In North American Catholic Educational Programming Foundation, Inc. v. Gheewhalla, (Del. Supr., May 18, 2007), read opinion here, the Delaware Supreme Court upheld the Chancery Court’s determination that creditors of a Delaware corporation do not have a direct claim against directors of an insolvent corporation, or one in the zone of insolvency, for breach of fiduciary duty. Professor Bainbridge comments on this important decision here. This decision will be of great interest to both corporate lawyers and litigators as well as bankruptcy lawyers. I hope to write more on it later.
Notably, in its opinion the Delaware Supreme Court cites to the writings of Professor Bainbridge on the topic (as the Chancery Court has done as well in its opinions.) Compare the Chancery Court’s Trenwick decision (no claim for "deepening insolvency") here, and the link here to the Chancery Court opinion that was affirmed yesterday by the Delaware Supreme Court. Professor Ribstein, whose writings were also cited by the Delaware Supreme Court in this opinion, has a blog post here on the opinion.
P.S. I try not to distract readers of this blog with any "off message" posts outside the limited scope of this blog, but I hope you will indulge me this small expression of joy. My youngest brother was ordained today as a priest for the Diocese of Wilmington. I am very proud of him and I hope he has many happy years ahead of him as a priest. I hope his prayers for me carry extra weight now.