There's a new Delaware decision on the distinction between direct and derivative suits that has me scratching my head a bit. As the Legal Solutions Blog explains (sub may be req'd):
Shareholders who claim Citigroup deceived them into holding on to their stock by misrepresenting its exposure to risky mortgage-backed securities can sue its officers directly, the Delaware Supreme Court said May 24 in response to the 2nd Circuit’s request for an advisory ruling....
Chief Justice Strine’s opinion noted that neither the plaintiffs’ common law fraud claims nor the negligent-representation claims involve fiduciary duty or corporate governance charges or “claims otherwise belonging to the corporation.”
All of which prompted the following Twitter exchanges:
Delaware justices find allegedly duped Citigroup investors have 'direct' claim https://t.co/DG7E32EZV2 #ThomsonReuters via @Westlaw
— Francis Pileggi, Esq (@fpileggi) May 26, 2016
(1/2) @BenPEdwards @fpileggi Q: A and Corp C have a contract. A is not a director, officer, or otherwise a fiduciary. A breaches contract.
— Stephen Bainbridge (@ProfBainbridge) May 27, 2016
(2/3) @BenPEdwards @fpileggi Can a shareholder of C sue A at all? If so, isn't that derivative? And don't we use Tooley to decide that?
— Stephen Bainbridge (@ProfBainbridge) May 27, 2016
(3/3) @BenPEdwards @fpileggi If we use Tooley to decide direct v derivative in suits against 3rd parties, why not in holder suits? 😕
— Stephen Bainbridge (@ProfBainbridge) May 27, 2016
Thoughts? Comments open.
