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Assume for a moment that Trenwick itself never went bankrupt. Imagine further

that it had bought another insurer and pledged a key asset of Trenwick America as

security for the purchase price. The purchase goes wrong and causes Trenwick to

become less profitable, but not insolvent. To satisfy its creditors, Trenwick causes

Trenwick America to sell the key pledged asset and uses the proceeds to pay off the

acquisition debt. As a result, Trenwick America is less profitable and less valuable. In

this scenario, even though the course of events posed no prospect of benefit for Trenwick

America when it is conceived solely as an entity, there would be nothing troubling about

it from a fiduciary perspective. Rather, the scenario would involve a garden-variety

situation when a parent corporation used the asset value of one of its wholly-owned

subsidiaries to help it finance and absorb the down-side of the parent’s larger business


The case before me now does not present a materially different situation, and is

complicated only by the reality that both the corporate parent and the corporate child

went into bankruptcy, leaving their creditors with less than 100 cents on the dollar. The

question is whether, on the facts as pled, this distinction supports recognition of a cause

of action on the subsidiary’s part against the directors of the parent. For the following

reasons, I conclude not.

I begin with the reality that if the complaint was filed on behalf of Trenwick itself,

it would fail to state a claim for breach of fiduciary duty. Trenwick’s Delaware charter

contained an exculpatory charter provision under § 102(b)(7) before the LaSalle merger,

and a similar provision carried forward in the charter of the resulting Bermudan public


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