Quadrant Structured Prods. Co., Ltd. v. Vertin

Quandrant Structured Products Company, Ltd. owned debt securities issued by Athilon Capital Corp. a Delaware corporation. Quadrant asserted derivative claims for breach of fiduciary duty against the members of Athilon’s board of directors, contending that Athilon was insolvent. Defendants moved for summary judgment, arguing (1) for a creditor to have standing to maintain a derivative action, the corporation on whose behalf the creditor sues must be insolvent at the time of suit and continuously thereafter; and (2) when defining solvency, a plaintiff must prove that the corporation has no reasonable prospect of returning to solvency. The Court of Chancery denied Defendants’ motion for summary judgment on the breach of fiduciary duty claims, holding (1) to bring a derivative action, a creditor (i) must plead and later prove that the corporation was insolvent at the time the suit was filed, and (ii) must plead and later prove insolvency under the traditional balance sheet or cash flow tests; and (2) there was evidence which supported a reasonable inference that Athilon was insolvent at the time Quadrant filed suit. View "Quadrant Structured Prods. Co., Ltd. v. Vertin" on Justia Law