Court Opinion

ID: 4104860
Source: CourtListenerOpinion
Date Created: 2016-12-06 17:06:56.20886+00
Date Added: 2024-06-11T14:46:27.829646
License: Public Domain

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

I.A.T.S.E. LOCAL NO. ONE PENSION  )
FUND,                             )
                                  )
                Plaintiff,        )
                                  )
      v.                          ) C.A. No. 11893-VCG
                                  )
GENERAL ELECTRIC COMPANY,         )
GENERAL ELECTRIC CAPITAL          )
CORPORATION, GE CAPITAL SUB 3, )
INC., JEFFREY R. IMMELT, JAMES S. )
TISCH, DOUGLAS A. WARNER, III,    )
JAMES E. ROHR, JEFFREY S.         )
BORNSTEIN, WILLIAM H. CARY,       )
BRACKETT B. DENNISTON III,        )
RYAN A. ZANIN, ROBERT C.          )
GREEN, KEITH S. SHERIN,           )
ALEXANDER DIMITRIEF, THOMAS )
C. GENTILE and MARK W. MIDKIFF, )
                                  )
                Defendants.       )

                         MEMORANDUM OPINION

                       Date Submitted: September 6, 2016
                        Date Decided: December 6, 2016

Michael Hanrahan, Paul A. Fioravanti, Jr., Kevin H. Davenport, Samuel L. Closic, of
PRICKETT, JONES & ELLIOTT, P.A., Wilmington, Delaware; OF COUNSEL:
Marc A. Topaz, Lee D. Rudy, Michael C. Wagner, Grant Goodhart, of KESSLER
TOPAZ MELTZER & CHECK, LLP, Radnor, Pennsylvania, Attorneys for Plaintiff.

Daniel A. Dreisbach, John D. Hendershot, Andrew J. Peach, John F. Mezzanotte, Jr.,
of RICHARDS, LAYTON & FINGER, P.A., Wilmington, Delaware; OF
COUNSEL: Greg A. Danilow, Amanda K. Pooler of WEIL, GOTSHAL &
MANGES LLP, New York, New York; Christine T. Di Guglielmo, of WEIL,
GOTSHAL & MANGES LLP, Wilmington, Delaware, Attorneys for Defendants.
GLASSCOCK, Vice Chancellor
      This matter involves a question of standing to pursue breach of fiduciary duty

claims, arising from a complex merger transaction, in the context of a motion to

dismiss. The Plaintiff was a preferred stockholder (and member of a purported class

of former preferred stockholders) in a Delaware corporation, General Electric

Capital Corporation (“GECC”). As that name indicates, the business of GECC was

to provide financial services. The common stock of GECC was owned by its parent,

the well-known manufacturing company, General Electric (“GE”). In 2015, GE

decided to merge GECC into the parent company. In the resulting series of

transactions (referred to collectively as the “Exit Plan”), the Plaintiff’s interest in

GECC was unilaterally terminated by GE. At the end of the Exit Plan—as described

in detail in the body of this Memorandum Opinion—the Plaintiff, who had held a

certain number of shares of GECC preferred stock, found itself the owner of a

different number of shares of GE preferred stock, with different contractual rights

and, it alleges, worth less than the GECC preferred it had owned. In other words,

the Plaintiff’s interest in GECC was squeezed out in the Exit Plan, and the

consideration it received for its GECC stock was, ultimately, GE preferred—

different stock in a different entity. The Plaintiff alleges that the price and process

whereby GE—which stood on both sides of the transaction—terminated the interests

of GECC preferred stockholders was unfair to those stockholders. The Defendants

for purposes of this motion do not contest—and I assume without deciding—that

                                          1
Plaintiff’s former ownership of preferred stock in GECC entitles it to a review of the

transaction under the entire fairness standard, assuming the Plaintiff has standing to

invoke such a review.

