Title: Citigroup Inc., et al. v. AHW Investment Partnership, MFS, Inc., et al.
Citation: N/A
Docket Number: 641, 2015
State: Delaware
Issuer: Delaware Supreme Court
Date: May 24, 2016

IN THE SUPREME COURT OF THE STATE OF DELAWARE 
 
CITIGROUP INC., CHARLES 
PRINCE, VIKRAM PANDIT, 
GARY CRITTENDEN, ROBERT 
RUBIN, ROBERT DRUSKIN, 
THOMAS G. MAHERAS, 
MICHAEL STUART KLEIN, and 
DAVID C. BUSHNELL, 
 
Defendants Below-Appellants, 
 
v. 
 
AHW INVESTMENT 
PARTNERSHIP, MFS, INC., and 
ANGELA H. WILLIAMS, as 
Trustee of the Angela H. Williams 
Grantor Retained Annuity Trust 
UAD March 24, 2006, the Angela 
Williams Grantor Retained Annuity 
Trust UAD April 17, 2006, the 
Angela Williams Grantor Retained 
Annuity Trust UAD May 9, 2006, 
the Angela Williams Grantor 
Retained Annuity Trust UAD 
November 1, 2007, the Angela 
Williams Grantor Retained Annuity 
Trust UAD May 1, 2008, the Angela 
Williams Grantor Retained Annuity 
Trust UAD July 1, 2008, and the 
Angela Williams Grantor Retained 
Annuity Trust UAD November 21, 
2008, 
 
Plaintiffs Below-Appellees. 
 
§ 
§   
§ 
§  No. 641, 2015 
§ 
§  Certification of Question of Law 
§  from the United States Court of   
§  Appeals for the Second Circuit   
§   
§  C.A. Nos. 13-448-cv(L) and 
§  13-4504-cv(XAP) 
§ 
§ 
§ 
§ 
§ 
§ 
§ 
§ 
§ 
§ 
§ 
§ 
§ 
§ 
§ 
§ 
§ 
§ 
§ 
§ 
§ 
§ 
§ 
 
 
 
 
Submitted: April 27, 2016 
 
 
 
 
Decided: 
May 24, 2016 
 
 
 
 
Before STRINE, Chief Justice; HOLLAND, VALIHURA, VAUGHN, and 
SEITZ, Justices, constituting the Court en Banc. 
 
Certification of question of law from the United States Court of Appeals for the 
Second Circuit.  Question answered. 
 
Stephen P. Lamb, Esquire, Matthew D. Stachel, Esquire, Paul, Weiss, Rifkind, 
Wharton & Garrison LLP, Wilmington, Delaware; Brad S. Karp, Esquire, Walter 
Rieman, Esquire (Argued), Susanna M. Buergel, Esquire, Paul, Weiss, Rifkind, 
Wharton & Garrison LLP, New York, New York, for Appellants. 
 
Kevin G. Abrams, Esquire, J. Peter Shindel, Jr., Esquire, Abrams & Bayliss LLP, 
Wilmington, Delaware; Steven F. Molo, Esquire, Robert K. Kry, Esquire, 
MoloLamken LLP, New York, New York; Jeffrey A. Lamken, Esquire (Argued), 
Hassan A. Shah, Esquire, MoloLamken LLP, Washington, D.C.; Jacob H. 
Zamansky, Esquire, Zamansky LLC, New York, New York, for Appellees. 
 
Paul J. Lockwood, Esquire, Elisa M.C. Klein, Esquire, Skadden, Arps, Slate, 
Meagher & Flom LLP, Wilmington, Delaware; Jay B. Kasner, Esquire, Skadden, 
Arps, Slate, Meagher & Flom LLP, New York, New York, Amicus Curiae for 
Securities Industry and Financial Markets Association. 
 
Thad J. Bracegirdle, Esquire, Wilks, Lukoff & Bracegirdle, LLC, Wilmington, 
Delaware; Alan L. Rosca, Esquire, Colin R. Ray, Esquire, Peiffer Rosca Wolf 
Abdullah Carr & Kane, Cleveland, Ohio, Amicus Curiae for Public Investors Bar 
Association.  
 
 
STRINE, Chief Justice: 
 
 
 
1 
 
I. 
The U.S. Court of Appeals for the Second Circuit has certified to this Court 
the following question of law arising from an appeal from a decision issued by the 
U.S. District Court for the Southern District of New York: 
Are the claims of a plaintiff against a corporate defendant alleging 
damages based on the plaintiff‘s continuing to hold the corporation‘s 
stock in reliance on the defendant‘s misstatements as the stock 
diminished in value properly brought as direct or derivative claims?1 
 
The answer to that question, as explained below, is that the holder claims in 
this action are direct.  This is because under the laws governing those claims—
those of either New York or Florida—the claims belong to the stockholder who 
allegedly relied on the corporation‘s misstatements to her detriment.  Under those 
state laws, the holder claims are not derivative because they are personal to the 
stockholder and do not belong to the corporation itself.   
The familiar two-pronged test we articulated in Tooley v. Donaldson, Lufkin 
& Jenrette, Inc.2 is not relevant to the analysis of whether the holder claims at issue 
here are direct or derivative.  Rather, Tooley and its progeny deal with the narrow 
issue of whether a claim for breach of fiduciary duty or otherwise to enforce the 
corporation‘s own rights must be asserted derivatively or directly.  Before 
evaluating a claim under Tooley, ―a more important initial question has to be 
                                                 
1 AHW Inv. P’ship v. Citigroup, Inc., 806 F.3d 695, 705 (2d Cir. 2015). 
2 845 A.2d 1031 (Del. 2004). 
2 
 
answered: does the plaintiff seek to bring a claim belonging to her personally or 
one belonging to the corporation itself?‖3  Because the holder claims at issue here 
belong to the holding stockholders under the state laws that govern the claims, and 
are not fiduciary duty claims or claims otherwise belonging to the corporation, 
Tooley does not affect our answer to this certified question. 
II. 
In answering recent certifications of questions of law, we have explained the 
need for a certification to be accompanied by a stipulated set of facts.4  In lieu of a 
stipulated set of facts, the Second Circuit explained that ―the factual setting for 
addressing the question presented is certain:  It is set by the amended complaint.‖5  
In some situations, we suppose that referring us to a complaint as the required 
factual context would be sufficient.  Here, however, we note that our referring 
courts have struggled with defining the contours of the plaintiffs‘ claims.  In fact, 
                                                 
