Malone v. Brincat
Supreme Court of Delaware
722 A.2d 5 (1998)
Mercury Finance Company is a publicly held Delaware corporation. Doran Malone, Joseph Danielle, and Adrienne Danielle (plaintiffs), Mercury stockholders, brought an individual and class action suit against the directors of Mercury and KPMG Peat Marwick LLP (KPMG) (defendants). The complaint alleges that Mercury’s directors breached their fiduciary duty of disclosure by intentionally overstating the company’s financial condition in its SEC filings and its disclosures to shareholders, and that as a result of the false disclosures Mercury lost all of its value, approximately $2 billion. The complaint also alleges that KPMG aided and abetted in the Mercury directors’ breach of their fiduciary duty of disclosure. The Mercury directors moved for dismissal, arguing that they did not owe a fiduciary duty of disclosure. KPMG also filed a motion to dismiss the claim against it. The Court of Chancery granted the motions to dismiss, with prejudice, finding that directors have no duty of disclosure under Delaware law where there has been no request for shareholder action. Malone and the Danielles appealed.
Rule of Law
Holding and Reasoning (Holland, J.)