Macauley Law

In re Dan River Holdings LLC

Mr. Macauley defended six current and former directors of Dan River, Inc., a Georgia corporation ("Dan River"), in a suit by prosecuted by its chapter 7 trustee alleging breach of fiduciary duty in the U.S. Bankruptcy Court for the District of Delaware. The amended complaint alleged that the directors had authorized transactions with Dan River's affiliate, and that most of the directors also were directors of the affiliate. By alleging that the directors were on both sides of the transactions, the trustee sought to shift the burden of proof to the directors to demonstrate that the transactions were fair.

After partial written discovery, but before the directors answered the complaint, they moved for summary judgment on the basis that the evidence - specifically, the corporate minutes - did not demonstrate that some or all of the directors had authorized or even considered the affiliate transactions. The trustee defended the motion initially on the bases that the motion was premature and that directors had not satisfied their initial burden to establish summary judgment. In supplemental briefing, the trustee pointed to minutes of a board of directors meeting showing that the directors considered an amendment to Dan River's revolving credit facility that would allow related-party transactions.

After oral argument and the completion of supplemental briefing, Judge Brendan Shannon issued a memorandum order granting the directors' motion for summary judgment. The Court was not persuaded by the minutes offered by the trustee because they did not specifically mention any of the transactions and because the timing of the transactions differed significantly from the date of the minutes.

Accordingly, the Court granted summary judgment to the directors because they had carried their burden to show that no genuine issue of material fact existed with respect to the director authorization of the transactions, and the trustee had failed to point to any material evidence to the contrary.

Judge Shannon's memorandum order is unpublished. Click here for a copy of it.