3 NAF Holdings, LLC v. Li & Fung (Trading) Ltd., 118 A.3d 175, 180 (Del. 2015). 
4 See Culverhouse v. Paulson & Co., Inc., 133 A.3d 195, 196 (Del. 2016) (―We reiterate the need 
for a stipulated set of facts to accompany certified questions of law to avoid confusion over 
disputed and undisputed facts.‖); Espinoza v. Dimon, 124 A.3d 33, 36 (Del. 2015) (―The 
Delaware Supreme Court rule that governs our consideration of certified questions of law is 
Rule 41.  Because this tool can cause more harm than benefit if not used with precision, 
Rule 41(b) contemplates that a certification will pose a specific question of law, based on a 
stipulated set of facts.  This approach allows us to focus on a relevant question of Delaware law 
against the backdrop of established facts, which are not the subject of dispute among the parties.  
The certification request before us is not tailored in that way.  As a result, we will endeavor to be 
as helpful as we can be without risking giving overbroad and potentially misleading guidance 
because of the absence of stipulated facts, against which a precisely tailored question is framed.‖ 
(citations omitted)); see also Supr. Ct. R. 41(b) (―A certification will not be accepted if facts 
material to the issue certified are in dispute.‖). 
5 AHW Inv. P’ship, 806 F.3d at 705. 
3 
 
the parties before us even disagree about the scope of the certified question and 
whether it encompasses not only a holder claim based on principles of common 
law fraud, but also a holder claim for negligent misrepresentation.  Indeed, one of 
the parties offered to file additional papers regarding the claim—or claims, as they 
would have it—before us.  We declined that invitation, as it hazards litigation over 
what should have been clearly settled by the parties before the referral to us.  
Likewise, much of the briefing before us by the defendants seems to be addressed 
to the subject of whether Delaware should say that no such thing as a holder claim 
exists.6  The problem with that is, as we discuss below, that the District Court and 
the Second Circuit did not find, and the parties do not contend, that the plaintiffs‘ 
claims arise under the substantive law of Delaware.7   
The extent of uncertainty about the nature of the claim—or claims—before 
us is inconsistent with the nature of the important, but carefully circumscribed role 
that we play under Article 4, § 11 of our Constitution.8  The extent of disagreement 
between the parties about the scope of the question before us, and the underlying 
nature of the claims, highlights why a stipulation of facts is essential.  
Nevertheless, we wish to be as helpful as possible to our distinguished judicial 
                                                 
6 See, e.g., Opening Br. at 30–33. 
7 See infra note 62 and accompanying text. 
8 See Del. Const. art. IV, § 11. 
4 
 
colleagues and have done our best to isolate the undisputed parts of the record and 
use them to frame the issue before us as we best understand it.   
But before we can answer the certified question, we need to identify what 
the plaintiffs‘ claims before us are and what they are not.  This requires a deep 
exploration of the underlying record, and the back and forth between the parties 
before the District Court and Second Circuit. 
A. 
The plaintiffs are all affiliates of Arthur and Angela Williams, who owned 
stock in Citigroup.  The defendants are Citigroup and eight of its officers and 
directors, which we collectively refer to for the sake of brevity as ―Citigroup.‖  The 
basic events leading to the Williamses‘ claims are as follows.  In 1998, Citicorp 
and Travelers Group, Inc. merged, forming Citigroup.  At that point, Arthur 
Williams‘s shares in Travelers Group were converted into 17.6 million shares of 
Citigroup common stock, which were valued at the time of the merger at $35 per 
share.  In 2007, the Williamses had these shares transferred into AHW Investment 
Partnership, MFS Inc., and seven grantor-retained annuity trusts, all of which the 
Williamses controlled.  For the sake of simplicity, we refer to the various related 
plaintiffs—including AHW, MFS, and the trusts—as ―the Williamses.‖ 
According to the Williamses, they and their financial advisors developed a 
plan in May 2007 to sell their 17.6 million Citigroup shares.  On May 17, 2007, the 
5 
 
Williamses sold one million shares at $55 per share.  But, the Williamses halted 
their plan to sell all of their Citigroup stock because, based on Citigroup‘s filings 
and financial statements, they concluded that there was little downside to retaining 
their remaining 16.6 million shares.  The Williamses allegedly held those shares 
for the next twenty-two months, finally selling them on March 18, 2009 for $3.09 
per share, which is much less than $55 per share.   
B. 
After selling their 16.6 million shares, the Williamses sued Citigroup in the 
U.S. District Court for the Southern District of New York. The theory of the 
Williamses‘ amended complaint is that their decision not to sell all of their shares 
in May 2007, and their similar decisions to hold on at least three later dates, were 
due to Citigroup‘s failure to disclose accurate information about its true financial 
condition from 2007 to 2009.  Their complaint alleged: 
Had Williams received truthful and honest disclosures from Citigroup 
about the true state of its financial health, its subprime mortgage 
exposure and its related risks, he would have sold all of his shares in 
May 2007 at $55 per share and diversified into safer investments. . . .  
He also considered selling out his remaining 16.6 million shares on 
three other separate occasions—at $33 per share, $17.50 per share and 
$8.50 per share—in an effort to minimize his losses.  He delayed 
doing so in continued reliance on the Company‘s misrepresentations 
and omissions.9   
 
                                                 
9 App. to Opening Br. at 25 (Compl. ¶¶ 48–49). 
6 
 
The Williamses pled two counts: ―negligent misrepresentation‖ and 
―common law fraud.‖10  Although the Williamses filed their complaint in New 
York, they asserted that Florida law applied to both claims.  In pleading the 
negligent misrepresentation theory, the Williamses alleged:  
Defendants had a duty, as a result of a special relationship, i.e., the 
issuer of shares to public investors, to give accurate information. . . .  
Defendants occupied a special position of confidence and trust such 
that Plaintiffs’ reliance on their public statements was justified.  Put 
another way, Defendants had a duty to speak with care in these 
circumstances, where the relationship is such that in morals and good 
conscience Plaintiffs had the right to rely on Defendants for 
information.  Defendants made multiple false representations that they 
should have known were incorrect.  Defendants knew that Plaintiffs 
desired the information supplied in the representations for a specific 
purpose, i.e., to decide whether to hold or sell their shares in 
Citigroup.11 
 
As to the common law fraud count, the Williamses alleged: 
Plaintiffs were personally defrauded by Citigroup, as that cause of 
action is delineated by the common law in the State of Florida.  
Plaintiffs were the recipients of multiple misrepresentations and 
omissions of material fact.  Defendants knew that their statements to 
Plaintiffs concerning Citigroup‘s subprime exposure were false at the 
time they were made. . . .  Defendants knowingly made multiple 
misrepresentations and omissions of material fact . . . for the purpose 
of inducing [the Williamses] to hold their Citigroup shares, which 
they in fact did.12   
 
For both the negligent misrepresentation and common law fraud claims, the 
Williamses‘ theory of damages is identical.  The Williamses alleged that had 
                                                 
10 See id. at 83, 92 (Compl. at 72, 81).   
11 Id. at 83–84 (Compl. ¶¶254–62) (emphasis added). 
12 Id. at 93 (Compl. ¶¶ 290–94). 
7 
 
Citigroup informed the market in real time of the deepening problems at Citigroup, 
the Williamses would have acted on those disclosures and sold all 17.6 million of 
their shares at $55 on May 17, 2007.  Because they, however, allegedly relied on 
the disclosures, the Williamses say that they held 16.6 million of their shares until 
March 2009—a time when the severe depth of Citigroup‘s subprime mortgage 
exposure was fully evident—and therefore sold those shares at $3.09.  Thus, they 
seek $809,950,000, or the difference between what they otherwise would have 
received for each share they held and the $3.09 they collected.13  Alternatively, the 
Williamses demand $532,897,000, which is based on the $35 value of Citigroup 
shares at the time of the 1997 merger.14 
C. 
Citigroup moved to dismiss under Federal Rule 12(b)(6), arguing that (1) the 
Williamses lack standing because their claims are derivative; and (2) New York 
law, not Florida law, applied.  On October 13, 2013, the District Court granted 
Citigroup‘s motion and dismissed the amended complaint.   
In its decision, the District Court did not begin by analyzing the nature of the 
Williamses‘ claims or discussing whether the claims were ones that belonged to 
the Williamses—as the holding stockholders—or somehow Citigroup as the issuer.  
Instead, the District Court first analyzed whether the Williamses‘ claims are direct 
                                                 
