Thе TORCH LIQUIDATING TRUST, by and through BRIDGE ASSOCIATES L.L.C. as trustee, Plaintiff-Appellant,
v.
Lyle STOCKSTILL; Lana J. Hingle Stockstill; Andrew L. Michel; R. Jere Shopf; Ken Wallace; Curtis Lemons; Robert E. Fulton; XL Specialty Insurance Company, Defendants-Appellees.
United States Court of Appeals, Fifth Circuit.
*380 Alan H. Goodman, (argued), William R. Forrester, Jr. (argued), Lemle & Kelleher, LLP, New Orleans, LA, for Torch Liquidating Trust.
Harry A. Rosenberg (argued), David L. Patron, Christopher Kent Ralston, Phelps Dunbar, New Orleans, LA, for Lyle Stockstill, Lana Stockstill, Michel, Shopf, Wallace, Lemons, Fulton.
Robert Joseph Burns, Jr., Perry, Atkinson, Balhoff, Mengis & Burns, Baton Rouge, LA, for XL Specialty Ins. Co.
Before KING, DENNIS and ELROD, Circuit Judges.
KING, Circuit Judge:
Torch Liquidating Trust, through its trustee Bridge Associates L.L.C., brings this suit alleging breach of fiduciary duties by the officers and directors of Torch Offshore, Inc.; Torch Offshore, L.L.C.; and Torch Express, L.L.C. The district court dismissed plaintiff's amended complaint under Rule 12(b)(6) of the Federal Rules of Civil Procedure on the ground that the amended complaint's allegations of injury to the creditors of Torch Offshore, Inc.; Torch Offshore, L.L.C.; and Torch Express, L.L.C. failed to state a claim on behalf of Torch Liquidating Trust and on the ground that Delaware's business judgment rule applied to preclude liability of the officers and directors. We affirm because the amended complaint fails to allege injury to Torch Offshore, Inc.; Torch Offshore, L.L.C.; and Torch Express, L.L.C. and thus fails to state a claim on behalf of the Torch Liquidating Trust.
I. FACTUAL AND PROCEDURAL BACKGROUND
A. Factual Background
Torch Offshore, Inc.; Torch Offshore, L.L.C.; and Torch Express, L.L.C. (collectively, "Torch" or "debtor") operated a fleet of specialized vessels used in offshore underwater construction and in laying submerged oil and gas pipelines. Although Torch historically operated on the Gulf of Mexico's outer continental shelf, a slump in offshore oil and gas facility development led Torch to undertake deep-water operations in 2002. For this new business model, Torch raised capital by completing an initial public offering and borrowing additional sums of money from creditors to upgrade its fleet with new or overhauled vesselsincluding the MIDNIGHT RIDER, MIDNIGHT EXPRESS, and MIDNIGHT WRANGLER.
Starting in 2003, Torch's business deteriorated. By the end of 2003, it may have been insolvent, although it continued to incur trade debt. By December 2004, its loans were in default, leading the company to stop paying its vendors. On January 7, 2005, it filed a voluntary petition for relief under c Chapter 11 of the Bankruptcy Code in the Eastern District of Louisiana. The bankruptcy court confirmed Torch's *381 proposed First Amended Joint Chapter 11 Plan of Reorganization (the "Plan") on April 28, 2006. Pursuant to the Plan, debtor executed an agreement creating the Torch Liquidating Trust (the "Trust"). The Trust was comprised of "all property of the Debtors' Estates which has not previously been transferred." The confirmation order and trust agreement appointed Bridge Associates L.L.C. ("Bridge Associates") as the Trust's administrator and trustee. The Plan, confirmation order, and trust agreement preserved and transferred, inter alia, certain claims against Torch's directors and officers ("D&O claims") to the Trust, authorized Bridge Associates to retain and prosecute those claims, and empowered it to distribute to creditors any recovery of claims proceeds.[1] The Plan defined D&O claims as "any claims arising prior to January 7, 2005 [the date Torch filed its chapter 11 petition] and recoveries against the Debtors' directors, officers, and other principals which are related to the Debtors' D&O insurance." The parties do not dispute that the breach of fiduciary duty claims at issue on appeal are D&O claims.
