Basically....this is what it is...
Pagliara's case is based on one code section of the Delaware Corporate code. He claims that 220 allows him access to inspect the books as a shareholder of the company. His claim makes reference that HERA doesnt apply to his case because he is suing under Delaware state law.
FHFA, very expectedly in my opinion, is claiming that because Pagliara is trying to exercise a right that expressly reserved for shareholders, and because HERA took away shareholder rights, Pagliara has no standing to sue. Furthermore, because Pagliara wants to use his inspection rights in an attempt to uncover potential fiduciary breaches by the board of directors, FHFA is claiming that to sue the board of directors is a right of the corporation thru a derivative suit, not that of an individual shareholder. And because HERA prevents derivative suits, FHFA is claiming that Pagliara can not sue, as that is a right that HERA reserves for FHFA as conservator.
The biggest hole in FHFAs argument is that Pagliara hasnt actually sued the Board of Directors, so its entire argument that HERA prevents the lawsuit is erroneous in my eyes. However, ...it cant be denied that Pagliara is suing as a shareholder, attempting to exercise express shareholder rights. It also cant be argued that similar cases have already been thrown out on a similar basis that shareholder rights are removed during conservatorship.
In my opinion, the ruling of this order will depend on whether the judge is in agreement of the FHFAs interpretation of HERA.
All in all, though, Pagliaras case is neither the strongest we have on the table, nor the most important.
The appeals case is the end...for one side or the other.