13 See id. at 55–56 (Compl. ¶¶ 171–72). 
14 See id. at 56 (Compl. ¶ 173). 
8 
 
or derivative without any consideration of that predicate issue.15  It reasoned ―that 
Delaware law determines whether claims against Citigroup are direct or derivative 
because Citigroup is incorporated in Delaware.‖16  The court then concluded that 
the Williamses‘ claims are direct under Tooley because (1) the Williamses ―‗can 
prevail without showing an injury to‘ Citigroup because the nature of the allegation 
is that the misstatements and omissions concealed damage to Citigroup‘s assets 
that had already been done‖; and (2) ―any remedy will go directly to [the 
Williamses], not to Citigroup.‖17   
It was only after the District Court determined that the Williamses‘ claims 
were direct that it then went on to decide what state‘s substantive law governed 
their claims and whether those claims survived Citigroup‘s Rule 12(b)(6) motion.  
The District Court ultimately determined that New York substantive law applied to 
the Williamses‘ claims because New York had a greater interest in the case than 
Florida.18  In the course of this analysis, the District Court summarily analyzed the 
amended complaint‘s negligent misrepresentation count as a run-of-the-mill claim 
under state common law.19  The District Court apparently did not find that the fact 
that the Williamses‘ damages theory was based on a holder theory posed any 
special difficulties.  The District Court then dismissed the Williamses‘ negligent 
                                                 
15 See AHW Inv. P’ship v. Citigroup, Inc., 980 F. Supp. 2d 510, 516–18 (S.D.N.Y. 2013). 
16 Id. at 516. 
17 Id. at 517. 
18 See id. at 522–24. 
19 See id. at 519. 
9 
 
misrepresentation claim, noting that ―New York law requires ‗the existence of a 
special privity-like relationship‘ between the plaintiff and defendant for a 
successful negligent misrepresentation claim,‖20 and reasoning that ―because 
Citigroup is an issuer of shares to public investors, defendants are not in a special 
privity-like relationship with the investing public, or with actual purchasers.‖21   
Although the District Court did not construe the negligent misrepresentation 
count as a holder claim, the court referred to the common law fraud count 
explicitly as a ―holder claim.‖22  In addressing this reality, the District Court 
focused on the less-than-universal acceptance of common law fraud based on a 
theory that a stockholder held, rather than purchased, stock in a corporation:  ―The 
parties agree that the basic elements of common law fraud in New York and 
Florida are substantially equivalent [and] agree that the states differ in their 
treatment of holder claims.‖23  The District Court compared New York and Florida 
law on holder claims, foregoing any discussion of the more typical common law 
fraud elements.24  The court then dismissed the common law fraud claim, 
reasoning that it is ―impermissibly speculative‖ because the Williamses ―do not 
allege how long thereafter Williams cancelled the remaining sales, nor when he 
                                                 
20 Id. at 524 (quoting Mandarin Trading Ltd. v. Wildenstein, 944 N.E.2d 1104, 1109 (N.Y. 
2011)). 
21 Id. 
22 Id. at 519. 
23 Id. 
24 See id. at 519–21. 
10 
 
had planned to execute the sales before the alleged misstatements caused him to 
reverse course.‖25  The District Court also observed that the Williamses ―claim as 
damages the difference between the price they estimate would have prevailed on 
May 17, 2007 and the price they received in March 2009.  And yet, by [the 
Williamses‘] own telling, they would have sold the 16.6 million shares at issue 
here at some point after May 17, 2007.‖26  Finally, the District Court noted that 
New York precedent prohibits the court from hypothesizing about whether the 
Williamses would have sold their Citigroup shares absent the alleged 
misrepresentation.27 
D. 
The Williamses appealed, arguing ―that the District Court erred by applying 
New York, not Florida, law to their claims, and that, even applying New York law, 
their fraud and negligent misrepresentation claims were sufficient to withstand a 
motion to dismiss.‖28  Citigroup cross-appealed, asserting that the trial court erred 
because the Williamses‘ ―claims are properly considered derivative rather than 
direct.‖29  Rather than decide whether the District Court properly determined that 
                                                 
25 Id. at 526 (internal quotation marks omitted). 
26 Id. (internal citation omitted). 
27 See id. 
28 AHW Inv. P’ship, 806 F.3d at 699. 
29 Id.; see also id. at 697 (―Defendants cross-appeal, arguing that the District Court erred by 
addressing the adequacy of plaintiffs‘ substantive claims as ‗holders‘ of the shares during a 
period of decline in share value:  According to defendants, Delaware law mandates that such 
11 
 
New York substantive law applied to the Williamses‘ claims, the Second Circuit 
focused on the cross-appeal, reasoning that ―[i]f we accept defendants‘ argument, 
then the District Court lacked jurisdiction to adjudicate the sufficiency of 
plaintiffs‘ claims, and we must affirm the dismissal of the amended complaint 
without further considering plaintiffs‘ claims.  The lack of prudential standing 
would present an independent basis for dismissing the complaint.‖30 
Then, like the District Court had, the Second Circuit decided that Tooley 
might determine whether the Williamses‘ claims were derivative before discussing 
the nature of the claims or whether the claims could possibly belong to Citigroup.  
The Second Circuit agreed with the District Court that Delaware law governs 
whether the claims were direct or derivative because Citigroup is incorporated in 
Delaware:  ―Under New York law, we look to the law of the state of incorporation 
when adjudicating whether a claim is direct or derivative.  Because Citigroup is 
incorporated in Delaware, Delaware law controls whether plaintiffs‘ claims are 
properly characterized as direct or derivative.‖31  The Second Circuit also agreed 
with the trial court that ―Tooley suggests that the Williamses have stated direct 
claims.‖32  But, the Second Circuit explained that ―[s]ubsequent developments in 
the Delaware courts‘ application of Tooley give us pause‖ and ―suggest that the 
                                                                                                                                                             
claims be brought in a shareholder derivative action, not as direct claims (as plaintiffs have 
done).‖). 
30 Id. at 699 (citation omitted). 
31 Id. (citations omitted). 
32 Id. at 701. 
12 
 
two-part Tooley test may now have evolved and that the Williamses‘ 
claims . . . might not be correctly treated as direct under Delaware law.‖33  Because 
of this apparent confusion, the Second Circuit sought our guidance as to whether 
what it called a ―holder claim‖ is direct or derivative.34  
The Second Circuit then briefly discussed the nature of the Williamses‘ 
claims.  Like the District Court, the Second Circuit recognized that the Williamses 
pled counts of negligent misrepresentation and common law fraud.35  But, the 
Second Circuit classified the Williamses‘ claims—without distinguishing between 
those for negligent misrepresentation and common law fraud—as ―holder claims‖ 
because those claims ―alleg[e] harm based on the retention of stock in reliance on a 
defendant‘s statements.‖36  That is, although the District Court appeared to treat 
only the common law fraud claim as a holder claim and not the negligent 
misrepresentation claim, the Second Circuit deemed both to be holder claims 
because the Williamses‘ damages theory for both claims was identical, and was 
based on the alleged decision to hold the stock in reasonable reliance on 
Citigroup‘s public disclosures. 
The parties themselves have dickered over whether the ―claims‖ referred to 
in the question certified to us encompass both the negligent misrepresentation and 
                                                 