B. Procedural Background
On January 5, 2007, Bridge Associates filed a complaint on behalf of the Trust against Torch's former directors and officers (the "Directors").[2] The complaint alleged that the Directors breached fiduciary duties owed to Torch's creditors when Tоrch entered the zone of insolvency and after it became insolvent. Defendants moved to dismiss the complaint or for a more definite statement. They sought the latter in part because the complaint appeared to allege fraud, which under Rule 9(b) of the Federal Rules of Civil Procedure requires plaintiff to state with particularity the circumstances constituting fraud. After Bridge Associates clarified that it was not alleging fraud but instead *382 only breach of fiduciary duties,[3] the court denied defendants' motion.
In the intervening period, the Delaware Supreme Court issued its opinion in North American Catholic Educational Programming Foundation, Inc. v. Gheewalla,
In the aftermath of Gheewalla, plaintiff moved for leave to amend its complaint; Defendants opposed the motion on the grounds of futility and undue delay. The district court granted the motion to amend, and plaintiff then filed its amended complaint. In the amended complaint, plaintiff replaced nearly all of its prior references to "creditors" with new references to "creditors and shareholders" and sought damages on behalf of creditors and shareholders. (See, e.g., Am. Compl. ¶ 46 ("[T]he Torch creditors and shareholders have suffered damage in the amount of not less than $35,800,000, and in an amount to be proven at trial, and plaintiff is entitled to recover such damages from the defendants herein on behalf of the Torch creditors and shareholders.").) It also alleged that "[t]his matter is in the nature of a derivative suit in that plaintiff sues on behalf of the shareholders and creditors alike of [Torch]." (Id. at ¶ 2(d).)[5] As such, any recovery was to become property of the Trust for distribution according to the Plan. (See id. at ¶ 2(d) ("All net recoveries, if any, shall go to the Trust for *383 distribution in accordance with the Plan, all as ordered by the Court.").)[6]
Substantively, plaintiff alleged that the Directors: (1) "inflat[ed] the estimated fair market value of the [Torch] fleet in order to portray in published financial statements that [it was] solvent," (id. at ¶ 28; see also id. at ¶ 39); (2) "deferr[ed] paying unsecured creditors to the maximum extent possible while at the same time entering into an intensive campaign to mislead Torch's unsecured creditors as to its true financial condition and cajole Torch's unsecured creditors into continuing to supply goods and services to Torch on credit," (id. at ¶ 29); (3) delayed for as long as possible admitting "that Torch would be unable to fund its ongoing operations without new capital," (id. at ¶ 30); (4) postponed admitting that the delayed delivery of the MIDNIGHT EXPRESS "would probably destroy the company," (id. at ¶ 31); and (5) "orchestrated a public relations campaign to obscure and minimize the market impact of the financial data Torch was compelled to release in public reporting," (id. at 31). The Directors' public relations campaign allegedly included interviews and articles that misrepresented Torch's financial condition and the progress on MIDNIGHT EXPRESS in оrder to "mislead Torch creditors and shareholders and to permit Torch to continue to purchase essential supplies and services on credit." (Id. at ¶¶ 33-36.)
The Directors filed a motion to dismiss under Rule 12(b)(6), asserting that Bridge Associates lacked standing to bring the suit, that Delaware's business judgment rule applied to preclude the Directors' liability, and that exculpatory provisions in Torch's certificate of incorporation shielded the Directors from liability for certain alleged breaches of their fiduciary duties.
