Brenner v. Albrecht, C.A. No. 6514-VCP (Del. Ch. Jan. 27, 2012), read opinion here.
The issue addressed in this case was whether a derivative action in Delaware should be stayed or allowed to proceed despite a related, pending federal securities class action.
The plaintiff claimed in this derivative action that the directors and certain officers of SunPower breached their fiduciary duties by failing to implement or to monitor an effective internal control system, which caused the company to misstate, and then to restate, its financial statements for 2008 and 2009. The restatement led to related actions in federal court accusing the company and its directors of violating federal securities laws, and a class action that is still pending. This derivative action seeks indemnification for whatever losses the company ultimately incurs in the class action and recovery of other damages related to the restatement.
The Court discussed the standard that applies to its exercise of discretion in determining whether to grant a stay in light of pending related actions. The Court also reviewed the factors that it considers when presented with such a motion. See footnotes 17 to 19. The Court also relied on the Delaware Court of Chancery decision in Brudno v. Wise, 2003 WL 1874750 (Del. Ch. 2003).
The Court reasoned that the pending class action would need to address similar issues as arise in this case. In the course of its analysis, the Court reviewed the familiar elements of a Caremark claim which would need to be established if this case were allowed to proceed. See footnotes 22 to 24.
In addition to other reasons explained in the opinion, the Court decided that granting the stay was appropriate although it allowed an opportunity for the plaintiff to revisit the issue and submit a new motion “for good cause shown” based on any unforeseen development, and any unexpected burden that the stay might cause.