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In re InfoUSA, Inc. Shareholders Litigation

Delaware Court of Chancery
953 A.2d 963 (Del. Ch. 2007)


Facts

Company infoUSA, Inc. (infoUSA) was a Delaware corporation. Shareholders (plaintiffs) brought derivative lawsuits against infoUSA’s directors: V. Gupta, Haddix, Raval, Fairfield, A. Gupta, Kaplan, Kahn, Reznicek, Walker, Andersen, and Stryker (defendants). The complaints alleged that the directors engaged in massive, self-interested transactions, mostly transactions that benefited the company’s chief executive officer (CEO) and largest shareholder, V. Gupta. For example, infoUSA allegedly paid for V. Gupta’s use of private jets and a yacht, personal residence, and unrelated travel expenses. Further, Kaplan, Walker, Haddix, Kahn, and Raval allegedly approved the company’s 10-Ks [required Securities and Exchange Commission filings] with knowledge that they contained material misrepresentations. For example, while the 10-Ks stated that payments were for “usage of aircraft and related services,” the payments were actually compensation for personal residences. Further, Kaplan’s law firm received about $500,000 in legal fees per year from infoUSA. Raval received a $50,000 grant from the V. Gupta School of Business Administration, and both V. Gupta and Haddix were connected with Raval’s employer. Haddix and Walker allegedly received rent-free office space from infoUSA to operate their businesses. Allegations against the remaining directors were vague and insufficient. The defendants moved to dismiss.

Rule of Law

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Issue

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Holding and Reasoning (Chandler, J.)

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  • A "yes" or "no" answer to the question framed in the issue section;
  • A summary of the majority or plurality opinion, using the CREAC method; and
  • The procedural disposition (e.g. reversed and remanded, affirmed, etc.).

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