The district court granted the motion, holding that plaintiff lacked standing to assert many of its claims, which the district court interpreted as continuing to allege direct creditor claims barred by Gheewalla, and, to the extent any of the claims were properly derivative, that Delaware's business judgment rule defeated those claims. The district court concluded thаt plaintiff failed to state a claim that it had standing to bring because "the Amended Complaint ... does not allege that the creditors are bringing the derivative action on behalf of the corporation, but rather states that the Trust is `entitled to recover damages from the defendants herein on behalf of the Torch creditors and shareholders.'" Torch Liquidating Trust ex rel. Bridge Assocs., L.L.C. v. Stockstill, No. 07-133,
Plaintiff's arguments and its Amended Complaint blur[] the distinction made by the Gheewalla court between creditors and shareholders. The creditors, and therefore the Trust on its behalf, do have standing to assert any derivative claim on behalf of the corporation. However, neither the creditors nor the Trust have standing to assert the claims raised in the Amended Complaint that allege direct breach of fiduciary duty claims by the directors owed to the creditors. Such direct claims do not exist under the current state of Delaware law. Accordingly, the Court finds that the Amended Complaint fails to state a *384 cause of action by the creditors for breaches of fiduciary duties during Torch's zone of insolvency or when Torch was in fact insolvent and[,] therefore, the Trust cannot raise such claims against the directors on behalf of the creditors.
Id. at *6-7 (footnotes omitted).
The district court simultaneously concluded that both shareholders' and creditors' claims were "subject to dismissal under Delaware's business judgment rule." Id. at *7, 10-11. Plaintiff raised numerous points in opposition to the applicability of the business judgment rule, including that (1) court review would be inappropriate in a motion to dismiss, (2) defendants fail to demonstrate the requisite board action, (3) the rule does not protect the Directors from their intentional misrepresentations, (4) a different standard applies when a fiduciary duty is owed to the creditor during insolvency or in the zone of insolvency, and (5) the rule is inapplicable to situations evidencing bad faith or self-dealing. The district court rejected each of these arguments. Id. at *7-10. Thus, the court held that the creditors did not have a direct cause of action for breach of fiduciary duties against the Directors, alleged an improper derivative suit on behalf of the creditors, and did not state a claim that falls outside of the business judgment rule. Id. at *11. Consequentially, it granted the motion, dismissed the suit with prejudice, and entered a final judgment for the Directors.
Bridge Associates timely filed a notice of appeal. We have jurisdiction pursuant to 28 U.S.C. § 1291.
II. DISCUSSION
We review de novo the district court's order granting a motion to dismiss for failure to state a claim under Rule 12(b)(6). See Vanderbrook v. Unitrin Preferred Ins. Co. (In re Katrina Canal Breaches Litig.),
In this case, the parties contest Bridge Associates's standing to bring a derivative suit on behalf of creditors or shareholders. In so doing, they misconstrue the nature of Bridge Associates's standing to assert the claims. As the trustee, Bridge Associates may bring D&O claims that were part of debtor's estate on behalf of the Trust; it need not allege a derivative suit based on either shareholder or creditor derivative standing. Although plaintiff has standing, it fails to state a claim for which the court may grant relief. It argues that it is *385 attempting to assert a breach of fiduciary duties owed to Torch but fails to allege necessary elements of such a claimspecifically, but not limited to, injury to Torch. As the district court recognized, when plaintiff amended its complaint, it failed to allege a claim on behalf of Torch and continued to maintain what appear to be impermissible direct claims on behalf of creditors, now clothed in the unnecessary pleadings of a derivative action (ostensibly, but never expressly, on behalf of Torch). The district court therefore did not abuse its discretion in denying plaintiff an opportunity to amend.
A. Standing
The Trust, through its trustee Bridge Associates, attempts to allegein the form of a shareholder and creditor derivative suitthat the Directors breached their fiduciary duties. This ill-conceived pleading posture distracts from Bridge Associates's standing as trustee to bring a direct suit on the Trust's behalf for Torch's claims against the Directors.
