Arkansas Teacher Retirement System v. Countrywide Financial Corp., 2013 Del. LEXIS 458

Certified question from Ninth Circuit on whether the Delaware fraud exception allows post‑merger derivative standing after a merger that divests ownership due to alleged fraud.
Countrywide merged with BoA in stock‑for‑stock deal; all Countrywide shareholders exchanged into BoA and derivative claims were extinguished.
District Court dismissed claims under continuous ownership under both federal and Delaware law; plaintiffs sought to rely on Delaware fraud exception.
Arkansas Teacher Retirement System v. Caiafa was decided after initial dismissal, prompting reconsideration arguments about the scope of the fraud exception.
Court reaffirms Lewis v. Anderson and the narrow fraud exception; rejects expansion through Arkansas Teacher dicta; answer to certified question is negative.
Result: Delaware law maintains continuous ownership rule and limits the fraud exception; opinion transmitted to Ninth Circuit.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether fraud exception expands post‑merger standing after a merger that deprives ownership.	Caiafa expansion; inseparable fraud allows post‑merger standing.	Arkansas Teacher does not expand; fraud exception remains narrow as in Lewis.	Negative; fraud exception not expanded.

Lewis v. Anderson, 477 A.2d 1040 (Del. 1984) (establishes continuous ownership rule and two exceptions, including fraud exception)
Ark. Teacher Ret. Sys. v. Caiafa, 996 A.2d 321 (Del. 2010) (dictum discussed inseparable fraud; not expansion of Lewis rule)
Braasch v. Goldschmidt, 199 A.2d 760 (Del.Ch. 1964) (survival of direct claims; guides distinction between direct vs. derivative)
Tooley v. Donaldson, Lufkin & Jenrette, Inc., 845 A.2d 1031 (Del. 2004) (direct vs derivative injury framework for determining claim type)
Lambrecht v. O’Neal, 3 A.3d 277 (Del. 2010) (reaffirms scope of fraud exception post‑Arkansas Teacher)