The Delaware Supreme Court declines to impose a fiduciary duty in the vicinity of insolvency

The Delaware Supreme Court has held that the creditors of a Delaware corporation in the zone of insolvency have no breach of fiduciary duty claims against the corporation’s directors. See North American Catholic Educational Programming Foundation v. Gheewalla, May 18, 2007.

As discussed in my article with Alces, Directors’ Duties in Failing Firms (one of many cited in the opinion), this conclusion follows directly from the business judgment rule, under which courts refuse  second-guess directors’ decisions, including their decisions to favor, or not favor, any particular corporate constituency.