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Kahn v. Kolberg Kravis Roberts & Co. Case Brief
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Case Brief Summary & Legal Analysis
tl;dr: The Delaware Supreme Court reversed the dismissal of a derivative suit, holding that a corporation need not suffer actual harm for shareholders to seek disgorgement of profits from fiduciaries who traded on material nonpublic information (Brophy claim).
Legal Significance: This case clarifies that under Delaware law, a Brophy claim for insider trading by a fiduciary does not require proof of corporate harm for disgorgement, reaffirming the principle of preventing unjust enrichment.
Kahn v. Kolberg Kravis Roberts & Co. Law School Study Guide
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Case Facts & Court Holding
Key Facts & Case Background
Shareholders of Primedia, Inc. brought a derivative action alleging that Kohlberg Kravis Roberts & Co. (KKR), Primedia’s controlling shareholder, and Primedia directors breached fiduciary duties. KKR, through its affiliate ABRA III LLC, purchased over $75 million of Primedia’s preferred stock between July and November 2002. Plaintiffs alleged KKR made these purchases while possessing material nonpublic information, including an internal memo updating Primedia’s performance and knowledge of an impending sale of a major asset (American Baby Group). The Primedia board had consented to KKR purchasing up to $50 million in preferred stock when Primedia itself was not in the market. A Special Litigation Committee (SLC) investigated and moved to dismiss. The Court of Chancery granted the motion, interpreting Pfeiffer v. Toll to require corporate harm for disgorgement in a Brophy claim. The plaintiffs appealed, arguing this interpretation was erroneous.
Court Holding & Legal Precedent
Issue: Does a derivative claim for breach of fiduciary duty based on a fiduciary’s trading with material nonpublic information (Brophy claim) require a showing that the corporation suffered actual harm before the equitable remedy of disgorgement is available?
Yes, the Court of Chancery erred. Actual harm to the corporation is Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehend
IRAC Legal Analysis
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Legal Issue
Does a derivative claim for breach of fiduciary duty based on a fiduciary’s trading with material nonpublic information (Brophy claim) require a showing that the corporation suffered actual harm before the equitable remedy of disgorgement is available?
Conclusion
This decision solidifies Delaware's stance that fiduciaries cannot profit from insider trading Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullam
Legal Rule
Under Delaware law, a corporate fiduciary who trades on material, nonpublic company Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut
Legal Analysis
The Delaware Supreme Court reaffirmed the principles established in *Brophy v. Cities Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed
Flash-to-Full Case Opinions
Flash Summary
- A Brophy claim for disgorgement of insider trading profits **does not
