Grace Brothers v. Uniholding Corporation

11 Citing cases

  1. Unzipped Apparel, LLC v. Sweet Sportswear, LLC

    No. B203995 (Cal. Ct. App. Jul. 7, 2010)

    One exception is where the defendant is a director who sits on the board of directors for both the parent and the subsidiary corporations, because such a director owes fiduciary duties to both corporations. (Grace Brothers, Ltd. v. Uniholding Corp. (Del. Ch. July 12, 2000, No. 17612) 2000 WL 982401, at *12.) Another exception is where the defendant is a director of the parent corporation only, but has knowledge of injury to the subsidiary that will also harm the parent.

  2. Miller v. Black Diamond Capital Mgmt., L.L.C. (In re Bayou Steel BD Holdings, L.L.C.)

    651 B.R. 179 (Bankr. D. Del. 2023)   Cited 2 times
    Stating that "Delaware law presumes that managers of limited liability companies owe fiduciary duties unless explicitly disclaimed"

    See Bayou Investment LLC Agreement ยง 4.1(a) (vesting all management in BD Long Products as its sole "Manager"); BD LaPlace LLC Agreement ยง 4.1(a) (same); see also Holdings LLC Agreement at 1 (stating that BD Long Products, LLC changed its name on April 6, 2016 to Bayou Holdings). Grace Bros., Ltd. v. Uniholding Corp., No. 17612, 2000 WL 982401 (Del. Ch. July 12, 2000); see also In re Sunstates Corp. S'holder Litig., No. 13284, 2001 WL 432447, at *1 (Del. Ch. Apr. 18, 2001) (denying motion to dismiss claims that parent directors breached their duties of care and loyalty to the parent even though the transaction at issue was implemented through various subsidiaries rather than the parent and explaining: Those subsidiaries may, conceptually, have separate claims against their directors.

  3. In re Musicland Holding Corp.

    424 B.R. 95 (Bankr. S.D.N.Y. 2010)   Cited 7 times
    Stating that under Delaware law, "[i]ndividual creditors . . . have no right to assert direct claims for breach of fiduciary duty against corporate directors" (quoting Gheewalla, 930 A.2d at 103)

    The case law relied upon by the Best Buy Defendants to support their motion to compel is distinguishable. They cite RSL Comm'ns, PLC v. Bildirci No. 04 Civ. 5217(RJS), 2009 WL 454136, at *1 (S.D.N.Y. Feb.23, 2009) and Grace Bros. Ltd. v. Uniholding Corp., Civ. A. No. 17612, 2000 WL 982401, at *16 (Del.Ch. July 12, 2000) for the proposition that a plaintiff in a suit charging breach of fiduciary duty must show causation and damages. (Best Buy Reply at 13-14.)

  4. Ont. Provincial Council of Carpenters' Pension Tr. Fund v. Walton

    C. A. 2021-0827-JTL (Del. Ch. Apr. 26, 2023)   Cited 1 times   1 Legal Analyses

    That family relationship is sufficient to create a reason to doubt Mr. Feghali's ability to impartially consider a demand."); Grace Bros., Ltd. v. UniHolding Corp., 2000 WL 982401, at *10 (Del. Ch. July 12, 2000) (Strine, V.C.) (finding reasonable doubt about whether a director impartially could consider a demand adverse to the interests of his brother-in-law); Harbor Fin., 751 A.2d at 889 (granting inference at pleading stage that reasonable doubt existed as to director's ability to consider a litigation demand impartially when the proposed defendant was his brother-in-law). See generally Chaffin v. GNI Gp., Inc., 1999 WL 721569, at *5 (Del. Ch. Sept. 3, 1999) ("[M]ost parents would find it highly difficult, if not impossible, to maintain a completely neutral, disinterested position on an issue, where his or her own child would benefit substantially if the parent decides the issue a certain way").

  5. In re Ezcorp Inc.

    C.A. No. 9962-VCL (Del. Ch. Jan. 25, 2016)   Cited 23 times   1 Legal Analyses
    Clarifying that entire fairness review applies to transactions involving self-interested controllers outside the squeeze-out merger context

    "While there is nothing wrong with family members serving together on a board, . . . a 'reasonable doubt' is raised when a demand would require a director to support a suit contrary to the interests of a close family member." Mizel, 1999 WL 550369, at *4; see Grimes, 673 A.2d at 1216-17 (noting that a "familial interest" can disable a director); Grace Bros., Ltd. v. UniHolding Corp., 2000 WL 982401, at *10 (Del. Ch. July 12, 2000) (Strine, V.C.) (finding reasonable doubt about whether a director impartially could consider a demand adverse to the interests of his brother-in-law); Cooper, 2000 WL 1664167, at *6 ("The Complaint alleges that director Feghali was interested and/or lacked independence because he was Steven Singer's father in law. That family relationship is sufficient to create a reason to doubt Mr. Feghali's ability to impartially consider a demand."); Harbor Fin. 751 A.2d at 889 (granting inference at pleading stage that reasonable doubt existed as to director's ability to consider a litigation demand impartially when the proposed defendant was his brother-in-law); see also Chaffin v. GNI Gp., Inc., 1999 WL 721569, at *5 (Del.

