve Asheville and hopefully address other plants at the same time. We do expect a civil penalty and compliance schedule of tasks, all of which constitute “diligent prosecution” and bar the environmental groups’ citizen suit.92

The plaintiffs argue that because Duke Energy wanted to “hopefully address other plants at the same time,” it was attempting to establish “a veneer of ‘diligent prosecution.’ ”93 But, as the Court of Chancery found, the reasonable interpretation of this statement was innocuous— Duke Energy chose to work with DEQ to address all of its facilities at the same time to minimize costs and avoid repeated prosecution.94 As noted before, the lead regulator with enforcement authority is DEQ, not concerned citizens. Further, the board was informed through presentations that Duke Energy expected “a civil penalty and compliance schedule of tasks,” which meant Duke Energy anticipated actual remediation and was not just “facially ap-pearfing]” to be complying with the law.95 When the board presentations are fairly considered, none of the facts relied on by the plaintiffs lead'to a reasonable inference of bad faith conduct by the board.

The plaintiffs also rely on board minutes stating that Duke Energy wanted to “maintain control over its coal ash ponds,”96 leading to the inference that Duke Energy did not want to “expend funds to comply with the law.”97 That inference, however, is not one reasonably drawn from the minutes. A company’s desire to maintain control of its operations, without more, does not lead to a conclusion the company would violate the law to do so.

Finally, the plaintiffs rely on'a federal decision that held DEQ was not diligently prosecuting a case against Duke Energy. In Yadkin Riverkeeper, Inc. v. Duke Energy Carolinas, LLC,98 the plaintiffs brought suit against Duke Energy for CWA violations at Duke Energy’s Buck Steam Station coal-bürning power plant.99 Because DEQ was already prosecuting Duke Energy for the violations, the plaintiffs could only proceed with their suit if DEQ’s prosecution was not “diligent.”100 To establish a lack of diligence, the plaintiffs had to show “a pattern of conduct in [the state’s] prosecution of the defendant that could be considered dilatory, collusive or otherwise in bad faith.”101 The Yadkin court held that plaintiffs met their burden of proving dilatory prosecution, meaning DEQ “appealed] to have done little, if anything, to move the case forward. It had not taken depositions, it had not filed motions, and an initial case management order was not yet in place, one year into litigation.”102 Because the court believed there was “little likelihood that [DEQ’s] action would proceed expeditiously to a final resolution,” the court held the prosecution was not diligent and allowed the plaintiffs to proceed with their suit.103

The plaintiffs argue the Yadkin 'decision is “persuasive evidence that DEQ was a captive regulator” in the instant case.104 But , the Yadkin court found a lack of dili-. gent prosecution — not bad faith by the Company or the board. Like plaintiffs’ other arguments, the court’s finding of a lack of diligence in pursuing litigation does not lead to a reasonable inference that DEQ was a corrupt .regulator colluding with Duke Energy, and that the board knew about the corrupt activities and consciously ignored those facts.

III.

Duke Energy was. responsible for fouling the Dan River with a slurry of toxic coal- ash, causing major environmental damage many miles downstream. The Company pled guilty to environmental crimes ahd faced stiff fines and costly remediation expenses. The backlash for its poor environmental stewardship was. severe.' .The EPA and. the State of North Carolina responded by enacting stricter laws and proposing rules governing coal ash pond maintenance and closure.105

None of this reflected, well on Duke Energy. But, the question before us is not whether Duke Energy should be punished for its actions..That has already happened. What is before-us is whether a majority pf Duke Energy directors face a substantial likelihood that they will be found personally liable for. intentionally causing Duke Energy to violate the law or consciously disregarding the law. We find, as the Court of Chancery did, that the plaintiffs failed to meet this pleading requirement.106 Thus, the plaintiffs were required to first demand that the board of directors address the claims they wished to pursue on behalf of the Company. '

We therefore affirm the Court of Chancery’s December 14, 2016 judgment dismissing the plaintiffs’ derivative complaint.

dissenting:

With regret, I respectfully dissent from the well-stated decision of my colleagues, which affirms a thoughtful'decision of the Court of Chancery. I do so because I find that the facts pled raise a pleading, stage inference that it was the business strategy of Duke Energy, accepted and supported by its board of directors, to run the company in a manner that purposely skirted, and in many ways consciously violated, important environmental laws. Being skilled at running an energy company whose conduct presented " environmental hazards, but whose operations provided an important source of employment, Duke’s executives, advisors, and directors used all the tools in their large box to cause Duke to flout its environmental responsibilities, therefore reduce its costs of operations, and by that means, increase its profitability. This, fiduciaries of a Delaware corporation, may not do.107

