By Abigail Pickering Bomba, Steven Epstein, Arthur Fleischer, Jr., Peter S. Golden, Brian T. Mangino, J.Christian Nahr, Philip Richter, Brad Eric Scheler, Robert C. Schwenkel, Gail Weinstein of Fried, Frank, Harris, Shriver & Jacobson LLP
In Quadrant Structured Prods. Co., Ltd. v. Vertin, No. 6990-VCL, 2015 WL 6157759 (Del. Ch. Oct. 20, 2015), the Delaware Court of Chancery emphasized that creditors’ rights will flow from the contractually agreed terms of the debt, and that creditors’ derivative claims for breach of fiduciary duty will rarely succeed.
Fried Frank discusses whether there are circumstances under which a creditor’s claim for breach of fiduciary duty might succeed. Based on Vertin and a prior opinion in the case, it can be argued that a creditor’s fiduciary duty claim regarding a company’s post-insolvency adoption of an equity value maximization plan can succeed only if the directors were so uncareful or disloyal in formulating the plan, or the plan was so patently flawed, that the plan would not pass muster under the business judgment rule. Moreover, although the transactions in Vertin did not support a claim for breach of fiduciary duty, the opinion leaves open whether affiliated transactions may give rise to a creditor’s claim for breach of fiduciary duty.
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