Lewis v. Ward
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C0UR.T O F C H A N C E R Y OF- THE STATE OF DELAWARE August 282000 Norman M. Monhait, Esquire IRosenthal, Monhait, Gross & Godd ess Mel Ion Bank (Center, Suite 140 1 P.O. Box 1070 Wilmington, DE 19899 David C. McBride, Esquire James P. Hughes, Jr., Esquire Young, Conaway, Stargatt & Taylor Suite 1100, Rodney Square North P. 0. Box 391 Wilmington, DE 19899 .Kenne th J. Nachbar, Esquire Morris, Nichols, Arsht & Tunnel1 1201 N. Market Street P.O. Box 1347 .Wilmington, DE 19899-1347 Joel E. Friedlander, Esquire Bouchard, Margules & Friedlander 222 Delaware Avenue Suite 1102 Wilmington, DE 1980 1 Thomas P. Preston, Esquire Ree:d, Smith, :Shaw & McClay, LLP 120 1 Market Street, Suite 1500 Wilmington, DE 19899 RE: Harry Lewis v. Milton H. Ward, et al. Civil Action No. 15255 Date Submitted: April 25, 2000 Gentlemen: Pending are motions to dismiss the derivative complain-t and to stay discovery. This is the Court s decision on those motions. My apologies to counsel for the delay in issuing this Letter Opinion. Norman M. Morthait, Esquire David C. McBride, Esquire Kenneth J. Nachbar, Esquire Joel E. Friedlander, Esquire Thomas P. Preston, Esquire August 28,200O Page 2 The basis for the motion to dismiss is that Amax Gold, Inc., the company that is .the beneficial plaintiff in this action, was acquired in a merger in which Kinross Gold Corporation, through a subsidiary, became the sole shareholder of Amax Gold, Inc., and the shareholders of Amax Gold, Inc. became shareholders of the acquiring corporation. Under Delaware law the effect of such a merger is normally to deprive a shareholder of the merged corporation of standing to maintain the derivative action. Lewis v. Anderson, Del. Supr., 477 A.2d 1040 (1984). The defendants contend that the Kinross Merger had that effect here and as a result, dismissal of this action is required. rJnless this case falls within one of two exceptions articulated in Lewis v. T h e p supra,i the tdefendants areocorrect. n d Anderson, l a n i f f s c n t e t h a t t h e y h a v e pled facts that bring this case within the exception where the merger itself is the subject of a claim of fraud, being perpetuated merely to deprive the plaintiff of derivative standing. Id., 477 A.2d at 1046, n. 10. On that basis, the plaintiffs contend, the motion to dismiss must be denied, as also should be the defendants pending motion to stay the plaintiffs discovery. Norman M. Monhait, Esquire David C. McBride, Esquire Kenneth J, Wachbar, Esquire Joel E. Friedland.er, Esquire Thomas P. Preston, Esquire Augl~st 28, 2000 Page 3 The difticulty with the plaintiffs position is that the complaint does not p1ea.d facts .fi-om which it could be reasonably inferred that the defendants perpetrated the merger merely to deprive the plaintiff of derivative standing. I3ecause the plaintiffs brief suggests that the plaintiffs may be able to plead such a claim, however, the defendants motion to dismiss will be granted with leave to amend. Because the case will be dismissed subject to the filing of an amended pleading, there is at present no procedural basis for the plaintiffs to go forward with discovery. Accordingly, the defendants motion to stay discovery is granted pending the tiling of an amended complaint. IT IS SO ORDERED. Very truly yours, cc: Register in Chancery
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