A pension fund sues over Dropbox's Delaware-to-Nevada reincorporation

On 3 April 2025 the Plumbers & Fitters Local 295 Pension Fund sued Dropbox, Inc. and its leadership in the Delaware Court of Chancery (Plumbers & Fitters Local 295 Pension Fund v. Dropbox, Inc., C.A. No. 2025-0354-KSJM), before Chancellor Kathaleen St. Jude McCormick. The suit followed a books-and-records demand and challenged Dropbox's planned reincorporation from Delaware to Nevada. The plaintiff alleged that the move would benefit Dropbox's founder, chairman, CEO, and controlling stockholder, Andrew Houston, by reducing the company's exposure to Delaware's stockholder-protective corporate law.

The complaint, filed under seal, was reported as the first known court challenge to Delaware's Senate Bill 21 — the March 2025 amendments to the Delaware General Corporation Law that narrowed certain controlling-stockholder protections — raising both a fiduciary-duty theory and a constitutional challenge to SB 21. Law.com's Delaware Business Court reported that the 103-page complaint was originally filed under seal on 3 April and made public on 8 April 2025, and the Chancery stay letter refers to it as the "Verified Class Action Complaint." On June 9, 2025, Chancellor McCormick stayed the entire action. Her order explained that the constitutional questions pleaded in the complaint overlapped with questions the Delaware Supreme Court had already agreed to hear in a separate case, Rutledge v. Clearway Energy Group LLC: "At a minimum, the above-certified questions overlap with the Constitutional Questions." Delaware's Governor had moved to intervene "for the limited purpose of addressing the Constitutional Questions" — the constitutionality of Section 144 of the Delaware General Corporation Law as amended by SB 21 — without taking a position on certification. The order concluded: "This action is STAYED pending resolution of the Clearway Certified Questions." The defendants' motion to dismiss was among the motions pending when the stay was entered.

Those questions have since been answered. In Rutledge v. Clearway Energy Group LLC (submitted 5 November 2025), the Delaware Supreme Court decided on 27 February 2026 and wrote: "we answer both questions in the negative." It concluded that the Safe Harbor Provisions in Section 1 of SB 21 "do not conflict with Article IV, § 10 of the Delaware Constitution," and that Section 3 of SB 21, which applies them to "all acts or transactions whether occurring before, on or after the enactment date," "does not violate Article I, § 9 of the Delaware Constitution." The Rutledge opinion is a separate case and does not mention Dropbox. What this archive could not establish is what has happened in the Dropbox case since: it found no order lifting the stay, no ruling on the motion to dismiss, and no 2026 docket page for C.A. No. 2025-0354 — CourtListener searches for the case number returned only the June 2025 stay letter as an opinion and no docket, and the Delaware Judiciary's opinions page rejected the archive's automated request, so it could not be checked there. The stay is therefore not reported here as lifted and the case is not reported as resumed, although the plaintiff did file an amended complaint in July 2026; this archive does not know on what procedural footing.

On July 6, 2026, after obtaining documents through a Section 220 books-and-records demand, the plaintiff filed what The D&O Diary described as a "substantially expanded amended complaint." The amended complaint alleges that Dropbox pursued the Nevada reincorporation amid an AI-focused business transformation and pressure from activist investor Half Moon Capital, which had challenged both the company's strategy and Houston's voting control through Dropbox's dual-class structure, and that the reincorporation was part of a broader effort by Houston to strengthen his influence over Dropbox. It further alleges that the board's evaluation committee lacked independence and that stockholders received a materially misleading Information Statement about the reincorporation. Harvard's Forum on Corporate Governance reported that the amended complaint additionally alleges that after reincorporating to Nevada, Dropbox proposed charter amendments that would eliminate jury trials in certain corporate disputes — which the plaintiff says undercuts the company's stated rationale for leaving Delaware's Court of Chancery. The plaintiff seeks rescission of the Nevada reincorporation and restoration of Dropbox's Delaware domicile or, alternatively, rescissory and compensatory damages.

The amended pleading is a "Verified Amended Class Action Complaint" e-filed on 6 July 2026 (the archive read the public version). It states that the plaintiff "brings this action individually and as a class action, pursuant to Court of Chancery Rule 23," on behalf of holders of Dropbox common stock. The complaint alleges that the reincorporation "became effective on March 5, 2025." By its table of contents it pleads six counts: breach of the fiduciary duties of loyalty and care in recommending, approving, disclosing and implementing the reincorporation (Count I); breach of fiduciary duty through a defensive measure (II); breach of continuing fiduciary duty by failing to reconsider (III); abdication of the fiduciary duty of disclosure (IV); breach of fiduciary duty by an officer (V); and breach of the duty of loyalty by the CEO as controlling stockholder (VI). The plaintiff asks the court to certify the class and to enter "an order rescinding the Reincorporation and directing the Delaware Secretary of State to void the Certificate of Conversion," and to award damages "(including if the Reincorporation is not rescinded, rescissory damages)." The complaint also tabulates what it alleges were sales by the CEO of 2,526,000 shares between September 2024 and January 2025 for $69,411,022.29, and argues it is "reasonably conceivable" that those sales were related to the transformation and the reincorporation. These are the plaintiff's allegations; this archive found no ruling on them. The public version of the complaint does not contain the words "unconstitutional" or "Constitution"; it argues instead that the reincorporation does not fall within Section 144.

An August 2026 D&O Diary article (published 3 August 2026) calls the amended pleading a "newly amended class action complaint" and refers to Delaware's response to the reincorporation trend as including "the enactment of SB 21" and, in the same sentence, "the Delaware Supreme Court’s decision upholding the statute." The article does not name that decision; the Delaware Supreme Court opinion this archive located is Rutledge, and it is described above in the court's own words rather than in that shorthand. The article is cited here for its commentary only. Its headline calls the matter a derivative suit, but the complaint is a class action under Rule 23; the complaint's references to derivative claims concern Delaware derivative claims that it alleges the reincorporation cut off, not a claim it brings.

The allegations in both the original and amended complaints are unproven. Both are pleaded as class actions, not derivative suits. As of 11 October 2026, this archive found no ruling on the merits of the case, no order lifting the stay and no ruling on the motion to dismiss, and there is no finding of liability against Dropbox of record.