Delaware Business Litigation Report

Supreme Court Hints How To Avoid Losing Standing After A Merger

Arkansas Teacher Retirement System v. Caiafa, C.A. 530, 2009 (May 21, 2010)

This is the odd case whose dicta may be more important than we now appreciate.  It has long been Delaware law that a plainitff loses standing to pursue a derivative case when he is ceases to be a stockholder after a merger. The exception is when the merger is done solely to deprive the stockholders of standing to sue.

Here the Court seems to be saying that when a merger is the only way out for a corporation that has been devastated by wrongful conduct, the former stockholders may have a claim for damages even after they cease to be stockholders.  If so, that is new law and this bears watching.

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