CML V, LLC v. Bax
Delaware Court of Chancery
6 A.3d 238 (2010)
- Written by Rich Walter, JD
Facts
JetDirect Aviation Holdings, LLC (JetDirect) (defendant) operated pursuant to the Delaware Limited Liability Company Act (LLC Act). With the approval of John Bax and JetDirect’s other directors (defendants), JetDirect financed a rapid expansion by borrowing large sums from CML V, LLC (CML) (plaintiff). The directors were aware of serious breakdowns in JetDirect’s accounting and billing processes. Had the directors looked into the implications of those breakdowns, the directors might have realized that JetDirect lacked the working capital to repay CML. JetDirect subsequently defaulted on the loans and became insolvent. CML sued. CML’s complaint included derivative counts against the directors and a direct count against JetDirect. The directors moved for dismissal of the derivative claims on the grounds that the LLC Act restricted derivative standing to a company’s directors or assignees.
Rule of Law
Issue
Holding and Reasoning (Laster, J.)
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