Richards Layton & Finger

In What State Is the Harm Felt When a Derivative Suit Is Pursued By Creditors?

December 2013

Can a trustee of a litigation trust created under a plan sue in a U.S. bankruptcy court the directors and officers of a non-debtor Canadian parent, when many of the defendant D&Os had rarely set foot in the forum state? According to a recent Tenth Circuit opinion, the answer is yes. Newsome v. Gallacher, 722 F.3d 1257, (10th Cir. 2013). This might surprise directors and officers of Canadian parent companies. The holding might be explained, in part, by a misreading of the Delaware Supreme Court’s holding in North Am. Catholic Educ. Programming Found. v. Gheewalla, 930 A.2d 92 (Del. 2007).