Paul v. China MediaExpress Holdings, Inc.
Court of Chancery of Delaware
2012 WL 28818 (2012)
Media reports alleged fraud by officers of China MediaExpress Holdings, Inc. (CME) (defendant), a Delaware corporation. The NASDAQ stock market stopped trading CME stock. CME’s independent auditor and three board members, including its chief financial officer (CFO), resigned, citing concerns about CME’s management and accounting practices. CME initiated an internal investigation. A CME investor brought an action in federal court against CME, the independent auditor, the CFO, and a director who resigned, alleging violations of state law and federal securities laws. While the federal action was pending, Marc Paul (plaintiff), a CME shareholder, sued CME in Delaware state court, requesting to inspect CME’s books and records under Del. Code tit. 8, § 220 to investigate fraud and mismanagement by CME. CME requested that the action be stayed, pending resolution of a motion filed in the federal court action to stay the state court action.
Rule of Law
Holding and Reasoning (Parsons, J.)
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