Courtesy of Wilmington lawyer Kurt Heyman is a decision issued today by the Chancery Court in Feldman v. Cutaia, et al., (Del. Ch., August 1, 2007), read opinion here. Kurt’s email with the case highlighted a key part of the ruling as follows: Based on the facts of this case, the court refused to extend the derivative/direct analysis under Gentile v. Rosette and Gatz v. Ponsoldt.
This is an important decision that warrants extensive review and commentary, but time contstraints today will limit this post, for now, to the following summary from the court’s opinion:
A co-founder and now former stockholder of a Delaware corporation sues members of the company’s management and its directors for alleged breaches of fiduciary duty arising out of a number of transactions, including a recapitalization scheme, a stock repurchase, an issuance of stock options, and ultimately a cash-out merger. The various defendants move to dismiss the complaint, arguing that the merger extinguished the plaintiff’s standing to bring derivative causes of action in the right of the corporation. Because the complaint does not adequately allege the presence of a controlling stockholder (which might allow the plaintiff to bring a direct claim for unfair equity dilution), and since no equitable exception to the continuous stock ownership requirement operates here (which would allow the plaintiff to continue asserting its derivative claims), the defendants’ motions will be granted.