      After the transaction, the GE preferred traded at a price that made the interests

received as consideration by former holders of GECC preferred worth less than what

had been taken from them.           Former GECC preferred stockholders were

understandably unhappy, and, eventually, GE allowed them to exchange their new

GE preferred for other assets that, presumably, made them whole, in return for the

release of potential breach of duty claims (the “Follow-on Exchange Offer”). For

reasons of its own, GE decided to extend that exchange right to those who had

purchased the new GE preferred after the Exit Plan, as well as former holders of

GECC preferred who continued to hold GE preferred.             Unfortunately for the

Plaintiff, it had sold its new GE preferred shortly after the Exit Plan, and was

therefore unable to benefit from the Follow-on Exchange Offer; it now seeks to

pursue its cause of action for breach of duty against GE, GECC, GE Capital Sub 3,

Inc. (“Sub 3”) (a subsidiary used in the transaction at issue), and directors and

officers of GE, GECC, and Sub 3.

      These Defendants, as stated above, concede for purposes of this motion that

the Exit Plan was a transaction for which GECC preferred holders were entitled to

entire fairness review, and that the breach of fiduciary duty claims the Plaintiff

                                          2
asserts here are direct claims. They assert, however, that having sold the new GE

preferred, the Plaintiff (and the putative class of similarly-selling stockholders) are

without standing.        The Defendants conceded at oral argument that, had the

consideration the Plaintiff received for its stock been anything other than stock, the

Plaintiff could have disposed of that consideration and retained its direct claim for

breach of duty. Under the circumstances here, however, the Defendants argue that

Plaintiff’s cause of action adhered to the GE stock received in consideration, and

was sold with that stock; thus the Plaintiff lacks standing. The Defendants point to

Vice Chancellor Laster’s learned discussion in In re Activision Blizzard, Inc.

Stockholder Litigation1 of two types of direct claims stockholders may have against

corporate fiduciaries—personal and non-personal—and argue that, as a cause of

action “arising out of the relationship between the stockholder and the corporation,”

Plaintiff’s action best fits the non-personal category of claims. Those claims, they

point out, adhere to the stock. Therefore, according to the Defendants, these claims

then adhere to the shares into which that stock was converted by the Exit Plan—that

is, the new GE preferred. As a result, Plaintiff’s cause of action was transferred to

the buyer of that stock, and was released by that buyer in connection with the Follow-

on Exchange Offer (or, alternatively, is still attached to that stock). Accordingly, in

the view of the Defendants, the Plaintiff lacks standing here.

1
    124 A.3d 1025 (Del. Ch. 2015).

                                          3
       The Defendants raise three issues in this motion to dismiss. Two can be

dispensed with in summary form. The first is whether the Plaintiff has stated a claim,

as it purports to do, for “quasi appraisal.” Quasi appraisal is a remedy, not a cause

of action,2 therefore Count II is dismissed, without prejudice to the Plaintiff’s right

to seek the remedy of quasi-appraisal, as appropriate. The Defendants also seek to

dismiss Count III for failure to state a claim; that count alleges entitlement to

damages for purported materially-misleading disclosures in connection with the Exit

Plan. Because entire fairness review, if available, will encompass the process of that

transaction (including disclosures) in any event, there is little utility to engaging in

an analysis of whether the disclosure allegations, standing alone, state a claim: I

decline to do so here. That leaves the core issue referred to above: did Plaintiff’s

breach of duty claim adhere to its GE preferred stock, so that the buyer of that stock,

and not the Plaintiff, possesses that cause of action? Or does the Plaintiff possess

the claim? Because I find the latter to be the case, the Defendants’ motion to dismiss

under Rule 12(b)(1) is denied. My rationale follows.

2
  See, e.g., Houseman v. Sagerman, 2015 WL 7307323, at *4 (Del. Ch. Nov. 19, 2015) (“[Q]uasi-
appraisal is not itself a cause of action, but is instead a remedy that, where appropriate, awards
stockholders damages based on the going-concern value of their previously owned stock upon a
finding of a breach of fiduciary duty, such as the duty to disclose.”).

