McPadden v. Sidhu
Delaware Court of Chancery
964 A.2d 1262 (Del. Ch. 2008)
The board of directors (defendants) of i2 Technologies, Inc. (i2) approved the sale of i2's subsidiary, Trade Services Corporation (TSC), to i2's management, led by Anthony Dubreville (defendant) for $3 million. Two years later, Dubreville sold TSC to another company for over $25 million. Prior to the initial sale, i2’s board had hired an expert to assist its decision-making process. Despite knowing that Dubreville was interested in buying TSC, the board allowed Dubreville to run the sale process. The board provided little oversight and was aware that Dubreville made little efforts to solicit offers for TSC. Dubreville failed to contact TSC's competitors, including one that had previously offered $25 million to by TSC. The board knew that the two valuations of TSC were based on projections made by the management led by Dubreville, who had an incentive to undervalue TSC. The first valuation was $6 to $10.8 million, and the second was $3 to $7 million. Even so, the accepted price of $3 million was at the lowest end of either valuation range. McPadden (plaintiff) was i2's shareholder. McPadden sued i2's directors for breach of fiduciary duties, alleging that the directors approved the sale in bad faith, because they knew the price was far below TSC's fair-market value. McPadden sued Dubreville for breach of fiduciary duties and unjust enrichment. The defendants argued that McPadden failed to make a demand, but McPadden proved that the demand was futile. Further, i2 had an exculpatory provision in its certificate of incorporation, which limited the personal liability of directors for certain conduct. The defendants moved to dismiss for failure to state a claim.
Rule of Law
Holding and Reasoning (Chandler, J.)
What to do next…
Unlock this case brief with a free (no-commitment) trial membership of Quimbee.
You’ll be in good company: Quimbee is one of the most widely used and trusted sites for law students, serving more than 97,000 law students since 2011. Some law schools—such as Yale, Vanderbilt, Berkeley, and the University of Illinois—even subscribe directly to Quimbee for all their law students. Read our student testimonials.
Learn more about Quimbee’s unique (and proven) approach to achieving great grades at law school.
Quimbee is a company hell-bent on one thing: helping you get an “A” in every course you take in law school, so you can graduate at the top of your class and get a high-paying law job. We’re not just a study aid for law students; we’re the study aid for law students. Read more about Quimbee.
Here's why 173,000 law students have relied on our case briefs:
- Written by law professors and practitioners, not other law students. 14,000 briefs, keyed to 188 casebooks. Top-notch customer support.
- The right amount of information, includes the facts, issues, rule of law, holding and reasoning, and any concurrences and dissents.
- Access in your classes, works on your mobile and tablet. Massive library of related video lessons and high quality multiple-choice questions.
- Easy to use, uniform format for every case brief. Written in plain English, not in legalese. Our briefs summarize and simplify; they don’t just repeat the court’s language.