33 Id.; see also id. at 703 (―Delaware cases post-Tooley complicate our analysis and suggest that 
the Williamses may lack standing to pursue their claims against defendants.‖). 
34 Id. 
35 See id. at 698. 
36 Id. at 703 (emphasis omitted). 
13 
 
common law fraud theories.  Because the question uses the plural and both claims 
are holder claims,37 we read the question as referring to both of the Williamses‘ 
claims.  Thus, we refer to the Williamses‘ negligent misrepresentation and 
common law fraud claims as their ―Holder Claims.‖ 
E. 
We empathize with the struggle our federal judicial colleagues have had 
with the Williamses‘ claims. At one mundane level, that of definition, a holder 
claim seems simple enough: ―a cause of action by persons wrongfully induced to 
hold stock instead of selling it.‖38  But, our referring courts‘ struggle to identify the 
precise nature of the Williamses‘ claims is not surprising given the lack of uniform 
recognition of holder claims,39 and more specific to this case, the Williamses‘ 
shifting attempts at clarifying their claims, which have continued during this 
appeal. A reading of the amended complaint and our referring courts‘ opinions, 
                                                 
37 See supra note 1 and accompanying text. 
38 Small v. Fritz Cos., Inc., 65 P.3d 1255, 1256 (Cal. 2003) (emphasis in original); see also Grant 
Thornton LLP v. Prospect High Income Fund, 314 S.W.3d 913, 926 (Tex. 2010) (―In a ‗holder‘ 
claim, the plaintiff alleges not that the defendant wrongfully induced the plaintiff to purchase or 
sell stock, but that the defendant wrongfully induced the plaintiff to continue holding his stock.  
As a result, the plaintiff seeks damages for the diminished value of the stock, or the value of a 
forfeited opportunity, allegedly caused by the defendant‘s misrepresentations.‖); Lauren A. 
Demanovich, Holding Out for a Change: Why North Carolina Should Permit Holder Claims, 92 
N.C. L. REV. 988, 992 (2014) (―A holder claim is a suit brought for damages based on the fact 
that an individual shareholder suffered financial loss after retaining stock for longer than he or 
she otherwise would have as a consequence of an officer‘s or director‘s misrepresentation.‖). 
39 See Grant Thornton, 314 S.W.3d at 927–28 (―[A] number of courts have rejected [holder] 
claims.  Conversely, courts in several states (including California, Massachusetts, New Jersey, 
and New York) have recognized holder claims.‖ (citations omitted)); Demanovich, supra note 
38, at 999–1005 (surveying the controversial status of holder claims in various states). 
14 
 
which do not reference state securities laws, indicates that the Williamses 
originally framed their claims as Florida common law claims.  Then, in their brief 
to us, the Williamses couched their Holder Claims as state securities law claims, 
which is how holder claims have often been treated.40  A holder claim could 
theoretically be implied under New York‘s Martin Act41 or the Florida Securities 
and Investor Protection Act,42 and the Williamses‘ brief explains that ―[w]hether to 
allow holder claims is a question of substantive state securities law,‖43 and that 
they ―are pursuing tort claims for securities fraud.‖44  At oral argument, however, 
the Williamses retreated from this position, asserting once again that they ―are 
relying on actually, in fact, just common law fraud—the standard fraud under the 
Restatement.‖45 
A certified question of the kind we have accepted is not a proper vehicle in 
which to explore what the claims in the underlying action are.  That sort of 
                                                 
40 See, e.g., CONSTANCE E. BAGLEY, MANAGERS AND THE LEGAL ENVIRONMENT: STRATEGIES 
FOR THE 21ST CENTURY 693 (8th ed. 2016) (―Certain states, under their blue sky laws, permit 
so-called holder claims by investors who allege that they did not sell their securities because of 
the defendant‘s fraud.‖ (emphasis omitted)); Eric L. Talley, Cataclysmic Liability Risk Among 
Big Four Auditors, 106 COLUM. L. REV. 1641, 1668 (2006) (explaining that holder claims are a 
type of state securities law claim); Demanovich, supra note 38, at 997 (same).  
41 See N.Y. General Business Law §§ 352–53 (McKinney 2016). 
42 See Fla. Stat. §517.301 (2016). 
43 Answering Br. at 2. 
44 Id. at 25; see also id. at 14 (―It cannot be that, when a corporation defrauds a shareholder, the 
only remedy is a derivative suit in which the corporation keeps any recovery.  That ‗remedy‘ is 
no remedy at all:  It would effectively eliminate this category of securities fraud claims 
altogether.‖ (emphasis added)). 
45 Video: Oral Argument before the Delaware Supreme Court, at 30:45 (Citigroup v. AHW 
Investment, No. 641, 2015, Apr. 27, 2016), archived at http://livestream.com/Delaware 
SupremeCourt/events/5272320/videos/121185340 [hereinafter ―Oral Argument at __‖]. 
15 
 
fundamental issue should ordinarily be agreed to by the parties and stipulated to in 
the stipulation of facts upon which we are to base our answer to the certified 
question.  Consistent with our desire to be helpful, however, we will set forth what 
we understand to be the nature of the Williamses‘ Holder Claims, and how that 
bears on our answer to the question we have been asked. 
We start with noting that the reductive term ―holder claims‖ was reasonably 
used by the Second Circuit because the Williamses‘ negligent misrepresentation 
and common law fraud claims have identical elements, but for one element that is 
irrelevant to whether their claims are fundamentally based on their alleged decision 
to hold stock in reliance on the defendants‘ alleged failure to make timely 
disclosures necessary to ensure that Citigroup‘s public disclosures about its 
condition were materially accurate.  That element is an important one—whether 
the defendants had to act with scienter or merely with a lack of reasonable care46—
but it does not change the cause of action from one that would colloquially be 
regarded by a securities lawyer as a holder claim.  A holder claim based on a 
negligent misrepresentation claim is simply easier for a plaintiff to prove, because 
                                                 
46 See Vichi v. Koninklijke Philips Elecs., N.V., 85 A.3d 725, 762 (Del. Ch. 2014) (―[N]egligent 
misrepresentation is essentially a species of common law fraud with a lesser state of mind 
requirement—i.e., scienter is replaced with negligence.‖); see also 37 C.J.S. Fraud § 75 
(Westlaw 2016) (―The tort of negligent misrepresentation does not require scienter or an intent to 
defraud; it is not necessary to show that the defendant had any intent to deceive the victim, and 
that he or she generally did not demonstrably know that what he or she said was false.‖). 
16 
 
that plaintiff, unlike a plaintiff bringing a holder claim under a common law fraud 
theory, need not prove scienter. 
This is not to say that this distinction does not potentially have important 
implications for cases like these.  We are troubled by the shifting nature of the 
Williamses‘ approach to their negligent misrepresentation claim for a reason that 
relates to, but is somewhat differently grounded than, our referring courts‘ concern 
whether the holder claims are direct or derivative.  Our referring courts wanted to 
make sure that the Williamses were not asserting a claim that belonged to 
Citigroup rather than themselves personally, and were not thereby intruding on the 
Citigroup board‘s ability to control its own legal causes of action.  But, the 
Williamses‘ Holder Claims raise another sensitive concern:  Whether their claims 
are ones that under the internal affairs doctrine are governed by Delaware law, and 
not the law of any other state. 
The Williamses have been hard to pin down on the nature of what they are 
alleging.  As to their negligent misrepresentation claim, the Williamses alleged in 
their complaint that the scienter requirement of common law fraud was 
inapplicable because the Citigroup‘s officers and directors had ―a duty of candor‖ 
to the Williamses because of their special relationship with Citigroup‘s 
stockholders.47  Then, in their briefs to us, the Williamses went out of their way to 
                                                 
