A claim for aiding and abetting a breach of fiduciary duty fails if a plaintiff cannot allege an underlying breach. In that circumstance there is no breach to aid and abet. Where a plaintiff sufficiently alleges a breach, however, it still also must allege, in nonconclusory terms, facts sufficient to show knowing participation in the alleged breach to state a claim for aiding and abetting. In Jacobs v. Meghi, C. A. No. 2019-1022-MTZ (Del. Ch. Oct. 8, 2020), the Delaware Court of Chancery parsed the allegations of plaintiff’s complaint to conclude that it had failed to allege “specific facts supporting an inference of knowing participation in a breach” and dismissed plaintiff’s complaint against the alleged aider and abettor. As explained below, the court also denied the plaintiff’s claim for unjust enrichment.

Background Facts

This case arose out of a financing transaction in which the alleged controlling stockholder, Oaktree Power Opportunities Fund III Delaware L.P., together with a minority stockholder, Ares Management Corp., agreed to invest $50 million in a Delaware corporation (the company), in exchange for newly issued preferred stock and warrants. The plaintiff alleged that the company could have received sufficient financing in an alternative transaction with Oaktree and a party other than Ares but that Oaktree used its controlling influence to cause the board to approve the Oaktree/Ares financing. The plaintiff alleged that the Oaktree/Ares financing resulted in a transfer of equity value of $134 million whereas the alternative transaction would have transferred only $60 million for the same $50 million investment.

Court of Chancery Finds a Failure to Plead Knowing Participation in the Board’s Alleged Breach

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