Thursday, November 21, 2013

Parfi Holding AB v. Mirror Image Internet, Inc. case brief

Parfi Holding AB v. Mirror Image Internet, Inc. case brief summary
817 A.2d 149 (2002)

Plaintiff minority stockholders sued defendant corporation, majority stockholder, and others. The allegations included breach of fiduciary duty. Prior to filing suit, various claims had been decided in arbitration. The Court of Chancery of the State of Delaware in and for New Castle County dismissed the minority stockholders' claims, finding that all of their claims were required to be brought before the arbitration tribunal. They appealed.

The trial court found that the arbitration clause required all of the claims, related to the series of transactions being challenged, to be submitted to arbitration. With respect to the central issue, the trial court held that the fiduciary duty claims were "in connection with" the underwriting agreement and were, therefore, mandatorily arbitrable thereunder.


  • In disagreeing, the appellate court found that its analysis would turn on the issue of whether the fiduciary duty claims would have been assertable had there been no underwriting claim. 
  • The appellate court found that the claims would have been independently and separately assertable, and were therefore not "in connection with" the underwriting agreement. 
  • Applying the arbitration clause to bar the instant action would lead to an absurd outcome, because every other stockholder except plaintiffs could bring the unfair dilution claim, but plaintiffs could not, because they signed the underwriting agreement. 
  • The appellate court found that the parties likely did not intend for the arbitration provision to act as a bar to litigation over a set of rights and remedies that lay outside the scope of the underwriting agreement itself.

The judgment dismissing the complaint was reversed, and the case was remanded for further proceedings.

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