47 See App. to Opening Br. at 83 (Compl. ¶ 256). 
17 
 
distance themselves from any hint that their negligent misrepresentation claim was 
based on the fiduciary relationship that exists between a corporation‘s managers 
and its investors.  To do that, the Williamses stated that they ―are not pursuing 
claims for breach of fiduciary duty,‖48 and that ―[w]hether Citigroup‘s officers 
breached fiduciary duties to the company is totally irrelevant to the harm the 
Williamses suffered.‖49  And at oral argument, the parties agreed that no breach of 
fiduciary duty claim is at issue.50   
Consistent with their approach before us, in oral argument, the Williamses 
argued that Florida law governed their claim for negligent misrepresentation and 
that Florida law allows a wide-open cause of action on any speaker for negligent 
misrepresentation, regardless of any special relationship of trust between the 
speaker and the plaintiff.  This, of course, is more than a tad in tension with their 
prior arguments before our referring courts.  Whatever one would ultimately see 
after piercing this fog, we note the following:  If the Williamses were asserting a 
holder claim in which they were alleging that Citigroup‘s officers and directors 
                                                 
48 Answering Br. at 25. 
49 Id. at 15; see also id. at 16 (―The harm the Williamses suffered was Citigroup‘s violation of 
that tort-law duty.  That harm is separate from any injury Citigroup may have suffered from 
fiduciary breaches by its managers.‖); id. at 16 n.1 (―That reasoning applies a fortiori in a case 
like this, where plaintiffs are asserting, not a breach of fiduciary duty, but garden-variety tort 
claims for securities fraud.‖). 
50 See Oral Argument at 10:20 (―Now these claims of course could have been brought as breach 
of fiduciary duty claims.  As a pleading matter, they were brought as fraud claims or negligent 
misrepresentation claims.‖); id. at 28:12 (acknowledging that the Williamses disavowed any 
reliance on a fiduciary-based theory and ―are proceeding under common law fraud and common 
law misrepresentation‖). 
18 
 
were their fiduciaries and owed them a heightened duty, that claim would be an 
internal affairs claim for breach of fiduciary duty.  In that case, under the 
Commerce Clause51 and the Full Faith and Credit Clause,52 Delaware law would 
apply to the merits and we would have to decide whether that holder claim was 
cognizable at all and, if so, whether it was derivative or not.53  Likewise, any 
argument—such as the one the Williamses made explicitly in the amended 
complaint—that an issuer of stock owes special duties to the holders of its stock is 
just another way of arguing that the investors in a corporation are owed fiduciary 
duties by those who manage it.  In other words, it is a way of saying that because 
of the relationship between the governed and the governors of a corporation, a 
special cause of action ought to exist.  That kind of claim is governed by the laws 
of the state of incorporation exclusively under the internal affairs doctrine.54 
Furthermore, the way that the Williamses have pled both the negligent 
misrepresentation and common law fraud claims is troubling for another reason 
                                                 
51 U.S. Const. art. I, § 8. 
52 Id. art. IV, § 1. 
53 See McDermott Inc. v. Lewis, 531 A.2d 206, 216–17 (Del. 1987) (explaining the relationship 
between the internal affairs doctrine and the Commerce Clause and the Full Faith and Credit 
Clause); Rosenmiller v. Bordes, 607 A.2d 465, 468 (Del. Ch. 1991) (―The internal affairs 
doctrine requires that the state that has created the corporation be the only state whose law 
controls the relationships among the corporate entity, directors, officers and stockholders.  This 
concept implicates federal due process, commerce clause and full faith and credit clause 
considerations because in the absence of such a rule, a corporation would be subject to the risk of 
inconsistent judgments by virtue of its being amenable to service of process in different 
jurisdictions.‖); see also VantagePoint Venture Partners 1996 v. Examen, Inc., 871 A.2d 1108, 
1112–13 (Del. 2005). 
54 See VantagePoint, 871 A.2d at 1112–13. 
19 
 
that bears on whether the internal affairs doctrine might govern their claims.  That 
is that the Williamses have not sued only Citigroup.  They have also sued its 
officers and directors, as if this were a claim for breach of fiduciary duty.  On this 
limited record and without focus on this issue from the parties, we are loath to say 
more.  But, we do think it is important to note that the Williamses‘ complaint 
contained no claim for veil-piercing, and it seems, shall we say, improbable to 
think that Citigroup would be a good candidate for veil-piercing.  In discussing 
holder claims, the U.S. Supreme Court has explained ―that a misrepresentation 
which leads to a refusal to purchase or to sell is actionable in just the same way as 
a misrepresentation which leads to the consummation of a purchase or sale.‖55  
Why is it, then, that the Williamses have sued the directors and officers of 
Citigroup when the corporation itself is the typical defendant in a securities fraud 
claim regarding the purchase or sale of securities,56 such as an implied cause of 
action under SEC Rule 10b-5?57  After all, a common situation when federal claims 
                                                 
55 Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 744 (1975); see also infra notes 76–79 
and accompanying text. 
56 See In re Parmalat Sec. Litig., 594 F. Supp. 2d 444, 451 (S.D.N.Y. 2009) (―The typical 
defendant in a Section 10b-5 or other Exchange Act case is a corporation.‖). 
57 See Janus Capital Grp., Inc. v. First Derivative Traders, 564 U.S. 135, 142–43 (2011) (―For 
purposes of Rule 10b-5, the maker of a statement is the person or entity with ultimate authority 
over the statement, including its content and whether and how to communicate it.  Without 
control, a person or entity can merely suggest what to say, not ‗make‘ a statement in its own 
right.  One who prepares or publishes a statement on behalf of another is not its maker.  And in 
the ordinary case, attribution within a statement or implicit from surrounding circumstances is 
strong evidence that a statement was made by—and only by—the party to whom it is attributed.  
This rule might best be exemplified by the relationship between a speechwriter and a speaker.  
Even when a speechwriter drafts a speech, the content is entirely within the control of the person 
20 
 
under Rule 10b-5 are filed is for parallel derivative actions to be filed.58  The 
theory of those actions is normally that if the corporation is liable to the class in the 
10b-5 action, then the directors and officers are liable for breach of fiduciary duty 
in causing the corporation to make false and misleading disclosures, and should 
make the corporation whole for any damages it must pay to the class in the 10b-5 
action.  This is not a situation where the Williamses had face-to-face negotiations 
with any Citigroup director or officer, who said something directly to them.59  
Rather, the Williamses are suing over the failure of Citigroup itself to make timely 
and materially accurate public disclosures.  When one considers this reality along 
                                                                                                                                                             
