Mapping Delaware's Elusive Divide: Clarification and Further Movement Toward a Merits-Based Analysis for Distinguishing Derivative and Direct Claims in Agostino V. Hicks and Tooley V. Donaldson, Lufkin & Jenrette, Inc.

Abstract

Until recently, distinguishing derivative from direct shareholder claims in Delaware was complicated by confusing case precedent, especially with respect to the courts' inconsistent application of the special injury test and the highly subjective approach to differentiating shareholder injury from enterprise injury. While open issues remain, recent Delaware cases - including a landmark decision by the Delaware Supreme Court in April last year - have greatly clarified the analysis by eliminating the special injury test from the core inquiry. By design or by happenstance, this has brought the derivative versus direct analysis closer to a purely merits-based inquiry.

Keywords: merits-based analysis, derivative claims, direct claims, Delaware, Journal, Corporate, Law