Under Delaware law,[7] a claim alleging the directors' or officers' breach of fiduciary duties owed to a corporation may be brought by the corporation or through a shareholder derivative suit when the corporation is solvent or a creditor derivative suit when the corporation is insolvent. See Gheewalla,
Having reviewed Delaware's law on derivative suits, we now turn to consider the impact of a chapter 11 filing and plan confirmation on the standing of various parties to bring a suit on behalf of the debtor corporation and its bankruptcy estate. The filing of a chapter 11 petition creates an estate comprised of all the debtor's property, including "all legal or equitable interests of the debtor in property as of the commencement of the case." 11 U.S.C. § 541(a)(1). We interpret "all legal or equitable interests" broadly: The estate includes causes of action belonging to the debtor. See S.I. Acquisition, Inc. v. Eastway Delivery Serv., Inc. (In re S.I. Acquisition, Inc.),
*387 A chapter 11 plan of reorganization or liquidation then settles the estate's causes of action or retains those causes of action for enforcement by the debtor, the trustee, or a representative of the estate appointed for the purpose of enforcing the retained claims. See 11 U.S.C. § 1123(b)(3) ("[A] plan may ... provide for ... (A) the settlement or adjustment of any claim or interest belonging to the debtor or to the estate; or (B) the retention and enforcement by the debtor, by the trustee, or by a representative of the estate appointed for such purpose, of any such clаim or interest[.]"). To achieve the plan's goals, the retained assets of the estate may be transferred to a liquidating trust. See 11 U.S.C. § 1123(a)(5)(B) ("[A] plan shall ... provide adequate means for the plan's implementation, such as ... transfer of all or any part of the property of the estate to one or more entities, whether organized before or after the confirmation of such plan."). Section 1123 therefore allows a plan to transfer to a trustee of a liquidating trust the authority to enforce an estate's claims for breach of fiduciary duties owed to the corporation and to distribute the proceeds of successful suits. See McFarland v. Leyh (In re Tex. Gen. Petroleum Corp.),
In this case, Bridge Associates has standing to bring a suit on behalf of the Trust for the amended complaint's allеgations that the Directors breached the fiduciary duties that they owed to Torch. When Torch filed its chapter 11 petition, all claims owned by it, including claims against the Directors for breach of fiduciary duties, became part of the estate. In turn, the Plan, as confirmed by the bankruptcy court, transferred all of the debtor estate's remaining assets to the Trust. As part of that transfer, the Plan and the court's order expressly preserved and transferred all D&O claims. To administer the estate and the Trust, the Plan provided for the appointment of a Plan Administrator and Trustee, which was granted the "rights and powers of a debtor-in-possession under Section 1107 of the Bankruptcy Code,"[10] including the duty "to prosecute any D&O Claims and distribute the proceeds of such claims," and other rights and powers set forth in the Liquidating Trust Agreement. The court's confirmation order and the trust agreement named Bridge Associates аs the administrator and trustee of the Trust. Under the Plan, the court's confirmation order, and the trust agreement, Bridge Associates was to distribute proceeds of the Trust's assets according to the Plan, which allocated the proceeds of D&O claims to debtor's unsecured creditors by pro rata share. Pursuant to section 1123, therefore, Bridge Associates has standing to bring D&O claims on behalf of the Trust for injuries to Torch.[11]
*389 B. Merits
Even excusing the amended complaint's confusing construction of plaintiff's standing, however, dismissal pursuant to Rule 12(b)(6) was still appropriate because plaintiff fails to allege a cause of action on behalf of Torch for breach of the Directors' fiduciary duties. Under Delaware law, "[d]irectors owe their fiduciary obligations to the corporation and its shareholders." Gheewalla,
The amended complaint fails to meet this burden. It alleges no actual, quantifiable damages suffered by Torch. It alleges only that the creditors and shareholders were misled and harmed. (See Am. Compl. ¶ 27 (alleging that the Directors' breach "damaged the creditors and shareholders"); id. at ¶ 28 (alleging that the Directors' breach aimed to "cajole Torch's unsecured creditors into continuing to supply goods and services to Torch on credit and the shareholders to hold their stock interests"); id. at ¶ 45 ("The damages suffered by the Torch creditors and shareholders as alleged herein are covered by the D&O Insurers ...."); id. at ¶ 46 ("[T]he Torch creditors and shareholders have suffered damage in the amount of not less than $35,800,000, and in an amount to be proven at trial, and plaintiff is entitled to recover such damages from the defendants herein on behalf of the Torch creditors and shareholders.").)[14] When asked during oral argument to identify any specific pleading permitting an inference of injury to Torch, plaintiff could identify none. We conclude that the amended complaint thus fails to state a claim for breach of the fiduciary duties that the Directors owed to Torch. Reaching this conclusion, we refrain from wading into the parties' contentions regarding the district court's other bases for dismissal.