who delivers it.  And it is the speaker who takes credit—or blame—for what is ultimately said.‖); 
City of Pontiac Policemen’s and Fireman’s Ret. Sys. v. UBS AG, 752 F.3d 173, 185 n.53 (2d Cir. 
2014) (affirming District Court‘s dismissal of individual defendants ―on the grounds that under 
Janus, the individual defendants . . . must have actually made the statements . . . to be held liable 
under Section 10(b)‖ (internal citation omitted) (internal quotation marks omitted)); Fezzani v. 
Bear, Stearns & Co. Inc., 716 F.3d 18, 25 (2d Cir. 2013) (―Under . . . Janus, only the person who 
communicates the misrepresentation is liable in private actions under Section 10(b).‖ (internal 
citation omitted)); In re Smith Barney Transfer Agent Litig., 884 F. Supp. 2d 152, 166 (S.D.N.Y. 
2012) (explaining that for purposes of determining the proper defendants for 10(b)-5 purposes, 
―[a]s a general matter, ‗officer or director status alone does not constitute control‘‖ (quoting In re 
Global Crossing, Ltd. Sec. Litig., 2005 WL 1907005, at *12 (S.D.N.Y. Aug. 8, 2005))); In re 
Coinstar Inc. Sec. Litig., 2011 WL 4712206, at *10 (W.D. Wash. Oct. 6, 2011) (dismissing 
10(b)-5 claim against corporation‘s directors under Janus because they did not ―ultimately ha[ve] 
authority over a false statement or omission‖); see also  5 BROMBERG & LOWENFELS ON SEC. 
FRAUD § 7:306.55 (2d ed. 2015) (compiling additional cases that used Janus as a means of 
shielding directors from liability under Rule 10b-5). 
58 See 6 BROMBERG & LOWENFELS ON SEC. FRAUD § 8:12 (2d ed. 2015) (recognizing that there 
are often state law cases that accompany 10b-5 claims in federal court); 69A AM. JUR. 2D Sec. 
Regulation § 1019 (Westlaw 2016) (same). 
59 The Williamses do allege that their so-called ―Financial Advisors‖ had some meetings with 
unidentified senior officers at Citigroup.  See App. to Opening Br. at 61 (Compl. ¶ 188).  This 
thin gruel does not sustain any personal claim of fraud under traditional principles, and there is 
no indication that any meetings were in any way intended to influence buy and sell decisions by 
the Williamses. 
21 
 
with the Williamses‘ earlier attempts to base a scienter-free claim against directors 
and officers on the grounds that the issuer of securities owes special duties to its 
investors, there emerges a concern that the Williamses are pressing a cause of 
action that, if viable, has to be governed by the laws of the state in which Citigroup 
is incorporated. 
A related concern arises from state law holder claims more generally.  When 
a public corporation such as Citigroup has shares in the market, it will have 
investors from all around the world, and certainly in virtually every state in our 
nation.  For investors to be able to sue not only under federal law, but purport to 
sue under their own state‘s bespoke laws, subjects corporations to potential 
inconsistencies, inefficiencies, and unfairness.  This is another issue we do not 
delve into, but given the Williamses‘ attempt to subject Citigroup, a Delaware 
corporation with its shares listed on the New York Stock Exchange, to claims 
under Florida law because they assert that Florida law allows for a recovery 
without any need to prove scienter, we note this as another concern raised if state 
law holder claims are broadly recognized. 
Of course, there are other ways in which a state other than the state of 
incorporation could create a cause of action that would intrude on the important 
22 
 
space that must be exclusively occupied by the state of incorporation.60  For 
example, at oral argument, counsel for Citigroup suggested that a state could create 
a cause of action allowing a group of stockholders to sue and recover damages for 
the harm to the corporation from mismanagement that was not disclosed.  If a 
cause of action were created that involved having damages belonging to the 
corporation—because that sort of breach of fiduciary duty claim would ordinarily 
belong to the harmed corporation itself—awarded to a class of stockholders, that 
would be problematic, not only because it would usurp the corporation‘s own 
claim, but because it would usurp the state of incorporation‘s exclusive right to 
govern the internal affairs of the corporation.  But, the certified question before us 
asks only about holder claims, which are not of that kind.  Rather, the Williamses 
here seek damages on a theory that is the obverse of a typical securities purchaser 
claim.  Whether or not this sort of a holder claim should be cognizable is a separate 
question from whether it is one that could ever plausibly be said to belong to the 
issuer rather than the holder. 
The defendants have asked us to delve into the first issue even though that is 
not posed in the narrow question put to us.  We will not be tempted by them into 
overstepping our bounds.  Our answer to this certified question does not signal our 
                                                 
60 See Rosenmiller, 607 A.2d at 468 (―It is well settled that, under the internal affairs doctrine, 
the state of incorporation has the paramount interest in having disputes of internal corporate 
governance resolved according to its own laws.‖). 
23 
 
view as to whether states should recognize a holder claim such as those at issue 
here, as either a matter of statutory or common law.  Our opinion about that 
topic—which is an important and difficult one given the numerous policy and 
proof problems raised by holder claims—has not been sought and is not necessary 
to answer the question we have been asked.61   
For the purpose of answering this certified question, what matters is that the 
Williamses‘ Holder Claims are governed by either New York or Florida law—a 
fact about which the parties, and as important, our referring courts, agree62—and 
that although neither the Florida Supreme Court nor the New York Court of 
Appeals have addressed whether holder claims are permitted under their respective 
states‘ law,63 other courts in those states have suggested that their highest courts 
would recognize holder claims64 and would conclude, consistent with their very 
                                                 
61 See Chaplake Holdings, LTD. v. Chrysler Corp., 766 A.2d 1, 4–5 (Del. 2001) (explaining that 
we address only the question presented in the certified question). 
62 See AHW Inv. P’ship, 806 F.3d at 698–99; AHW Inv. P’ship, 980 F. Supp. 2d at 514; Opening 
Br. at 13; Answering Br. at 10. 
63 See AHW Inv. P’ship, 980 F. Supp. 2d at 519–20 (reviewing decisions from the Florida 
District Court of Appeal and the U.S. District Court for the Northern District of Florida, and 
―predict[ing] that Florida would adopt California‘s approach to recognizing holder claims‖ 
subject to ―heightened pleading standards‖); id. at 520–21 (reviewing decision from the New 
York Appellate Division—which ―has significantly narrowed the scope of cognizable damages 
for holder claims‖ by imposing strict limitations specific to holder claims—and reasoning that 
―New York‘s appellate courts are the best predictors of how the New York Court of Appeals 
would decide such a contentious issue‖). 
64 See Mantana v. Merkin, 989 F. Supp. 2d 313, 323–24 (S.D.N.Y. 2013) (―[T]his Court cannot 
predict that the New York Court of Appeals would preclude holder claims altogether.  No New 
York state court has so held, or even so stated in dicta.  The Court instead is compelled to 
predict . . . that the New York Court Appeals today would still recognize a limited set of holder 
claims . . . .‖); Rogers v. Cisco Sys., Inc., 268 F. Supp. 2d 1305, 1313 (N.D. Fla. 2003) 
24 
 
name, that if such claims are cognizable, they belong to the holder and that the 
primary defendant would be the issuer corporation.65  There is no hint in the 
authorities cited that a holder claim could somehow belong to the issuer 
corporation itself.  Having done our best to understand the nature of the Holder 
Claims at issue, we now answer the specific question posed to us. 
III. 
The answer to the certified question that we have accepted from the Second 
Circuit is that the Williamses may assert their Holder Claims against Citigroup 
directly if those claims are otherwise cognizable.  But, this is not an answer we 
reach by analyzing such a claim under the two-part test established in Tooley and 
applied in later cases.  Rather, the Holder Claims are direct claims because they 
belong to the holders and are ones that only the holders can assert, not claims that 
could plausibly belong to the issuer corporation, Citigroup. 
                                                                                                                                                             
