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