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Keywords

contractplaintiffstatutecorporation
contractplaintiffstatutecorporation

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Lewis v. Anderson, 477 A.2d 1040

Facts

Harry Lewis, a shareholder of Old Conoco, filed a derivative action against its former management, alleging that they improperly approved employment contracts in anticipation of a takeover. Following a merger with Du Pont, Lewis ceased to be a shareholder of Old Conoco and became a shareholder of Du Pont. The court found that the derivative claim against the former management passed to New Conoco, the surviving corporation, and thus Lewis lost standing to pursue the action.

Harry Lewis, a shareholder of Old Conoco, filed a derivative action against its former management, alleging that they improperly approved employment contracts in anticipation of a takeover.

Issue

Did the plaintiff lose standing to continue the derivative suit after ceasing to be a shareholder of Old Conoco due to the merger with Du Pont?

Did the plaintiff lose standing to continue the derivative suit after ceasing to be a shareholder of Old Conoco due to the merger with Du Pont?

Rule

A plaintiff who ceases to be a shareholder, whether by reason of a merger or for any other reason, loses standing to continue a derivative suit, and the derivative claim becomes the property of the surviving corporation.

A plaintiff who ceases to be a shareholder, whether by reason of a merger or for any other reason, loses standing to continue a derivative suit, and the derivative claim becomes the property of the surviving corporation.

Analysis

The court applied the relevant Delaware statutes, concluding that the derivative claim was an asset of Old Conoco that passed to New Conoco upon merger. Since Lewis was no longer a shareholder of Old Conoco, he lacked the standing to pursue the derivative action. The court emphasized that the right to a pending cause of action is an asset of a merged corporation, which transfers to the surviving entity.

The court applied the relevant Delaware statutes, concluding that the derivative claim was an asset of Old Conoco that passed to New Conoco upon merger.

Conclusion

The Supreme Court affirmed the Chancery Court's dismissal of the derivative action, ruling that Lewis lost standing to pursue the claim after the merger.

The Supreme Court affirmed the Chancery Court's dismissal of the derivative action, ruling that Lewis lost standing to pursue the claim after the merger.

Who won?

New Conoco prevailed because the court determined that the derivative claim belonged to the surviving corporation following the merger, and Lewis, as a former shareholder, had no standing to continue the suit.

New Conoco prevailed because the court determined that the derivative claim belonged to the surviving corporation following the merger, and Lewis, as a former shareholder, had no standing to continue the suit.

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