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change in the insured's identity." The appellants here have no economic incentive to prevent the assignment because the events creating liability have already occurred; indeed, a contrary result would result in a windfall for the insurance companies. For these reasons, the policies were properly assigned.
Facts: Bridge Associates L.L.C. ("Bridge") was the liquidating trustee for the post-confirmation trust of the Torch Offshore, Inc., Torch Offshore, L.L.C., and Torch Express, L.L.C. (collectively, "Torch"), the debtors in the chapter 11 cases. On January 7, 2005, Torch declared chapter 11 and on August 28, 2006 the bankruptcy court confirmed Torch's plan (the "Plan"). Under the Plan, the Torch Liquidating Trust (the "Trust") was created and Bridge was appointed the liquidating trustee. The Plan also preserved and transferred, among other things, certain claims against Torch's directors and officers (the "D&O Claims"), including breach of fiduciary duty, to the Trust. Bridge filed a complaint against the directors and officers (the "Directors") for breach of fiduciary duty owed to Torch's creditors when Torch entered the zone of insolvency and after it became insolvent. Thereafter, the Delaware Supreme Court issued its opinion in North American Catholic Educational Programming Foundation, Inc. v. Gheewalla, 930 A.2d 92, 94 (Del. 2007) in which the Delaware court held that "'creditors of a Delaware corporation that is either insolvent or in the zone of insolvency have no right, as a matter of law, to assert direct claims for breach of fiduciary duty against the corporation's directors.'" But, "'creditors of an insolvent corporation have standing to maintain derivative claims against directors on behalf of the corporation for breaches of fiduciary duties." Id. at 101. In light of the Gheewalla opinion, Bridge amended the complaint. The Directors filed a motion to dismiss (the "Motion") asserting that (a) Bridge lacked standing to file the suit, and (b) that Bridge failed to state a claim upon which relief could be granted under Delaware law. The district court granted the Motion, holding that Bridge lacked standing and that the Delaware business judgment rule defeated the claims asserted.
Issues: (1) Does Bridge lack standing to bring the D&O Claims? (2) Did Bridge properly assert the D&O Claims?
Rules: (1) Standing. In Delaware, "a claim alleging the directors' or officers' breach of fiduciary duties owed to a corporation may be brought by the corporation or through a shareholder derivative suit when the corporation is solvent or a creditor derivative suit when the corporation is insolvent... 'The nature of the [derivative] action is two-fold. First, it is the equivalent of a suit by the shareholders to compel the corporation to sue. Second, it is a suit by the corporation, asserted by the shareholders on its behalf, against those liable to it.'" Shareholders have standing to file a derivative suit because they are the beneficiaries of the company's growth and increased value; conversely, when a company is insolvent, the creditors are the party with standing because they become the beneficiaries of any increase in the value of the company. But, regardless of whom files the derivative claim, "'a derivative suit is being brought on behalf of the corporation, [so] the recovery, if any, must go to the corporation.'" When a company declares chapter 11, the estate is comprised of all of the debtor's legal and equitable interests, including a claim for a breach of fiduciary duty, regardless of whether it is filed by the creditors or the shareholders. Thus, the cause of action belongs to the estate. (2) Breach of Fiduciary Duty. In Delaware, when directors do not seek shareholder approval of an action, but deliberately misinform the shareholders, either directly or in a
