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In re InfoUSA, Inc. Shareholders Litigation
Delaware Court of Chancery
953 A.2d 963 (Del. Ch. 2007)
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
Holding and Reasoning (Chandler, J.)
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