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District Court Grants Motion to Strike Jury Demand in Breach of Fiduciary Duty Action

Posted In Fiduciary Duty
Cantor v. Perelman, C.A. No. 97-586-KAJ, 2006 WL 318666 (D. Del. Feb. 10, 2006). Plaintiffs alleged that defendants Perelman, Bevins and Drapkin, all of whom were directors of Marvel Entertainment Company ("Marvel") and were the only directors of each of Marvel's five holding companies, breached their fiduciary duties by causing Marvel and its holding companies to issue three tranches of notes, for which they received $553.3 million in proceeds and pledged all of their stock in Marvel as collateral. Plaintiffs alleged that none of the proceeds of the loan went to Marvel or were used for its benefit. Marvel was unable to repay the notes and subsequently filed for bankruptcy protection. Plaintiffs named Marvel's remaining directors as defendants and claimed that they aided and abetted Perelman, Bevins and Drapkin in breaching their fiduciary duties. Plaintiffs also alleged that the defendants artificially inflated Marvel's earnings by booking the fees resulting from various licensing agreements as income at the time the licensing agreements were executed, but never collecting the fees and writing them off. Plaintiffs sought a jury trial, which defendants opposed. The court concluded that plaintiffs' complaint did not state separate claims for compensatory damages and unjust enrichment, and applied the test set forth in Granfinanciera, S.A. v. Nordberg, 492 U.S. 31, 41 (1989) to the breach of fiduciary duty and aiding and abetting claims. The court determined that the breach of fiduciary duty and aiding and abetting claims were "historically equitable," and therefore weighed against plaintiffs' right to a jury trial under the first Granfinanceria factor. The court concluded that the second Granfinanceria factor led to a mixed result because plaintiffs' claim sought both equitable and legal relief. Considering the breach of fiduciary duty claims as equitable, and balancing them with the mixed legal and equitable rememdies sought, the court held that the factors weighed in favor of striking plaintiffs' demand for a jury trial. Share
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