(reasoning that because Florida has adopted provisions of the Restatement (Second) of Torts, 
Florida courts would likely recognize holder claims). 
65 See Starr Found. v. Am. Int’l Grp., Inc., 901 N.Y.S.2d 246, 251–52 (N.Y. App. Div. 2010) 
(explaining that a holder claim is asserted by a stockholder who allegedly relied on the 
misrepresentations to its detriment, and that damages are specific to that plaintiff‘s reliance); 
Rogers, 268 F. Supp. 2d at 1314 (explaining that Florida courts would require specific 
allegations of reliance in a complaint asserting a holder claim because those claims are specific 
to the plaintiff asserting them); see also Grant Thornton, 314 S.W.3d at 930 (concluding that 
under Texas law, ―holder claims, to the extent they are viable, must involve a direct 
communication between the plaintiff and the defendant‖). 
25 
 
As this Court and the Court of Chancery have explained, determining 
whether a claim is direct or derivative depends on the nature of the claim itself.66  
In NAF Holdings, LLC v. Li & Fung (Trading) Limited,67 a case in the commercial 
contract context, we explained that ―[t]he case law under Tooley . . . and its 
progeny deal with the distinct question of when a cause of action for breach of 
fiduciary duty or to enforce rights belonging to the corporation itself must be 
asserted derivatively.‖68  We then elaborated: 
Tooley and its progeny do not, and were never intended to, subject 
commercial contract actions to a derivative suit requirement.  That 
body of case law was intended to deal with a different subject: 
determining the line between direct actions for breach of fiduciary 
duty suits by stockholders and derivative actions for breach of 
fiduciary duty suits subject to the demand excusal rules set forth in 
§ 327 of the Delaware General Corporation Law, Court of Chancery 
Rule 23.1, and related case law.69 
                                                 
66 See, e.g., Agostino v. Hicks, 845 A.2d 1110, 1122 n.54 (Del. Ch. Mar. 11, 2004) (―Since the 
fiduciary duty of officers and directors runs to the corporation and the shareholder, the 
shareholder will always be able to assert a breach of duty owed to it, but plainly not all fiduciary 
duty claims are individual claims.  As such, in the context of fiduciary duty claims, the focus 
should be on the nature of the injury.  In other contexts, the focus upon to whom the relevant 
duty is owed will allow the segregation of derivative claims.‖ (internal citation omitted)); see 
also Tooley, 845 A.2d at 1036 (explaining that Agostino followed the proper inquiry for 
determining whether a claim is direct or derivative ―[i]n the context of a claim for breach of 
fiduciary duty‖); Allen v. El Paso Pipeline GP Co, L.L.C., 90 A.3d 1097, 1104 (Del. Ch. 2014); 
supra note 70 and accompanying text. 
67 118 A.3d 175. 
68 Id. at 176; see also Agostino, 845 A.2d at 1122 (―In other words, the inquiry should focus on 
whether an injury is suffered by the shareholder that is not dependent on a prior injury to the 
corporation.  In the context of a complaint asserting breaches of fiduciary duty—duty that under 
Delaware law runs to the corporation and the shareholder—the test may be stated as follows: 
Looking at the body of the complaint and considering the nature of the wrong alleged and the 
relief requested, has the plaintiff demonstrated that he or she can prevail without showing an 
injury to the corporation?‖ (emphasis in original)). 
69 NAF Holdings, 118 A.3d at 179; see also Tooley, 845 A.2d at 1036 (―In the context of a claim 
for breach of fiduciary duty, the Chancellor articulated the inquiry as follows: ‗Looking at the 
26 
 
 
After explaining that Tooley was designed for determining whether fiduciary duty 
claims are direct or derivative, we rejected the defendant‘s assertion that Tooley 
was ―intended to be a general statement requiring all claims, whether based on a 
tort, contract, or statutory cause of action . . . , to be brought derivatively whenever 
the corporation of which the plaintiff is a stockholder suffered the alleged harm.‖70  
                                                                                                                                                             
body of the complaint and considering the nature of the wrong alleged and the relief requested, 
has the plaintiff demonstrated that he or she can prevail without showing an injury to the 
corporation?‘‖ (quoting Agostino, 2004 WL 443987, at *7) (emphasis added)); In re El Paso 
Pipeline Partners, L.P., 132 A.3d 67, 99 (Del. Ch. 2015) (―[T]he two-part test that the Delaware 
Supreme Court created in Tooley does not apply to contract rights.  It deals with a different 
subject: ‗determining the line between direct actions for breach of fiduciary duty suits by 
stockholders and derivative actions for breach of fiduciary duty suits subject to demand excusal.‘  
This case did not involve any claims for breach of fiduciary duty, the Post-Trial Opinion did not 
address breaches of fiduciary duty, and the Liability Award does not rest on a breach of fiduciary 
duty.‖ (quoting NAF Holdings, 118 A.3d at 179) (internal citation omitted)); Allen, 90 A.3d at 
1105 (―Pre-Tooley cases recognized that a stockholder could assert a direct claim if the cause of 
action involved ‗a contractual right of shareholders that is independent of the corporation‘s 
rights.‘ . . .  Tooley did not overrule these cases or alter the longstanding principle that a 
stockholder suffers injury when its contractual rights are breached.‖ (internal citation omitted)); 
NAF Holdings, LLC v. Li & Fung (Trading) Ltd., 772 F.3d 740, 745 (2d Cir. 2014) (noting that 
―each of the many precedents of shareholder litigation that the Tooley opinion reviewed was also 
based on an allegation of breach of a fiduciary (or other similar) duty implied in law arising from 
the status of the defendant in relation to the corporation‖ and that ―each of the subsequent cases 
in which the Delaware Supreme Court has cited Tooley has also involved similar claims of 
breach of fiduciary (or like) duties‖); DEBORAH A. DEMOTT & DAVID F. CAVERS, SHAREHOLDER 
DERIVATIVE ACTIONS: LAW AND PRACTICE § 2.3 (2015) (―Influential though Tooley has been, its 
scope of applicability is also significant.‖ (citing NAF Holdings, 118 A.3d 175)); Corporate 
Litigation/Breach of Contract/Shareholder Litigation, 27 BUS. TORTS REP. 82 (2015) (―Tooley—
and the prior cases discussed therein by the Delaware Supreme Court on the subject of derivative 
versus direct claims—dealt solely with alleged fiduciary breaches by defendant boards.‖). 
70 NAF Holdings, 118 A.3d at 180; see also id. (―Reading Tooley to convert direct claims 
belonging to a plaintiff into something belonging to another party would, we confess, be alien to 
our understanding of what was at stake in that case, or in the cases after Tooley that relied on 
it.‖); In re El Paso, 132 A.3d at 86 (―[T]he General Partner errs by treating Tooley as if its 
holding required all claims, whether sounding in tort, contract, or a statutory cause of action, to 
be brought derivatively whenever an entity in which the plaintiff is an investor can be said to 
have suffered harm such that some component of the plaintiff‘s loss could be framed as having 
been suffered indirectly. . . .  [T]hat position overstates Tooley‘s reach.‖). 
27 
 
We take this opportunity to reaffirm our explanation in NAF Holdings of Tooley‘s 
limited scope. 
 
