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Summaries and analysis of recent Delaware court decisions concerning business-related litigation.
Morris James Blogs
Supreme Court Explains Merger Effect On Derivative Claims
When does a derivative suit survive a merger? This decision says "not very often." There seems to be two rules at play here. First, when the merger's sole purpose is to eliminate the standing of the derivative plaintiff, then the derivative suit may continue. Second, the merger may be attacked when it is an "inseparable" part of a fraud alleged as part of a direct pre-merger suit. Note the word "direct." A direct claim is not a derivative claim, but instead alleges wrongs for which the plaintiff may recover for herself. Hence, even if the merger is cast as part of some fraud inseparable from pre-merger acts, a derivative suit will not survive the merger just for that reason.