Delaware Supreme Court Clarifies Law Regarding Standing Of Plaintiff-Shareholders To Bring A Post-Merger Double Derivative Action

In Lambrecht v. O’Neal, No. 135, 2010, 2010 WL 3397451 (Del. Aug. 27, 2010), the Supreme Court of Delaware answered a certified question of Delaware law from the United States District Court for the Southern District of New York regarding the standing of a plaintiff-shareholder of a parent corporation to bring a “double derivative” action following a merger. The Court held that plaintiffs who were pre-merger shareholders in an acquired company and who, by virtue of a stock-for-stock merger, are current shareholders of a post-merger parent company need not demonstrate for purposes of standing that, at the time of the alleged wrongdoing at the acquired company, (1) they owned stock in the acquiring company, and (2) the acquiring company owned stock in the acquired company. In so holding, the Court clarified the law allowing for the possibility of double derivative claims where standard derivative claims are extinguished by an intervening merger.

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