Trenwick Group, Ltd.(fka TWKGQ)

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Trenwick America Litigation Trust 11/5/08...

WASN'T LASALLE ALREADY CONSIDERED SOLVENT BY KPMG SINCE LAST YEAR OR SINCE 2002?

Trenwick America Litigation Trust v. Ernst & Young

"Second, in Trenwick America Litigation Trust v. Ernst & Young, the Delaware Court of Chancery addressed the ability of creditors to assert a direct tort claim for "deepening insolvency" against directors of a Delaware corporation that is insolvent. Deepening insolvency is a judge-made cause of action, first recognized by the Third Circuit Court of Appeals, that could be asserted against a corporation's directors, officers, lawyers, accountants and other professionals for damages resulting from improper acts that cause the corporation to become insolvent or more insolvent. In Trenwick, the Delaware Court of Chancery definitively held, and the Delaware Supreme Court subsequently affirmed, that Delaware law does not recognize deepening insolvency as an independent cause of action. See Trenwick Am. Litg. Trust v. Billet, 931 A.3d 438 (Del. 2007), aff'g Trenwick Am. Litig. Trust v. Ernst & Young L.L.P., 906 A.3d 168, 174-75, 195, 205 (Del. Ch. 2006).

As a result of these decisions, the Delaware Supreme Court has effectively eliminated creditors' ability to assert direct claims against directors of Delaware corporations that are insolvent or operating in the zone of insolvency.

...When a corporation is solvent, [directors'] fiduciary 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." Id., at 101 (emphasis in original).

As a result, the Delaware Supreme Court's highlighting of the existing legal protections available to creditors, strong focus on the fiduciary duties owed by directors to the corporation's shareholders, and emphasis on creditors' ability to enforce derivative claims only after a corporation's insolvency all strongly suggest that the Delaware Supreme Court views creditors as having no right to bring derivative claims for breach of fiduciary claims against directors of a corporation that is operating within the zone of insolvency."

http://www.mondaq.com/article.asp?articleid=69214