                                                4
                                  I. BACKGROUND3

       The following lengthy and tedious recitation is necessary to an understanding

of the complex transaction by which GE absorbed GECC.

       A. The Parties

       The Plaintiff is I.A.T.S.E Local No. One Pension Fund (the “Plaintiff”), which

formerly held Series B Preferred Stock of GECC.4 The Plaintiff is challenging the

Exit Plan undertaken by Defendant GE to reorganize its financial services

subsidiary, GECC.5 The Plaintiff brings this action on behalf of itself and a class of

all previous holders of Series A, B, and C GECC Preferred Stock (the “GECC

Preferred”) who received shares of certain GE preferred stock (the “GE Preferred”)

in the Exit Plan and sold those shares before GE commenced the Follow-on

Exchange Offer on December 18, 2015.6

       Defendant GE is a “New York corporation based in Schenectady, New York

and Fairfield, Connecticut.”7       GE’s products and services consist of “aircraft

engines, power generation, water processing and household appliances to medical

imaging, business and consumer financing and industrial products.”8 Defendant

3
  The facts, drawn from Plaintiff’s Verified Class Action Complaint (the “Complaint”) and from
documents incorporated by reference therein, are presumed true for purposes of evaluating
Defendants’ Motion to Dismiss.
4
  Compl. ¶ 1.
5
  Id.
6
  Id.
7
  Id. at ¶ 2.
8
  Id.

                                              5
GECC, incorporated in Delaware, was GE’s financial services subsidiary.9 “GE has,

directly and indirectly, owned all of the common stock of GECC since at least the

end of 2014.”10 “All the directors of GECC were directors and/or officers of GE.”11

Only one GECC director held any GECC Preferred (or Sub 3 preferred).12 To raise

additional capital in 2012 and 2013, GECC issued three different series of preferred

stock—Series A, Series B, and Series C—worth a total of $5 billion.13

       Defendant Sub 3 was “incorporated in Delaware on June 30, 2015” and was

used in the Exit Plan.14 “All the directors of Sub 3 were directors and/or officers of

GE.”15 No Sub 3 director now holds GE Preferred or held GECC Preferred or Sub

3 preferred.16 Plaintiff’s complaint also lists thirteen directors and officers as the

remaining Defendants (the “Individual Defendants”), all of whom were directors or

officers of GE who served as directors of GECC or Sub 3, or both.17 GE, GECC,

Sub 3, and the Individual Defendants collectively are referred to as “the Defendants”

for purposes of this Memorandum Opinion.

9
  Id. at ¶ 3.
10
   Id. at ¶ 20.
11
   Id. at ¶ 3.
12
   Id.
13
   See id. at ¶¶ 22, 26. Series A, B, and C GECC Preferred were issued on June 7, 2012; July 24,
2012; and May 29, 2013, respectively.
14
   Id. at 4.
15
   Id.
16
   Id.
17
   Id. at ¶¶ 3–18 (listing Jeffrey R. Immelt, James S. Tisch, Douglas A. Warner III, James E. Rohr,
Jeffrey S. Bornstein, William H. Cary, Brackett B. Denniston III, Ryan Zanin, Robert C. Green,
Keith S. Sherin, Alexander Dimitrief, Thomas C. Gentile, and Mark W. Midkiff).

