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Hershman, Gallo Win Dismissal in Delaware Chancery Court

Feb. 24, 2009 — Jordy Hershman, co-chair of Bingham’s Securities Litigation Group, and Andrew Gallo of the Financial Restructuring Group teamed up to obtain judgment in the Delaware Court of Chancery dismissing all claims against a client who was a former director of a Delaware corporation that is currently in bankruptcy. The plaintiffs in the action attempted to assert class action claims against the former director for alleged injury caused by actions taken by the client in her capacity as a director. Hershman and Gallo argued, in a motion to dismiss the complaint, that the claims asserted by the plaintiffs were derivative claims belonging to the corporation and, therefore, could not be asserted outside of the bankruptcy without the consent of the estate and bankruptcy court approval. Furthermore, to the extent that the claims were not derivative, the motion argued that the individual shareholders suffered no damage because the company’s bankruptcy case will not provide a return to equity. The court, in a decision by Vice Chancellor Noble, agreed on both fronts and dismissed the complaint in its entirety, with prejudice as to the named plaintiffs. Boston associate Josephine Deang Chin provided invaluable assistance.
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