C. Remand to Amend
Plaintiff asks us to remand to allow it to amend its amended complaint to allege injury to Torch. Typically, we review the district court's decision not to grant leave to amend for abuse of discretion. Ellis v. Liberty Life Assurance Co.,
*391 Rule 15 of the Federal Rules of Civil Procedure states that a court "should freely give [leave to amend] when justice so requires." "Although Rule 15 evinces a bias in favor of granting leave to amend, it is not automatic." Southmark Corp. v. Schulte Roth & Zabel (In re Southmark Corp.),
We conclude that justice does not require allowing plaintiff additional opportunity to amend. Plaintiff had ample opportunity to cure the noted defects when it amended its complaint in the aftermath of Gheewalla and in its arguments to the district court. See St. Germain v. Howard, No. 08-30364,
The way in which plaintiff amended its original complaint also lends support to our conclusion. Plaintiff substituted "creditors" with "creditors and shareholders," labeled its previously direct claim "derivative," and asserted the same substantive facts without determining whether those facts supported a claim on behalf of Torch. This pleading practice demonstrated a complete disregard for its burden to allege facts that state a claim under existing law. Nor is it an appropriate answer for plaintiff to suggest that Gheewalla changed the applicable law. Even before Gheewalla, the Delaware Supreme Court in Malone identified the necessary elements to state a claim for deliberate misinformation when the directors are not seeking shareholder action. That plaintiff was responding in one way to new Delaware case law does not forgive its burden to research and plead the necessary elements of the claim it attempts to bring in its amended complaint.
To cure the present deficiency, plaintiff informed the court during oral argument that it could "easily amend" paragraph 46 of the complaint "to delete the reference to creditors and shareholders to say Torch has suffered damages in the amount" of not less than $35,800,000 another "find and replace" exercise. In light of its prior substitution of "creditors and shareholders" for "creditors," we are not inclined to oblige a simple substitution now without better explanation regarding how the amendment would allow the twice-amended complaint to sustain plaintiff's burden of alleging a complete, properly pleaded, and plausible claim. Lacking a viable theory to support its claim of injury,[16] plaintiff asserts that discovery would *392 entail finding out "What would have happened?" had the Directors made their disclosures earlier. This sounds like a request to discover a claim. The role of discovery, however, is to find support for properly pleaded claims, not to find the claims themselves. Cf. Brown v. Texas A & M Univ.,
III. CONCLUSION
For the foregoing reasons, we AFFIRM the decision of the district court. Costs shall be borne by plaintiff.
NOTES
Notes
[1] The Plan granted Bridge Associates the right, power, and duty to, inter alia, "prosecute any D&O Claims and distribute the proceeds of such Claims." First Amended Joint Chapter 11 Plan of Reorganization for Torch Offshore, Inc., Torch Offshore, L.L.C. and Torch Express, L.L.C. at 41, In re Torch Offshore, Inc., Nos. 05-10137, 05-10138 & 05-10140 (Bankr.E.D.La. Feb. 9, 2006). It also stated that:
Debtors hereby preserve any and all Causes of Action they may have including ... D&O Claims. Upon the Effective Date, all ... D&O Claims shall, pursuant to (i) Bankruptcy Code Section 1123(b)(3)(B), (ii) this Plan and (iii) the Confirmation Order, be retained by the Plan Administrator and Trustee as the duly appointed representative of the Estates. Subject to the provisions of this Plan, the Plan Administrator and Trustee may prosecute, settle, or dismiss any and all Causes of Action ... as the Plan Administrator and Trustee sees fit without Bankruptcy Court approval.