                                                6
       B. The Press Releases

       On April 10, 2015, GE issued a press release (the “April Press Release”)

announcing the GE Capital Exit Plan.18 The April Press Release stated that the Exit

Plan would be executed in a way that “works for . . . GE . . . GE Capital Corporation

debtholders and GE shareholders” and that one element “involves a merger of GECC

into GE . . . .”19 Subsequently, on June 30, 2015, GE formed GE Capital Sub 1 (“Sub

1”), GE Capital Sub 2 (“Sub 2”), and Sub 3, each of which would later be used in

the Exit Plan.20 Five months later, GE followed up with an additional press release

on December 1, 2015 (the “December Press Release”) announcing the

“reorganization of GE Capital.”21 The December Press Release announced that GE

would transfer GECC’s international operations to a new holding company, GE

Capital International Holdings Limited, and likewise would consolidate GECC’s

U.S. operations under another new holding company, GE Capital US Holdings,

Inc.22 In transactions that would be executed under Delaware law, the December

Press Release also stated that the holders of the “three outstanding series of preferred

stock issued by GECC . . . will receive on December 3, 2015 preferred stock to be

newly issued by GE . . . .”23 The December Press Release explained that the terms

18
   Aff. of Greg A. Danilow, Esq., Ex. 3 (the “April 2015 Press Release”).
19
   Id. at ¶ 29; April 2015 Press Release.
20
   Compl. ¶ 30.
21
   Id. at ¶ 31; Aff. of Greg A. Danilow, Esq., Ex. 1 (the “December 2015 Press Release”).
22
   Id.
23
   See December 2015 Press Release; Compl. ¶ 32.

                                               7
of the new GE preferred stock were “determined in order to provide” the holders of

the GECC Preferred with “at least [the] equivalent value” of their existing GECC

holdings.24 Finally, the December Press Release added that “holders of existing

GECC preferred stock that continue to hold through December 3, 2015 will be

eligible to exercise appraisal rights to the extent set forth in Section 262 of the

[Delaware General Corporation Law (“DGCL”)].”25

       C. The Exit Plan

       The Exit Plan called for a series of mergers that would not be subject to a vote

of or consent by the holders of the GECC Preferred.26 No Special Committee was

formed nor were independent legal or financial advisors retained for the

transactions.27 Briefly, the Exit Plan worked as follows: GECC became a subsidiary

of a different subsidiary of GE, Sub 3, and the GECC Preferred was converted into

Sub 3 preferred stock (the “Sub 3 Preferred”). Next, GECC merged with and into

GE in a short-form merger. Sub 3 then merged with another GE subsidiary, Sub 2,

and the Sub 3 Preferred was converted into GE Preferred. The details, as set out in

the Complaint, are given below.

24
   December 2015 Press Release.
25
   Id.
26
   See Compl. ¶ 32; December 2015 Press Release.
27
   Compl. ¶ 43.

                                             8
                    1. The Holdco Merger

          “First, on December 1, 2015, pursuant to 8 Del. C. 251(g), Sub 1 was merged

with and into GECC in the Holdco Merger, with GECC surviving. GECC became

a subsidiary of Sub 3 and each share of each series of GECC Preferred Stock was

automatically converted into one share of a corresponding series of newly issued . .

. Preferred Stock of Sub 3. Each series of Sub 3 Preferred purportedly had identical

terms to the corresponding series of GECC Preferred Stock. Second, after the

Holdco Merger, Sub 3 distributed all of the issued and outstanding common stock

of GECC to GE Capital Holdings, and GE Capital Holdings then distributed all of

GECC’s issued and outstanding common stock to GE.” 28

                    2. The GECC Merger

          “Third, on December 2, 2015, GECC merged with and into GE in the short-

form GECC Merger pursuant to [Section] 253 of the [DGCL].”29

                    3. The Merger

          “Fourth, effective at 12:05 a.m. on December 3, 2015, Sub 2 was merged with

and into Sub 3 pursuant to [Section] 251 of the DGCL in the Merger, with Sub 3

surviving. Each share of each series of Sub 3 Preferred Stock was automatically

converted into shares of a series of GE Preferred Stock. Fifth, a Certificate of

28
     Id. at ¶ 33.
29
     Id.

                                           9
Dissolution was filed with the Delaware Secretary of State at 8:10 a.m. on December

3, 2015, dissolving Sub 3.”30

       D. The Prospectus Supplement

       On December 1, 2015, GE filed a Prospectus Supplement with the SEC

describing the Exit Plan and providing a number of definitions.31 The Prospectus

Supplement defined “Old Preferred Stock” as “each series of preferred stock initially

issued by GECC . . . together with the mirror preferred stock newly issued by [Sub

