Cypress Holdings, III, L.P. v. Sport-BLX, Inc.
- Lorna Schofield
- 1:22-cv-01243
- U.S. District Court · Southern District of New York
- 2
In Cypress Holdings v. Sport-BLX, Judge Schofield ordered briefing about derivative claims, indemnification, insurance, and whether certain claims were direct.
Cypress Holdings, III, L.P.; Sport-BLX, Inc.; the individual defendants; and Sport-BLX shareholders who may be similarly situated in enforcing Sport-BLX’s rights.
What happened
In Cypress Holdings, III, L.P. v. Sport-BLX, Inc., the defendants asked the court to dismiss derivative claims in the Second Amended Complaint, arguing that Cypress did not fairly and adequately represent similarly situated Sport-BLX shareholders.
The court did not decide that motion in this order. It ordered the defendants to provide information about indemnification and directors-and-officers insurance for the individual defendants, including who shared coverage and when it applied. It also ordered Cypress to explain whether that coverage affected its ability to bring derivative claims and why Counts Six, Nine, Ten, and Fifteen should be treated as direct rather than derivative claims under Delaware law. The defendants may reply.
Judge Lorna Schofield set deadlines of July 15, July 24, and July 30, 2024, for those letters. The order therefore requires additional briefing and information; it does not state that the motion to dismiss was granted or denied.
The detailed version
- Cypress Holdings, III, L.P. v. Sport-BLX, Inc. · No. 1:22-cv-01243
- Lorna Schofield
- July 1, 2024
Background
The defendants filed a motion to dismiss the derivative claims in the Second Amended Complaint. A derivative claim is a claim brought on behalf of a corporation to enforce rights belonging to the corporation. The defendants argued that Cypress Holdings, III, L.P. did not fairly and adequately represent the interests of Sport-BLX, Inc. shareholders who were similarly situated in enforcing Sport-BLX’s rights.
What the Court Ordered
The court ordered the defendants to file a letter by July 15, 2024, stating whether the individual defendants were indemnified against a finding of liability and damages. If so, the defendants must identify who provided the indemnification and the circumstances under which it applied. The defendants also must state whether the individual defendants were covered by directors-and-officers liability insurance, identify co-insureds who drew from the same fund, explain whether the individual defendants shared a limited amount of coverage, and describe the relevant coverage circumstances.
The court ordered Cypress to file a letter by July 24, 2024, addressing whether any indemnification or insurance coverage identified by the defendants affected Cypress’s adequacy of representation for bringing derivative claims. Cypress also must explain why purported direct causes of action in Counts Six, Nine, Ten, and Fifteen were not derivative claims under Delaware law. The order cited Tooley, Brookfield Asset Management, and Miller. The defendants may reply by July 30, 2024.
Disposition
This order does not grant or deny the motion to dismiss. It requires the parties to provide additional information and briefing concerning adequacy of representation and the classification of certain claims. Judge Lorna Schofield left the motion for later consideration.
Read the full 2-page opinion on CourtListener, the free public archive maintained by the Free Law Project.