The prior Chancery decision in this case refused to grant expedited injunctive relief in connection with installment payments for the purchase of a cement business. This opinion granted a motion to dismiss.
Issues Addressed: The Motion to Dismiss was based on Court of Chancery Rules 12(b)(1) through 12(b)(7), and the arguments included: lack of personal jurisdiction, invalid service and improper venue (under McWane and forum non conveniens). Failure to comply with Court of Chancery Rule 23.1 was also advanced based on the argument that there was a failure to comply with the derivative suit requirements of both Spanish and Delaware law.
As described in the prior opinion at the above link, this suit seeks to prevent the payment of any additional funds under a stock purchase agreement on the basis of self-dealing, and to rescind the transaction.
Key Legal Principles Discussed
- This decision features an analysis of standing for derivative claims under the law of Spain. (Slip op. at 12). The Court found that there was no standing under Spanish law.
- The Court also discussed the definition of a “double derivative action” involving a wholly owned subsidiary, where a stockholder plaintiff need only plead demand futility at the parent level. See footnote 18 and accompanying text.
- The internal affairs doctrine was also discussed as the basis to determine which state’s (or country’s) law applied to the right of a stockholder to pursue a derivative action. See footnote 12 and related text.
- The Court applies Delaware law to the issue of whether a claim is direct or derivative (or both).
- The duty of loyalty owed by a controlling shareholder to minority shareholders is addressed at page 14.
- The first-filed rule, sometimes called the McWane doctrine, was applied at page 16.
- Based on the McWane doctrine, the Court determined that it should defer to the first-filed suit in Spain. The Court was not persuaded to reach a different conclusion despite arguments that the Courts of Spain might not dispatch justice with the same alacrity or celerity as if the suit were to proceed in the Court of Chancery.