Globe Photos, Inc. owned a portfolio of millions of images of celebrities and musicians, including Marilyn Monroe, the Beatles, and Jimi Hendrix, some taken by famous photographers such as Frank Worth. Despite these assets, Globe didn’t make a go of it and its assets were used to pay off its secured creditors, leaving the shareholders and unsecured creditors with nothing. Some of the shareholders sued alleging that the directors breached their fiduciary duties.
The defendant directors unsuccessfully moved to dismiss on the basis that the plaintiffs lacked standing to sue them because the breach of fiduciary duty claim seeks to redress harm to Globe. Consequently, the claim belonged to Globe’s bankruptcy estate which the trustee controlled, and over which the bankruptcy court had exclusive jurisdiction. The plaintiffs countered by claiming that the breach of fiduciary duty claim hurt them specifically while benefiting another shareholder.
The Nevada Supreme Court reversed, finding that the plaintiffs’ claims were derivative, not direct, and the plaintiffs therefore lacked standing to bring the claim. Black v. Eighth Judicial Dist. Ct, 141 Nev. Adv. 11 (April 17, 2025). It should be noted that the Supreme Court applied Delaware, not Nevada, law because Globe was a Delaware corporation. Thus, it applied the two-part test enunciated in Tooley v. Donaldson, Lufkin & Jenrette, Inc., 845 A.2d 1031 (Del. 2004) which asks:
- who suffered the alleged harm (the corporation or the suing stockholders, individually); and
- who would receive the benefit of any recovery or other remedy (the corporation or the
stockholders, individually)?
The Nevada Supreme Court’s original decision issued as an unpublished order. The Court subsequently granted the petitioners’ (defendants below) request to publish the order as an opinion. The opinion was signed by all seven justices.