3].”32 “New Preferred Stock” was defined as “preferred stock to be newly issued by

GE.”33 The Prospectus Supplement defined “Old Preferred Holders” as “holders of

the Old Preferred Stock issued and outstanding immediately prior to the Effective

Date” and stated that these Old Preferred Holders “are eligible to exercise appraisal

rights.”34 The appraisal process, as described in the Prospectus Supplement, would

allow Old Preferred Holders who follow Section 262 of the DGCL and “do not

thereafter withdraw their demand for appraisal . . . or otherwise lose their appraisal

rights” the opportunity to have their Old Preferred Stock “appraised by the Delaware

Court of Chancery and to receive payment of the ‘fair value’ of such shares.”35

30
   Id.
31
   See Aff. of Greg A. Danilow, Esq., Ex. 2 (the “December 2015 Prospectus Supplement”) at 2;
Compl. ¶ 34.
32
   December 2015 Prospectus Supplement at 2.
33
   Id.
34
   Id.
35
   Id. at S-29.

                                             10
       E. The Follow-on Exchange Offer

       The Exit Plan left the former holders of GECC Preferred with allegedly less

valuable GE preferred stock, in part due to lower dividend rates.36 This resulted in

the GE Preferred trading at a price that made the consideration received by the

former holders of GECC Preferred less valuable than the market value of their GECC

Preferred prior to the Exit Plan.37 The December Press Release, however, had stated

that the GE Preferred Stock’s terms were “determined in order to provide” the

previous holders of GECC Preferred with “at least equivalent value.”38

Understandably, this left the previous holders of GECC Preferred—now holders of

GE Preferred—disgruntled. On December 15, 2015, GE announced the Follow-on

Exchange Offer, which offered new GE preferred stock with better terms in

exchange for the GE Preferred that was received in the Exit Plan.39 On December

18, 2015, GE commenced this exchange offer.40 Unfortunately for the Plaintiff, it

had sold its GE Preferred before the Follow-on Exchange Offer was announced.41

36
   Compl. ¶ 40.
37
   Id. at ¶ 42. I note that the GE Preferred was issued to the Old Preferred Holders at more than a
one-two basis in consideration for the Old Preferred.
38
   December 2015 Press Release.
39
   Compl. ¶ 46.
40
   Id.
41
   Id.

                                               11
          F. Procedural History

          The Plaintiff filed its Verified Class Action Complaint (the “Complaint”) on

January 12, 2016, challenging the Exit Plan. The Complaint pleads three counts. In

Count I, the Plaintiff alleges that because GE was a controlling stockholder of GECC

and the GE directors and officers were serving as GECC directors and/or Sub 3

directors, those directors were on both sides of the transaction and entire fairness

applies.42 According to the Plaintiff, the forced conversions of GECC Preferred into

Sub 3 Preferred and then into GE Preferred were designed to benefit GE at the

expense of the stockholders, with the purpose of getting GE out from federal

regulatory scrutiny, and were structured to strip the putative class of any meaningful

appraisal rights.43 Count II is the claim for “quasi-appraisal” and Count III alleges

materially misleading and incomplete disclosures related to the Exit Plan.

          On February 3, 2016, the Defendants moved to dismiss all Counts under Court

of Chancery Rule 12(b)(1) for lack of standing (as well as to dismiss Counts II and

III for failure to state a claim under Court of Chancery Rule 12(b)(6), which matters

I have already resolved above). I heard oral argument on Defendants’ Motion to

Dismiss on August 23, 2016 during which I requested supplemental briefing from

42
     Id. at ¶¶ 58–59.
43
     See id. at ¶¶ 60–66.

                                           12
the parties.      Having now received the supplemental briefing, this is my

Memorandum Opinion.

