Chancery Court Denies Motions for Summary Judgment in Case Brought by Minority Stockholders against Controlling Stockholders for Diversion of Equity as a Result of Breach of Duties
By Whitney Smith and Kevin Szu-Tu
In Fotta v. Morgan, C.A. No. 8230-VCG (Feb. 29, 2016), Vice Chancellor Glasscock denied cross motions for summary judgment and granted a motion to dismiss for failure to comply with Rule 23.1. After determining that factual issues remained as to causes of action brought by certain stockholders of First Orion Corp. for waste, breach of fiduciary duty, and statutory claims, the Court of Chancery was unable to determine whether a significant creditor to nominal defendant First Orion Corp. used its control over the board of directors to divert equity to itself in breach of duties owed to the common stockholders.