Court Of Chancery Clarifies Rules On Class Action For Fraud Claims

Posted on August 20, 2010 by Edward M. McNally

Dubroff v. Wren Holdings LLC, C.A. 3940-VCN (August 20, 2010)

This decision clarifies when a class action may be brought arising out of a claim based on the duty of disclosure.  Briefly, when there was no request for the stockholders to vote [such as when they just receive notice of a completed corporate action], then a plaintiff must prove "reliance, loss causation and damages."   As those elements of the claim may vary for each individual plaintiff, a class action is inappropriate.  Delaware does not recognize the "fraud on the market" theory in those instances.

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