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October 1, 2021

01 October 2021

“Upon Further Review…”: Delaware Supreme Court Admits Mistake and Clears Up Question of Direct vs. Derivative Standing

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Every once in a while, a court admits it made a mistake.  And, in even rarer circumstances, that admission comes from a court as prominent as the Supreme Court of Delaware.  But that’s exactly what happened last week in Brookfield Asset Management, Inc. v. Rosson, in which Delaware’s highest court overruled its own 2006 holding in Gentile v. Rosette that certain claims of corporate dilution are “dual-natured” and may be pursued both as derivative claims and as direct claims by stockholders.  The Court’s decision to revisit a much-criticized decision is likely to restore some predictability and analytic consistency to the resolution of an important and threshold question frequently presented in stockholder litigation: whether a claim is properly characterized as direct (on behalf of one or a class of a company’s stockholders) or derivative (on behalf of the company itself). (more…)