  6. In re China Agritech, Inc. Shareholder Derivative Litig.

    C.A. No. 7163-VCL (Del. Ch. May. 21, 2013)   Cited 17 times
    Determining that litigation risk Audit Committee members faced regarding an entire fairness challenge to a certain transaction raised "reasonable doubt about their ability to disinterestedly consider a litigation demand"

    See Mizel v. Connelly, 1999 WL 550369, at *4 (Del. Ch. July 22, 1999); see also Grace Bros. Ltd. v. UniHolding Corp., 2000 WL 982401, at *10 (Del. Ch. July 12, 2000). Dai also cannot consider a demand that would place Chang or Teng at risk because his daughter's primary employment depends on the good wishes of the Company's controlling stockholders.

  7. Hamilton Partners, L.P. v. Englard

    11 A.3d 1180 (Del. Ch. 2010)   Cited 98 times   3 Legal Analyses
    Finding that specific personal jurisdiction existed over defendant to consider claims for breach of fiduciary duty by defendant arising out of a settlement where the parties agreed to create a Delaware entity to hold the intellectual property assets that formed part of the settlement

    This states a claim. See Grace Bros., Ltd. v. Uniholding Corp., 2000 WL 982401, at *13 (Del.Ch. July 12, 2000) (rejecting argument that "a director of a parent board . . . has no duty to stop himself from injuring the parent while wearing his subsidiary hat" on grounds that such a rule "so obviously invites abuse and . . . would gut the duty of loyalty owed by Delaware directors to their stockholders"). In Trenwick, a litigation trust sued on behalf of the creditors of Trenwick America, a wholly owned subsidiary that had taken on significant debt.

  8. Zaman v. Amedeo Holdings

    C.A. No. 3115-VCS (Del. Ch. May. 23, 2008)   Cited 17 times   1 Legal Analyses
    Explaining that an award of 80% of the plaintiffs' fees is a measured way to reflect the policy goal that "corporate officials do not achieve a pyrrhic victory in ยง 145 cases whereby what they win is largely offset by their costs of prosecution ... while giving the defendants credit for the fact that the [plaintiffs] did not attain complete success."

    As a director of those Holding Corporations, she could not take action at a subsidiary level that purposely injured those Corporations without breaching her fiduciary duties to them. See Grace Bros. v. UniHolding Corp., 2000 WL 982401, at *13 (Del.Ch. 2000) ("There is no safe harbor in our corporate law for fiduciaries who purposely permit a wholly-owned subsidiary to effect a transaction that is unfair to the parent company on whose board they serve."). The implications of this reasoning are not identical, however, as to the various chains of ownership in issue.

  9. Trenwick America Lit. v. Ernst Young

    906 A.2d 168 (Del. Ch. 2006)   Cited 320 times   14 Legal Analyses
    Holding that "if there was a breach of fiduciary duty by conduct [of the parent's directors], the proper defendant is the parent itself, as the parent corporation, not the directors of [the parent]."

    "It is by no means a novel concept of corporate law that a wholly-owned subsidiary functions to benefit its parent." Grace Bros. v. UniHolding Corp., 2000 WL 982401, at *12 (Del.Ch. July 12, 2000); see also Sternberg v. O'Neil, 550 A.2d 1105, 1124 (Del. 1988) (same). Again, the implications of the complaint's incantation of the word "insolvency" must be considered.

  10. Actrade Fin. Technol. v. Aharoni

    C.A. No. 20168 (Del. Ch. Oct. 17, 2003)   Cited 1 times

    See Armstrong v. Pomerance, 423 A.2d 174, 177 (Del. 1980) (finding personal jurisdiction over foreign directors on a claim for breach of fiduciary duty to a Delaware corporation when directors had no contact with Delaware other than being directors of the Delaware corporation. See Grace Bros., Ltd. v. Uniholding Corp., 2000 WL 982401, at * 12 (Del.Ch. July 12, 2000) (hereinafter Grace). In Grace, the defendants who were directors of both a Delaware parent and foreign subsidiary company allowed the subsidiary to assume control over the parent's primary asset and thus become the owner of the parent, to the detriment of the parent's stockholders but to the benefit of the subsidiary.