Bridgeport holdings liquidating trust
Plaintiffs will certainly seize upon the Bridgeport decision to press their claims against the directors and officers of financially distressed companies.
In particular, plaintiffs will be sure to allege any facts they can to support the inference that officers and directors abdicated their responsibilities and failed to inform themselves of material facts before making decisions.
Bridgeport Holdings Inc.'s Liquidation Plan became effective on 10/14/2004 and the company ceased to exist.
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With respect to the business judgment rule, the Court said that to invoke its protections "’directors have a duty to inform themselves, prior to making a business decision, of all material information reasonably available to them.’" If directors fail to do so, then a court will scrutinize the challenged transaction under the "entire fairness" standard of review.
In Bridgeport, a bankruptcy liquidating trust filed a complaint against the officers and directors of the debtor, traded as "Micro Warehouse," alleging that they breached their duties to the company, its shareholders and its creditors in connection with a sale of the company’s assets.
The complaint alleged that Micro Warehouse began experiencing financial difficulty in 2000.
Finally, the Court granted the Motion as to waste claims, holding that the Complaint did not allege facts that support the conclusion that no reasonable person would find million adequate for the Assets of a failing entity.
June 30, 2008 On May 30, 2008, the United States Bankruptcy Court for the District of Delaware issued a memorandum opinion in which it refused to dismiss breach of fiduciary duty claims against corporate directors who approved the sale of a financially distressed company’s assets on the eve of bankruptcy. The Court’s opinion sheds light on directors’ duties, and what they can and should do to protect themselves from liability, in such situations.