Frank Reynolds of Thomson Reuters has a helpful article summarizing the key points in this ruling on the fraud exception to the requirement that one must own stock in a company to pursue an derivative action. An excerpt follows on this issue of first impression accepted by Delaware’s High Court on certification from the U.S. Court of Appeals for the Ninth Circuit. (The press of paying clients is the reason that blogging has been light lately.)
Bank of America Corp.’s 2008 rescue merger with Countrywide Financial Corp. left Countrywide investors without shareholder standing to continue their derivative suit against its officers and they can’t use Delaware’s “fraud exemption” to revive it, the state’s highest court has ruled.
In an en banc opinion on a first-impression issue, the Delaware Supreme Court unanimously ruled that the Countrywide shareholders didn’t prove that their case was an exception to the state’s “no stock, no standing” rule because they lacked proof that the merger’s main purpose was to kill their suit.