                                       II. ANALYSIS

       I assume for purposes of this motion that when Plaintiff’s GECC Preferred

shares were converted, first to Sub 3 Preferred, then to GE Preferred, a claim for

breach of fiduciary duty in favor of the Plaintiff and against the Defendants

accrued.44 The consideration received by the Plaintiff for its GECC shares was a

different number of preferred shares in a separate corporate entity with different

contractual rights, trading at a different value. The Plaintiff subsequently sold those

shares, but seeks redress for breach of fiduciary duty in regard to the merger

nonetheless. The Defendants raise a discrete issue with regard to Plaintiff’s standing

here, based on the following syllogism: Plaintiff’s claim arose out of the relationship

between Plaintiff, as a stockholder, and GECC; Activision45 teaches that such claims

are non-personal, and adhere to the stock; the Plaintiff has sold its stock; the claim

transferred to the buyer; thus, the Plaintiff is without standing. This reasoning is

straightforward, but relies on two questionable assumptions. First, can claims

arising from the involuntary removal of Plaintiff’s stock really be said to arise from

44
   The Defendants, at this stage, do not argue otherwise. See generally LC Capital Master Fund,
Ltd. v. James, 990 A.2d 435 (Del. Ch. 2010) (discussing the interplay of contract versus equitable
rights of preferred stockholders in the merger context).
45
   In re Activision Blizzard, Inc. Stockholder Litig., 124 A.3d 1025 (Del. Ch. 2015).

                                               13
the relationship between stockholder and GECC, where the transaction at issue

stripped the stock and ended that relationship? And if so, how does the claim adhere

to the stock into which the Plaintiff’s interest was converted? On these two rocks

the Defendants’ theory founders.

       The Defendants characterize Activision as providing that direct claims that

arise from the relationship among the stockholder, her stock and the company are

non-personal in nature, and adhere to the stock; when that stock is sold, the inherent

choses-in-action are therefore transferred to the buying stockholder with the stock.46

This is in contradistinction to claims arising outside the stockholder/company

relationship, as when the stockholder is defrauded by the company—that claim is

personal, and does not adhere to the stock, because the stockholder/company

relationship there is incidental to, not a part of, the claim.47 The Defendants point

out that the Activision distinction generally categorizes fiduciary duty claims as non-

personal, and that Plaintiff’s claims are fiduciary duty claims; they argue that by

extension, the rationale of Activision mandates a finding that the Plaintiff’s claims

accordingly adhered to Plaintiff’s stock.48 However, the Activision distinction is

both more basic and more nuanced than that.

46
   See Defs’ Opening Br. 16–25.
47
   See Activision, 124 A.3d at 1056.
48
   See Defs’ Opening Br. 16–25.

                                          14
       Activision represents a scholarly treatment of existing law, not a creation of

new law. It states the unremarkable proposition that claims arising from the

relationship among stockholder, stock and the company generally adhere to the

stock, and are alienable.49 The direct fiduciary and statutory claims presented there

arose as part of the ongoing relationship between stockholder and company, and

Activision points out that, by choosing to disassociate himself from the corporation,

an ex-stockholder, having sold his shares, has disassociated himself from an interest

in causes of action involving the stockholder-corporate relationship; moreover, he is

selling into a market that recognizes implicitly the value of the adherent cause of

action in the price of the stock.50 When a stockholder is squeezed out by a merger,

however, in a transaction representing a breach of duty, the transaction involved

necessarily severs the relationship between stockholder and entity. That is true

whether the stock is converted into a right to receive cash or, as here, the right to

receive51 different stock in a different corporation; in either case, there simply is no

ongoing relationship between equity-holder and entity, and claims arising from the

transaction vest in the former owner of the stock, who has suffered the injury. This

is the simple negation of the Defendants’ argument; the claim that arose via the non-

49
   See, e.g., In re Sunstates Corp. Stockholder Litig., 2001 WL 432447, at *3 (citing 6 Del. C. § 8-
303 for the proposition that rights inherent in securities transfer with the securities).
50
   See Activision, 124 A.3d at 1044, 1058.
51
   According to the Defendants, the stockholders could forgo the conversion of their interests into
new stock, and pursue appraisal instead.

