Sagarra Inversiones, S.L. v. Cementos Portland Valderrivas, S.A.
2011 Del. LEXIS 680
| Del. | 2011Background
- Sagarra Inversiones, S.L. holds 26% of Uniland S.A., a Spanish company; CPV controls Uniland and Giant Cement Holdings.
- Uniland acquired Giant through its Delaware subsidiary UAC, with CPV opposing minority shareholder input on the deal.
- Sagarra sued in Delaware Court of Chancery, alleging self-dealing and fiduciary breach in the Giant transaction, suing derivatively on UAC’s behalf.
- Chancery dismissed the derivative claims for lack of standing, holding Spanish law governs derivative standing due to the internal affairs doctrine.
- Delaware law governs the direct claims only to the extent of internal affairs, but court applied Spanish standing rules; the action was dismissed.
- Sagarra appealed, contending Delaware demand futility and multi-tier standing should apply; the Delaware Supreme Court affirmed a Spanish-law standing framework.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| What law governs derivative standing? | Sagarra argues Delaware law governs due to the Delaware subsidiary’s rights. | CPV and Uniland argue the internal affairs doctrine requires Spanish law. | Spanish law governs derivative standing. |
| Can Sagarra sue derivatively on UAC through Uniland's board? | Sagarra asserts multi-tier derivative standing under Delaware law. | Defendants contend standing is controlled by Uniland’s internal affairs governed by Spain. | Standing is governed by Uniland’s law under the internal affairs doctrine. |
| Is the presuit demand requirement an internal affair to be governed by Spanish law? | Sagarra suggests Delaware demand-futility standards should apply to protect Delaware interests. | Demand requirements are internal affairs and governed by Spanish law. | Presuit demand requirements fall under the internal affairs doctrine and Spain governs. |
| Does public policy override the internal affairs doctrine here? | Delaware has a strong policy against abusive corporate structures and should apply Delaware law. | Comity and choice-of-law rules prevent overriding foreign (Spanish) derivative standing. | Public policy does not displace the internal affairs doctrine; comity controls. |
Key Cases Cited
- Aronson v. Lewis, 473 A.2d 805 (Del.1984) (presuit demand as an internal affair of corporate governance)
- Kamen v. Kemper Fin. Serv., Inc., 500 U.S. 90 (U.S.1987) (demand futility and control of litigation within corporate governance)
- Lambrecht v. O’Neal, 3 A.3d 277 (Del.2010) (wholly-owned subsidiary standing to sue on behalf of parent)
- McDermott Inc. v. Lewis, 531 A.2d 206 (Del.1987) (internal affairs doctrine governs choice of law for corporate disputes)
- Sternberg v. O’Neil, 550 A.2d 1105 (Del.1988) (application of internal affairs doctrine to Delaware subsidiaries)
- Lewis v. Anderson, 477 A.2d 1040 (Del.1984) (subsidiary’s claim ownership context post-merger)
- Hamilton Partners, L.P. v. Englard, 11 A.3d 1180 (Del.Ch.2010) (derivative standing and post-merger implications discussed)
- Zapata Corp. v. Maldonado, 430 A.2d 779 (Del.1981) (board's management discretion in derivative litigation)
- Buechner v. Farbenfabriken Bayer Aktiengesellschaft, 154 A.2d 684 (Del.1959) (indirect parent interest in subsidiary claims post-merger)
- Ramirez v. Murdick, 948 A.2d 395 (Del.2008) (Delaware law considerations in derivative contexts)