Just as a Tooley analysis was not needed to determine whether the 
commercial-contract claim in NAF Holdings was direct or derivative, it does not 
apply here.  Because directors owe fiduciary duties to the corporation and its 
stockholders,71 there must be some way of determining whether stockholders can 
bring a claim for breach of fiduciary duty directly, or whether a particular fiduciary 
duty claim must be brought derivatively on the corporation‘s behalf.  We 
established Tooley‘s two-pronged test as a means of determining whether such 
claims are direct or derivative.72 
But, as we explained in NAF Holdings, when a plaintiff asserts a claim based 
on the plaintiff‘s own right, such as a claim for breach of a commercial contract, 
Tooley does not apply.73  Here, the Williamses were the holders of Citigroup stock.  
Citigroup itself is not a holder, and at oral argument Citigroup‘s counsel was 
unable to identify any authority in New York or Florida law that would suggest 
that the issuer of stock should be the plaintiff in a holder claim lawsuit.  Nor do the 
amended complaint or our referring courts‘ decisions suggest that is the case.  That 
the holder claims under both New York and Florida law belong to the holder, not 
                                                 
71 See Mills Acquisition Co. v. Macmillan, Inc., 559 A.2d 1261, 1280 (Del. 1989); Aronson v. 
Lewis, 473 A.2d 805, 811 (Del. 1984); Guth v. Loft, 5 A.2d 503, 510 (Del. 1939). 
72 See supra note 68 and accompanying text. 
73 See supra notes 67–70 and accompanying text. 
28 
 
the issuer, alone is enough to make the Williamses‘ Holder Claims direct.74  
Delaware law cannot convert a direct claim that another state‘s law has granted to 
securities holders by deciding that it actually belongs to the corporation that the 
securities holder is suing.  Thus, because the Holder Claims here could not 
possibly belong to the corporation, Delaware law has nothing to do with what type 
of claims the Williamses are asserting.75  Their Holder Claims are direct, but a 
court need not engage in a Tooley analysis to arrive at that result. 
Finally, whatever analytical problems are involved in recognizing the Holder 
Claims as a species of common law fraud claim or negligent misrepresentation 
claim do not turn those Holder Claims into claims belonging to the issuer who is 
the primary defendant, or into claims governed by the internal affairs doctrine.  As 
discussed above, holder claims are analytically indistinct from seller and purchaser 
                                                 
74 Further, the alleged harm in a holder claim is not shared equally by all stockholders because 
not all stockholders will have relied on the corporation‘s misrepresentations and abandoned plans 
to sell their shares.  See In re Countrywide Corp. S’holders Litig., 2009 WL 846019, at *12 (Del. 
Ch. Mar. 31, 2009) (―[H]older claims are individual in nature [because they] require a merits 
determination of facts [that are] uniquely individual.‖). 
75 We note, however, that other courts have recognized that holder claims are direct under 
Delaware law.  See, e.g., In re Harbinger Capital Partners Funds Inv’r Litig., 2013 WL 
5441754, at *9 (S.D.N.Y. Sept. 13, 2013) (―[T]o the extent that Plaintiffs‘ claims involve the 
nondisclosure of information . . . , Delaware cases establish that these so-called ‗holding‘ claims 
are direct.‖), vacated in part, 2013 WL 7121186 (S.D.N.Y. Dec. 16, 2013); In re Parkcentral 
Global Litig., 2010 WL 3119403, at *6 (N.D. Tex. Aug. 5, 2010) (explaining that because no 
special injury is required to assert a direct claim under Delaware law, the plaintiffs could bring 
holder claim directly).  But see EDWARD P. WELCH ET AL., FOLK ON THE DELAWARE GENERAL 
CORPORATION LAW § 327.02[B][6], at 13-68 (6th ed. 2016) (―[F]ederal courts have been split 
concerning whether so-called ‗holder‘ claims are direct or derivative under Delaware law.‖) 
(compiling cases). 
29 
 
claims, which are direct claims that are personal to the holder.76  Purchaser, seller, 
and holder claims all involve very difficult questions of proof and damages, and 
holder claims just entail proving the additional requirement of inducement.  This 
admittedly can be said to compound, not just marginally add to, those complex 
questions of proof and damages.  That is, a holder claim plaintiff must prove that 
she would have sold her securities in some particular time period had she had 
certain information at that time.77  Because securities holders may decide whether 
to hold or sell stock for various reasons, proving inducement is difficult.78  The 
speculation arguably inherent in this added element has led states to be rightly 
cautious about creating broad causes of action for securities holders, as opposed to 
sellers or purchasers, a caution our state law has shared.79  That issue, however, 
                                                 
76 See In re El Paso, 132 A.3d at 88 (―‗Quintessential examples of personal claims would 
include . . . a tort claim for fraud in connection with the purchase or sale of shares.‘‖ (quoting In 
re Activision Blizzard, Inc. S’holder Litig., 124 A.3d 1025, 1056 (Del. Ch. 2015))); see also 
Merrill Lynch, Pierce, Fenner & Smith Inc. v. Dabit, 547 U.S. 71, 88–89 (2006) (holding that the 
Securities Litigation Uniform Standards Act preempts state law holder claims brought as class 
actions because a ―holder class action . . . is distinguishable from a typical Rule 10b-5 class 
action in only one respect: [i]t is brought by holders instead of purchasers or sellers,‖ which is an 
―irrelevant‖ distinction in this context); 12B FLETCHER CYCLOPEDIA OF THE LAW OF PRIVATE 
CORPS. § 5911, at 447 (2002 Supp. 2009) (noting that a claim ―on a fraud affecting the 
shareholder directly‖ is a direct claim). 
77 See Grant Thorton, 314 S.W.3d at 927–28; Starr Found., 901 N.Y.S.2d at 250.  
78 See Star Found., 901 N.Y.S.2d at 249 (―Here, the Foundation seeks to recover the value it 
might have realized from selling its shares during a period when it chose to hold, under 
hypothetical market conditions for [the defendant corporation‘s] stock (assuming disclosures 
different from those actually made) that never existed.  A lost bargain more undeterminable and 
speculative than this is difficult to imagine.‖ (internal quotation marks omitted)). 
79 See Malone v. Brincat, 722 A.2d 5, 12–13 (Del. 1998). 
30 
 
does not transmogrify a common law fraud or negligent misrepresentation claim 
belonging to the security holder under state law into one belonging to the issuer. 
Having answered the certified question, the Clerk is directed to transmit this 
opinion to the Second Circuit.