Delaware Business Litigation Report

Court Of Chancery Explains What Is A Control Group

Dubroff v. Wren Holdings LLC, C.A. 3940-VCN (October 28, 2011)

What is a derivative claim is sometimes hard to decide but may be central to a plaintiff's right to bring suit.  Under the Supreme Court's Gentile decision, a claim that the controlling stockholder has improperly diluted the minority shareholders' stock may be filed as a direct claim on behalf of those stockholders and does not have to pass the tough rules governing the filing of derivative litigation.  Who then constiutes a "controlling stockholder?"  This decision holds that a group may be in "control" for the purposes of the Gentile rule and explains how to decide if that control group exists.

The decision also further explains what sort of dilution qualifies to invoke Gentile, when disclosures after action by stockholder consent must be complete and that a pending class action tolls the statue of limitations until the class certification process is complete.

 

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