at which management made a cursory presentation. To state a claim of disloyalty, a
complaint might allege that a board undertook an acquisition of a company controlled by
one of its directors because that director was having financial problems and the board, in
bad faith, decided to prefer his interests to that of the company. What a plaintiff may not
do, however, is simply allege that a majority independent board undertook a business
strategy that was “all consuming and foolhardy”71 and that turned out badly and thereby
seek to have the court infer that the later failure resulted from a grossly deficient level of
effort or from disloyal motives.
That is all that the Litigation Trust has done here. Therefore, the Litigation Trust
has not stated a claim that the directors of Trenwick breached their duty of care or loyalty
to Trenwick itself in approving the Chartwell and LaSalle mergers, and the
reorganization of Trenwick.
I emphasize Trenwick itself for a reason. As I understand Delaware law, the
Litigation Trust may not assert claims on behalf of Trenwick America against the
Trenwick board of directors without piercing Trenwick’s veil in some manner. That is, if
there was a breach of fiduciary duty by conduct at the Trenwick-level toward Trenwick
America, the proper defendant is Trenwick itself, as the parent corporation, not the
directors of Trenwick. Delaware law does not blithely ignore corporate formalities and
the Litigation Trust has not explained how the Trenwick directors, as opposed to
Trenwick, can be deemed to be a “controlling stockholder” group that owes fiduciary
duties to a subsidiary.
Compl. ¶ 35.