Id. at 46. The bankruptcy court's confirmation order reiterated substantially the same content. See In re Torch Offshore, Inc., Nos. 05-10137, 05-10138 & 05-10140, slip op. at *13 (Bankr.E.D.La. Apr. 28, 2006) (order confirming the Plan). The trust agreement likewise authorized trustee action:
The Plan Administrator and Trustee shall be empowered to and ... may, [sic] take all appropriate action with respect to the Liquidating Trust Assets consistent with the purpose of the Liquidating Trust, including, without limitation, the filing, prosecution (including objections), estimation, settlement or other resolution of ... D&O Claims ... and oversee the management of any Liquidating Trust Assets. The Plan Administrator and Trustee is expressly authorized to settle and compromise ... the D&O Claims without further Bankruptcy Court approval....
Liquidating Trust Agreement at 6, In re Torch Offshore, Inc., Nos. 05-10137, 05-10138 & 05-10140 (Bankr.E.D.La. May 2006).
[2] The Directors include: Lyle Stockstill, Lana J. Hingle Stockstill, Andrew L. Michel, R. Jere Shopf, Ken Wallace, Curtis Lemons, and Robert E. Fulton. Other defendants were XL Specialty Insurance Company and Greenwich Insurance Company.
[3] Bridge Associates specifically argued that its complaint did not allege intent or actual motive to deceive.
[4] The court reasoned that:
It is well settled that directors owe fiduciary duties to the corporation. When a corporation is solvent, those duties may be enforced by its shareholders, who have standing to bring derivative actions on behalf of the corporation because they are the ultimate beneficiaries of the corporation's growth and increased value. When a corporation is insolvent, however, its creditors take the place of the shareholders as the residual beneficiaries of any increase in value.
Consequently, the creditors of an insolvent corporation have standing to maintain derivative claims against directors on behalf of the corporation for breaches of fiduciary duties.
Id. at 101-02 (quotation marks and footnotes omitted).
[5] In an attempt to comply with Rule 23.1 of the Federal Rules of Civil Procedure, plaintiff alleged that it "was neither a shareholder or nor [sic] a creditor of Torch at the time the transactions complained of occurred but represents the interests of the shareholders and creditors of [Torch]"; that "[w]ritten demand was made upon the Directors of Torch by counsel for the Official Committee of Unsecured Creditors of Torch"; and that "[p]laintiff has not made demand upon the Directors nor shareholders of Torch to undertake the prosecution of this action because (i) the Plan and the Confirmation Order have vested the right to bring the action in the plaintiff; (ii) there are no Directors of Torch; (iii) the shareholders can take no action to force the Directors to sue, there being no directors; and (iv) plaintiff is the only legal person who can bring this action." (See Am. Compl. ¶ 2(b), (c)); see also Fed.R.Civ.P. 23.1.
[6] The amended complaint also dropped Greenwich Insurance Company as a defendant.
[7] The parties apply Delaware's substantive law to this case. We agree that Delaware law controls. In a diversity action, a federal court must apply the choice of law rules of the state in which the district court where the complaint was filed sits. See Klaxon Co. v. Stentor Elec. Mfg. Co.,
[8] Notably, the fiduciaries never owe duties to the creditors:
Recognizing that directors of an insolvent corporation owe direct fiduciary duties to creditors[] would create uncertainty for directors who have a fiduciary duty to exercise their business judgment in the best interest of the insolvent corporation. To recognize a new right for creditors to bring direct fiduciary claims against those directors would create a conflict between those directors' duty to maximize the value of the insolvent corporation for the benefit of all those having an interest in it, and the newly recognized direct fiduciary duty to individual crеditors. Directors of insolvent corporations must retain the freedom to engage in vigorous, good faith negotiations with individual creditors for the benefit of the corporation. Accordingly, we hold that individual creditors of an insolvent corporation have no right to assert direct claims for breach of fiduciary duty against corporate directors.
Gheewalla,
[9] After the commencement of a chapter 11 case and before the confirmation of a chapter 11 plan, it is clear beyond peradventure that a debtor in possession or trustee "has the authority to bring an action for damages on behalf of a debtor corporation against corporate principals for ... breach of fiduciary duty where such an action could have been assеrted by the debtor corporation, or by its stockholders in a derivative action, prior to bankruptcy." La. World Exposition,
[10] As noted earlier, section 1107 grants a debtor in possession standing to prosecute the estate's causes of action, so this provision further evinces the Plan's design to allow Bridge Associates to prosecute this cause of action.
