NAF Holdings, LLC v. Li & Fung (Trading) Limited
Delaware Supreme Court
118 A.3d 175 (2015)
NAF Holdings (plaintiff) contracted with Li & Fung (Trading) Limited (defendant) as a sourcing agent, a condition of NAF's financing for an acquisition carried out through two subsidiaries; when Li & Fung allegedly refused to perform, upending the financing and causing NAF a claimed $30 million loss, NAF's subsidiaries separately settled and released all claims against the acquisition target, agreeing not to bring or support any claim based on the failed deal, though neither NAF itself nor Li & Fung were parties to that settlement. NAF then sued Li & Fung directly for breach of contract, the trial court granted Li & Fung summary judgment on the theory NAF had to sue derivatively on behalf of its subsidiaries (a route barred by the subsidiaries' release), and on appeal the Second Circuit certified the underlying Delaware-law question to the Delaware Supreme Court.
Whether an action to enforce a contracting party's own rights is derivative under Delaware law, even if the contract benefitted a third-party corporation.