ATR-Kim Eng Financial Corp. v. Araneta
Delaware Court of Chancery
2006 WL 3783520 (Del. Ch. 2006)
ATR-Kim Eng Financial Corp. and ATR-Kim Eng Capital Partners, Inc. (ATR) (plaintiffs) held 10% of PMHI Holdings Corp. (PMHI); Carlos Araneta (defendant) controlled 90% and chaired the board. ATR alleged Araneta transferred PMHI's main asset, worth over $35 million, to his own family, gutting ATR's minority stake, and that fellow directors Hugo Bonilla and Liza Berenguer (defendants) -- who worked for Araneta, held no board meetings, and completely deferred to him -- were also liable for failing to monitor him even though they never participated in, approved, or profited from the transfer.
Whether directors breach their fiduciary duties by failing to monitor self-dealing by another director, even though they did not participate in, approve of, or directly profit from the transactions.