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debt to continue the company’s operations, but that is the proper role of insolvency, to act

as an important contextual fact in the fiduciary duty metric. In that context, our law

already requires the directors of an insolvent corporation to consider, as fiduciaries, the

interests of the corporation’s creditors who, by definition, are owed more than the

corporation has the wallet to repay.104

In this case, the Litigation Trust has not stated a viable claim for breach of

fiduciary duty. It may not escape that failure by seeking to have this court recognize a

loose phrase as a cause of action under our law, when that recognition would be

inconsistent with the principles shaping our state’s corporate law. In so ruling, I reach a

result consistent with a growing body of federal jurisprudence, which has recognized that

those federal courts that became infatuated with the concept, did not look closely enough



, 863 A.2d at 791 (Del. Ch. 2004) (“When a firm has reached the

point of insolvency, it is settled that under Delaware law, the firm's directors are said to owe fiduciary duties to the company's creditors. This is an uncontroversial proposition and does not completely turn on its head the equitable obligations of the directors to the firm itself. The directors continue to have the task of attempting to maximize the economic value of the firm. That much of their job does not change. But the fact of insolvency does necessarily affect the constituency on whose behalf the directors are pursuing that end. By definition, the fact of insolvency places the creditors in the shoes normally occupied by the shareholders-that of residual risk-bearers. Where the assets of the company are insufficient to pay its debts, and the remaining equity is underwater, whatever remains of the company's assets will be used to pay

creditors, usually either by seniority of debt or on a pro rata basis among debtors of equal

priority.”) (internal citations omitted);

., 805

A.2d 221, 229 (Del. Ch. 2002) (“Even where the law recognizes that the duties of directors encompass the interests of creditors, there is room for application of the business judgment


., 621 A.2d 784, 787 (Del. Ch. 1992) (“[W]hen the

insolvency exception [arises], it creates fiduciary duties for directors for the benefit of


Laura Lin,

, 46 VAND. L. REV. 1485 (1993).


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