Delaware Business Litigation Report

Court Of Chancery Resolves Demand Requirement For Statutory Trust

Hartsel v. The Vanguard Group Inc.,  C.A. 5394-VCP ( June 15, 2011)

Recently Delaware enacted a statute to authorize business trusts, such as used in the mutual fund industry, the Delaware Statutory Trust Act.  This decision establishes that the normal rules for derivative litigation apply in actions brought by trust interestholders.  For example, whether the action is direct or derivative and when demand is excused will be decided applying established Delaware law.

The decision also squarely establishes that the alleged mismanagement of investments by a mutual fund manager is a derivative claim.

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