Plaintiffs, holders of preferred stock that are owed approximately $38.5 million, brought suit against Spanish Broadcasting System, Inc. for the company’s failure to repurchase plaintiffs’ preferred stock as required by the governing certificate of designation. Plaintiffs assert that Spanish Broadcasting breached its obligations under the certificate by failing to take all actions required or permitted under the DGCL—such as selling assets, issuing additional equity, or taking on new debt—to generate legally available funds that could be used to repurchase the outstanding preferred stock. Spanish Broadcasting moved to dismiss for lack of standing and failure to state a claim. The Court of Chancery denied that motion, finding instead that plaintiffs: (i) have standing under 6 Del. C. § 8-302(a), which provides that the purchaser of a security acquires all rights in such security; and (ii) sufficiently alleged that the company failed to take actions required or permitted by Delaware law that would have given it “legally available funds” necessary to repurchase the outstanding preferred stock. The Court’s decision can be found here.
Stephen E. Jenkins, Catherine A. Gaul, and Peter H. Kyle represent the plaintiffs in this action.