Delaware Chancery Court Dismisses Claims Involving a Related Party Transaction with a Controlling Stockholder under Court of Chancery Rules 23.1 and 12(b)(6)
By Kristy Harlan and Stephanie S. Liu
In Teamsters Union 25 Health Services & Insurance Plan v. Baiera, et al, a stockholder of Orbitz Worldwide, Inc. challenged the fairness of the terms of a five-year services agreement that Orbitz entered into with a group of entities affiliated with Travelport Limited, a controlling shareholder of Orbitz when the agreement was negotiated and signed. The plaintiff asserted four derivative claims challenging the services agreement and a separate putative class claim for breach of fiduciary duty against Orbitz’s directors for allegedly violating the rules of the New York Stock Exchange (NYSE). Defendants moved to dismiss plaintiff’s claims under Court of Chancery Rule 23.1 for failure to make a demand or to adequately plead demand is excused and under Court of Chancery Rule 12(b)(6) for failure to state a claim upon which relief may be granted. The Delaware Court of Chancery concluded that demand was not excused as to any of plaintiff’s derivative claims and that it was not reasonably conceivable that the plaintiff could establish that Orbitz’s directors caused Orbitz to violate the NYSE Rules. Thus, the Court granted Defendants’ motion to dismiss the derivative claims under Rule 23.1 and the NYSE-related claim under Rule 12(b)(6).
Plaintiff Teamsters Union 25 Health Services & Insurance Plan (“Plaintiff”) has been a stockholder of Orbitz Worldwide, Inc. (“Orbitz”), an online travel company, at all relevant times with respect to its claims. Nominal Defendant. The Travelport Defendants (“Travelport”), which were majority owned by Defendant Blackstone Group LP (“Blackstone”), are group of entities affiliated with Travelport Limited, which provides transaction processing services to travel companies. The other defendants included Orbitz’s board of directors when the company entered into the New Agreement (the “Agreement Board”), Orbtiz’s board of directors when Plaintiff initiated this action (the “Demand Board”), and Orbitz’s current board of directors (“Current Board”).