[11] The district court may have concluded, without discussion, that Bridge Associates, as trustee of the Trust, had standing to bring permissible derivative claims on behalf of creditors and shareholders. We wish to identify two problems with this conсlusion. First, the Plan transferred Torch's D&O claims to the Trust. The parties have not pointed us to any assignment of claims to the Trust by creditors or shareholders (assuming, without deciding, that they own any such claim and that such an assignment would be permissible); thus, Bridge Associates has standing to bring D&O claims on the Trust's behalf but does not have standing to bring such claims on the shareholders' or creditors' behalf. Despite Bridge Associates's allegations that it has standing to "sue on behalf of the shareholders and creditors alike," (Am. Compl.¶ 2(d)), the validity of that assertion is not clear in either law or fact.
Second, this case is not a derivative suit. The Trust, through Bridge Associates, is the plaintiffneither a shareholder nor a creditor is the plaintiff. Moreover, the Trust is willingly bringing the suit; thus, there is no need or authority for a derivative action. Cf. La. World Exposition,
The parties' dispute regarding Bridge Associates's standing to bring a derivative suit is simply not relevant to its standing to bring a suit on behalf of debtor's estate, and we will, therefore, ignore the amended complaint's excess allegations regarding derivative standing. We rely instead on those allegations and supporting documents that provide it with standing. (See Am. Compl. ¶ 2(c) ("[T]he Plan and the Confirmation Order have vested the right to bring the action in the plaintiff," and the "plaintiff is the only legal person who can bring this action.").)
[12] The corporation and its directors must also comport with the obligatiоns imposed by federal statutes and the regulations promulgated by the United States Securities and Exchange Commission. See 15 U.S.C. § 78j; 17 C.F.R. § 240.10b-5; see also, e.g., Santa Fe Indus., Inc. v. Green,
[13] The context of the claim as specified in Malone is a lack of shareholder action. Typically, such a claim would be brought by shareholders for some action that the shareholders took or forewent when relying on an alleged misstatement. See Malone,
[14] We also note that only two allegations of misinformation are made in the amended complaint. (See Am. Compl. ¶ 28) (falsely "inflating the estimated fair market value of [Torch's] fleet"); id. at ¶¶ 32-37 (conducting a "public relations campaign to obscure and minimize the market impact of the financial data Torch was compelled to release in public reporting"). Many of the allegations to which plaintiff directs us assert failures to disclose that are not actionable under Malone without a corresponding request for shareholder action. (See Am. Compl. ¶ 30 (alleging that the Directors delayed "for as long as possible" admitting that Torch would be unable to fund its ongoing operations without new capital); id. at ¶ 31 (alleging that the Directors postponed admitting that the delаyed delivery of the MIDNIGHT EXPRESS "would probably destroy the company"); see also Appellant's Br. 26 ("Through the Defendants' non-disclosures they ran up huge debts which destroyed Torch and breached their fiduciary duty to `maximize the corporation's long-term wealth creating capacity.'" (citation omitted)).) And, at least one allegation continues to assert a claim for breach of fiduciary duties (by Torch, not the Directors) owed to the creditors, a claim that is no longer viable after Gheewalla. (See Am. Compl. ¶ 29 ("Torch breached its duty of candor in its dealings with Torch's creditors.").)
[15] We recognize that plaintiff's briefing to the district court opposing defendants' motion to dismiss requested an opportunity to amend the amended complaint on the issues of self-dealing and bad faith and that the district court's opinion mentions and rejects these requests. See Torch Liquidating Trust,
[16] In plaintiff's most cogent statement during oral argumеnt, it asserted that Torch would have been better off had it gone into bankruptcy earlier, been relieved of the debt accompanying the MIDNIGHT EXPRESS, and restructured sooner. Delaware does not recognize a cause of action for "deepening insolvency." See Trenwick Am. Litig. Trust v. Ernst & Young, L.L.P.,