Delaware Business Litigation Report

Court Of Chancery Explains The Gentile Case

Carsanaro v. Bloodhound Technologies, Inc., C.A. 7301-VCL (March 15, 2013)

This is a major decision.  For some time lawyers have struggled to understand when a claim is derivative or direct. The distinction is important if for no other reason than derivative claims may be mooted by a merger that eliminates the plaintiff as a stockholder with standing to sue.  Under the Delaware Supreme Court's Gentile decision, some claims alleging a wrongful stockholder dilution may be direct, derivative or both.  Which ones qualify?  This decision answers that question with a thoughtful analysis that is useful in dealing with other factual patterns besides the controlling stockholder that was involved in Gentile.

This decision is also important for its holding that when a stockholder consents to any corporate action by a written consent form that refers to other documents that define the transaction consented to, the other documents must be given to the consenting stockholder for her consent to be effective.

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