On April 11, 2022, Justice Borrok of the New York County Commercial Division issued a decision in Alesco Preferred Funding VIII, Ltd. v. ACP RE, Ltd., 2022 NY Slip Op. 50258(U), holding that a creditor could not assert a breach of fiduciary duty claim under Delaware law, explaining:
The defendants argue that the causes of action for breach of fiduciary duty (sixth cause of action) and aiding and abetting breach of fiduciary duty (seventh cause of action) must be dismissed because the Plaintiffs lack standing to bring these claims, whether directly or derivatively. The defendants correctly argue that the Plaintiffs lack standing to bring breach of fiduciary duty claims directly. Under Delaware law, creditor-plaintiffs lack standing to assert breach of fiduciary duty claims even where the company is insolvent. This is also the case under Bermuda law as the defendants’ expert Rod S. Attride-Sterling, affirmed.
Under Delaware law, creditors may bring derivative claims where a company is insolvent because the creditors take the place of the shareholders. This may well be the case under Bermuda law as well as Mr. Attride-Sterling attests that there are no cases prohibiting or authorizing creditor derivative actions. Given the absence of Bermuda law to the contrary, under Delaware law, the Plaintiffs have standing to bring its breach of fiduciary duty claims derivatively.
Although not clear whether alleging demand futility in the context of a creditor derivative action is required, to allege demand futility under Delaware law, a derivative plaintiff must make a threshold showing, alleging particularized facts, to create a reasonable doubt that (i) that the directors are disinterested and independent, or (ii) the challenged transaction was otherwise the product of a valid exercise of business judgment. The Plaintiffs have more than met their burden here at this stage of the litigation.
(Internal citations omitted).