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board to cause the company or its top U.S. subsidiary to become insolvent or to dishonor

the rights of their creditors. In fact, what the complaint pleads is that the managers and

directors of the holding company simply replaced their existing options in the previous

public entity, which had been domiciled in Delaware, with identical options in the

Bermuda entity resulting from the last acquisition.

Furthermore, although the complaint accuses the board of the holding company of

a lack of diligence, it does so by conclusory insult, not by fact pleading. The complaint is

entirely devoid of facts indicating that the board did not engage in an appropriate process

of diligence before deciding to make its acquisitions and to reorganize its subsidiary

structure. Instead, the complaint argues from hindsight, that the fact that the holding

company’s strategy ultimately failed must mean that the process that led to its adoption

was the product of culpably sloppy efforts. Even less does the complaint confront the

reality that the holding company directors are immune from liability for breaches of their

duty of care, due to the holding company’s exculpatory charter provision.

Had this claim been brought by a stockholder of the holding company, it would be

easily stopped at the gate, because the complaint fails to plead a breach of fiduciary duty.

This is not surprising given that it is unusual for arms-length transactions approved by

majority independent boards and a diverse stockholder base to be subject to attack; after

all, they are the quintessential transactions subject to the protection of the business

judgment rule.

Here, what the Litigation Trust relies upon to make up for its pleading deficiencies

is the later-arising fact of insolvency. But that fact does not aid it.


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