June 28, 2021

Faegre Drinker Secures Dismissal for WPP Investors in Delaware Court of Chancery

Oderah C. Nwaeze, a business litigation partner at Faegre Drinker, has secured a dismissal for clients WPP Investors LLC and Edgar L. Smith from Vice Chancellor Slights of the Delaware Court of Chancery on all counts of a complaint made against the company by Clifford Paper, Inc. (CPI), alleging breaches of an operating agreement and fiduciary duty.

World Pac Paper, LLC was formed in 2004 by Faegre Drinker client WPP Investors (of which Mr. Smith owned 80%) and CPI to distribute paper and packaging products and provide printing, shipping and warehousing consignment services to commercial and retail clients. CPI withdrew from World Pac Paper in 2018. Over two years later, CPI alleged that WPP Investors breached an operating agreement and fiduciary duties in 2020.

In Clifford Paper, Inc. v. WPP Investors, LLC et al., the Delaware Court of Chancery held that CPI’s asserted derivative (as opposed to direct) claims against WPP Investors lacked standing under Delaware law because CPI was no longer a member of World Pac Paper after signing a termination agreement in 2018. The Court of Chancery also cited CPI’s failure to make a pre-suit demand or state a claim upon which relief could be granted.

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