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For one thing, the Litigation Trust has failed to plead facts supporting the

inference that either the holding company or its top U.S. subsidiary were insolvent at the

time of the transactions challenged in the complaint. For that reason, settled law

indicates that the holding company owed no fiduciary duty to the top U.S. subsidiary or

that entity’s creditors. If the holding company, as controlling stockholder, owed no such

duties, it is impossible to fathom how the holding company’s directors owed such duties.

Moreover, the mere fact that the holding corporation caused its wholly-owned

subsidiary to take on more debt to support the holding corporation’s overall business

strategy does not buttress a claim. Wholly-owned subsidiary corporations are expected to

operate for the benefit of their parent corporations; that is why they are created. Parent

corporations do not owe such subsidiaries fiduciary duties. That is established Delaware


That is not to say that Delaware law leaves the creditors of subsidiaries without

rights. That would be inaccurate. Delaware has a potent fraudulent conveyance statute

enabling creditors to challenge actions by parent corporations siphoning assets from

subsidiaries. And Delaware public policy is strongly supportive of freedom of contract,

thereby supporting the primary means by which creditors protect themselves — through

the negotiations of toothy contractual provisions securing their right to seize on the assets

of the borrowing subsidiary.

What Delaware law does not do is to impose retroactive fiduciary obligations on

directors simply because their chosen business strategy did not pan out. That is what the

Litigation Trust seeks here, to emerge from the wreckage wielding the club that the


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