                                                15
voluntary termination of the Plaintiff’s stock ownership cannot, as a matter of logic

or equity, adhere in the stock so taken. “One induced to sell shares as a consequence

of a breach of fiduciary duty plainly has a claim separate from the ownership of the

shares themselves.”52 Moreover, where the consideration is new stock in a discrete

entity, unlike the situation described in Activision, it does not appear that the market

value of the newly-received stock implicitly would reflect the value of the breach of

duty claim, assuming it did adhere to that new stock. Nothing in Activision, as I read

it, or in logic, suggests that a breach of duty action in a merger can adhere to stock

given in consideration for the stockholder interest taken in that merger.

         Activision itself involved a restructuring that left Activision stockholders with

their Activision stock intact, if diluted. In other words, the stock held by the plaintiff

in Activision was never eliminated, converted, exchanged, or otherwise

transmogrified. The plaintiff in Activision made “a conscious business decision to

sell [its stock, to which its duty claims adhered,]” into a market that “implicitly

reflects the value of any prospective lawsuits;” as a result, the Court held that sellers

had disassociated themselves from the corporate relationship, and could not join in

on a settlement for Activision stockholders related to the restructuring.53 Here, by

contrast, the breach of duty claim arose simultaneously with the sundering of the

52
     In re Sunstates, 2001 WL 432447, at *3.
53
     See Activision, 124 A.3d at 1043–44.

                                               16
relationship between the Plaintiff/stockholder and GECC, and cannot have adhered

to the GECC stock, which ceased to exist, or to the Sub 3 Preferred into which it was

converted, or to the GE Preferred which served, ultimately, as (theoretically

inadequate) consideration for Plaintiff’s assets taken in the Exit Plan.

      The Defendants concede that the fact that Plaintiff’s stock was taken, and

converted to stock of a different entity, means that Activision is not directly on point.

At oral argument, they clarified their position by suggesting that the conversion of

the Plaintiff’s interest from one security to another to a third, all within the same GE

“family,” means that I should treat the Plaintiff’s continued ownership of stock in

GE as part of an ongoing relationship between company and stockholder of the kind

referred to in Activision, and Plaintiff’s subsequent sale of its stock as transferring

its cause of action as well. I find this unpersuasive; unlike in Activision, the Plaintiff

did not continue to hold stock in GECC after the Exit Plan, it held different stock in

a different entity. Unlike Activision, the Plaintiff did not choose to sell its GECC

stock, and nothing in the record indicates that the market into which the Plaintiff

sold its new GE Preferred valued the potential breach-of-duty claim in the price of

the stock. I find that the Plaintiff’s claim did not inhere in the shares sold.

      Accordingly, I find that the Plaintiff has standing to seek redress for any injury

that arose from the forced conversion of its interest in GECC.

                                           17
                               III. CONCLUSION

      For the foregoing reasons, Defendants’ motion to dismiss the Complaint for

lack of standing is DENIED. Defendants’ motion to dismiss Count II for failure to

state a cause of action is GRANTED. I will consider the disclosure allegations of

Count III as part of the entire fairness review, without prejudice to Defendants’

ability to revive their motion to dismiss the disclosure claims as a motion for

judgment on the pleadings, or otherwise, should the state of the litigation make that

appropriate. The parties should provide an appropriate form of order.

                                         18