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The general rule embraced by Delaware is the sound one. So long as directors are

respectful of the corporation’s obligation to honor the legal rights of its creditors, they

should be free to pursue in good faith profit for the corporation’s equityholders. Even

when the firm is insolvent, directors are free to pursue value maximizing strategies, while

recognizing that the firm’s creditors have become its residual claimants and the

advancement of their best interests has become the firm’s principal objective.

Along with dismissing the Litigation Trust’s fiduciary duty claims and its

deepening insolvency claim, I dismiss its claims of fraud. The fraud claims are not pled

with appropriate particularity and rest on the general assertion that because the holding

company and subsidiary became insolvent nearly three years after the last challenged

transaction, the books and records of the companies must have contained knowing

misrepresentations of material fact. Because such conclusory allegations do not satisfy

Rule 9(b) and for other reasons, the fraud claims are not viable.

Finally, the Litigation Trust advances a host of claims against third-party advisors.

Rather than detail what the advisors did that was wrongful, the Litigation Trust devoted

much of the complaint to setting forth accusations made against these prominent advisors

in other lawsuits. For a myriad of reasons, the claims against these advisors are deficient

and will also be dismissed.

I now turn to the facts underlying this case and then to the merits of the motions

to dismiss.


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