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Court Of Chancery Finds Pre-Merger Suit Unripe

Posted In Fiduciary Duty

In re Straight Path Communications Inc. Shareholders Litigation, C.A. No. 2017-0486-SG (Nov. 20, 2017)

This is an interesting decision with potential implications for future shareholder litigation. Briefly, the complaint alleged that, in connection with a proposed merger, the controlling shareholder secured a side deal at the expense of the corporation and its other shareholders. However, the merger had yet to close and the plaintiff sought only money damages while favoring the merger’s consummation. Further, the plaintiff was trying to advance a direct claim for money damages based on the side deal, as well as derivative allegations based on harm to the company. Under these circumstances, the Court held the action was premature and stayed it until the merger either did or did not take place, when the path forward would be more certain.