My primary disagreement with my friends in the majority and the Court of Chancery involves the application of the procedural posture to the facts as pled. Even though' we are in' a context when particularized pleading is required, that does not mean that the plaintiffs must have conclusive proof of all their contentions. Instead, they must plead particularized facts that support a rational'inference of non-exculpated breaches of fiduciary duty by a majority of the Duke Energy board.108. Rarely will such evidence involve admissions by experienced managers and board advisors that-the strategy they are undertaking involves a conscious decision to violate the laws, against the backdrop of a regulatory environment heavily influenced by the company’s own lobbying and political contributions. • ■

Unlike the majority and the Court of Chancery, I do not believe that the plaintiffs have to prove at this stage that there was collusion between a weak local regulator and Duke to avoid more searching scrutiny of its practices that pose a risk to the environment, wildlife, and public health. What they have to do is plead facts supporting an inference that Duke consciously was violating the law, taking steps that it knew were not sufficient to come into good faith compliance, but which it believed would-be given a blessing by a regulatory agency whose fidelity to the law, the environment, and. public health, seemed to be outweighed by its desire to be seen as protecting Duke and the jobs it creates.

The pled facts that support this inference at this stage include:

• Duke’s board knew that Duke illegally discharged highly toxic water from its coal ash ponds into the groundwater, sometimes intentionally through manmade channels,109 in violation of both state and federal environmental law.110 Duke’s 760 daily violations of environmental regulations dated back to at least January 2012: the earliest time period from which the state regulator could assess liability under the statute of limitations.111

• Duke knew its coal ash ponds were contaminating groundwater at illegal levels,112 as confirmed by testing dating back to at least 2007 conducted by Duke itself, regulators, and environmental groups.113

• Duke’s board knew that Duke had to procure discharge permits for its many coal ash ponds, but continued to operate them illegally and, in some cases, without any permit at all, in violation of state law and the Clean Water Act, even after trying, but failing, to secure a less restrictive type of permit.114

• Duke and its affiliated donors spent over $1.4 million dollars to influence its home state political process to secure the election of officials who would be lax in their enforcement of federal and state environmental laws that applied to Duke’s operations,115 including a Governor who had been a Duke employee for twenty-eight years.116

• Duke’s board was aware of and supported the 'strategy to enlist the state regulator, which had done little to cause Duke to come into compli-anee with law in the past and which was now overseen by the Governor who had been a Duke employee for twenty-eight years and was supported by Duke in his campaign, to file complaints against Duke and thereby preempt the citizen suits that sought substantial, remediation.117 The .regulator then proposed a consent order that involved a trifle of a civil penalty and that did not require remediation or a change in Duke’s coal ash storage practices.118

• Four days after being court-ordered to immediately eliminate all sources of contamination from its coal ash ponds, Duke “was caught illegally and deliberately dumping toxic coal ash wastewater into the .Cape Fear River, a practice that had been ongoing for several months and which resulted in 61 million gallons of wastewater discharged in the river.” 119 Confronted with aerial photographs of this illegal activity, a Duke spokesman attributed the pumping to routine maintenance — an assertion rejected by DEQ because the pumping activity “far exceeded what would reasonably be considered routine maintenance.”120

As can be seen, in one respect, I share a key assumption with my colleagues in the majority. I do not rest my dissent on the notion that the board of Duke, under the pled facts, was ignorant of the company’s practices. Sadly, my dissent rests on my reluctant conclusion that the facts as pled support a fair inference that-the board was all too aware that Duke’s business strategy involved flouting important laws, while employing a strategy of political influence-seeking and cajolement to reduce the risk that the company would be called to fair account.121 Under the facts as pled, the only surprising thing about the Dan River spill that gave rise to. the state regulator’s issuance of a $6.8 million fine, twenty-three Notice of -Violation letters, twenty-six Notice of Deficiency letters, and a finding that Duke committed more than 760 daily violations of environmental regulations, in addition to other severe civil and criminal penalties related to Duke’s operations at other sites, is that something like it did not happen years earlier.122 And the fact that the local regulator that had'been so compliant and cooperative in shaping easy conditions for Duke that the plaintiffs from the environmental community Duke sought to avoid would not have accepted, so rapidly turned tail and ran in the face of public sentiment supports, rather than, contradicts, the complaint’s allegation that Duke knew it was dealing with a regulator that was not focused on its legal duties. When the deal they cut was put under the spotlight of public scrutiny, its friendly regulator abandoned it, consistent with the behavior one would expect of a regulator that did not, let’s say, run straight. The company then experienced the predictable: the serious financial and reputational consequences that come when an offender is caught out, and those complicit in turning a blind eye to the past misbehavior tries to distance itself from responsibility by slapping its old buddy hard.

It may be that after the daylight of discovery shines for some time, the rancid whiff that arises from the pled facts dissipates and turns into the bracing freshness of a new Carolina day. But, without that, the off-putting odor will linger and so too will rational suspicions that the defendants caused the smell.