Martin J. Siegel v. Cantor Fitzgerald, L.P. and Howard Lutnick

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

MARTIN J. SIEGEL, :
:
Plaintiff, :
:
v. : C.A. No. 2024-0146-LWW
:
CANTOR FITZGERALD, L.P. and :
HOWARD LUTNICK, :
:
Defendants. :

MEMORANDUM OPINION

Date Submitted: January 9, 2025
Date Decided: April 10, 2025

Kimberly A. Evans, Lindsay K. Faccenda, Irene R. Lax, Robert Erikson, BLOCK &
LEVITON LLP, Wilmington, Delaware; Jason Leviton, Nathan Abelman, BLOCK
& LEVITON LLP, Boston, Massachusetts; Jeremy Friedman, David Tejtel, Lindsay
La Marca, David Rosenfeld, FRIEDMAN OSTER & TEJTEL PLLC, Bedford Hills,
New York; Counsel for Plaintiff Martin J. Siegel

C. Barr Flinn, Paul J. Loughman, Skyler A. C. Speed, YOUNG CONAWAY
STARGATT & TAYLOR LLP, Wilmington, Delaware; Patrick Gibbs, Shannon
Eagan, COOLEY LLP, Palo Alto, California; Sarah Lightdale, Bingxin Wu,
COOLEY LLP, New York, New York; Counsel for Defendants Cantor Fitzgerald,
L.P. and Howard Lutnick

Will, Vice Chancellor
In 2023, BGC Partners, Inc. converted from an umbrella partnership

corporation to a full C corporation. BGC’s majority stockholder, Cantor Fitzgerald,

L.P., had a contractual consent right over the reorganization. Cantor agreed to

exchange its limited partnership units and associated benefits for shares of high-vote

BGC common stock, which increased its voting power. Although BGC’s minority

stockholders owned the same number of shares before and after the corporate

conversion, their collective voting power was diluted.

The plaintiff asserts that the greater voting control Cantor secured through the

reorganization was an unfair, non-ratable benefit that damaged BGC’s minority

stockholders. He styles his breach of fiduciary duty claim as a direct one, brought

on behalf of a putative class whose voting power was diminished. But his claim is

fundamentally derivative under settled Delaware law.

The crux of the plaintiff’s complaint is that BGC overissued shares of

high-vote common stock to Cantor for inadequate consideration. This is an alleged

harm to BGC, which would receive the benefit of any recovery from Cantor. The

minority stockholders’ reduced voting power is an indirect, pro rata harm.

Because the plaintiff neither made a demand nor pleaded demand futility, his

complaint is dismissed under Rule 23.1.

1
I. FACTUAL BACKGROUND

The following facts are drawn from the Verified Class Action Complaint (the

“Complaint”), the documents it incorporates by reference, and matters subject to

judicial notice.1

A. BGC’s Reorganization

In 2023, BGC Partners, Inc. (“Old BGC”) completed a corporate

reorganization (the “Reorganization”) that made it a wholly owned subsidiary of

BGC Group, Inc. (“New BGC”), a newly formed holding company.2

BGC’s business remained the same throughout the Reorganization.3 BGC

was—and is—a leading global financial brokerage and technology company.4

1
Verified Class Action Compl. (Dkt. 1) (“Compl.”); see DFC Glob. Corp. v. Muirfield
Value P’rs, L.P., 172 A.3d 346, 351 n.7 (Del. 2017) (taking judicial notice of public filings
with the SEC); Freedman v. Adams, 2012 WL 1345638, at *5 (Del. Ch. Mar. 30, 2012)
(“Because the contested proxy statements were expressly referred to and heavily relied
upon in the Complaint, they are considered to be incorporated by reference into the
Complaint.”).
Exhibits to the Transmittal Affidavit of Skyler A. C. Speed in Support of the Opening Brief
in Support of Defendants’ Motion to Dismiss the Verified Class Action Complaint are cited
as “Defs.’ Ex. __.” Dkt. 15. Certain exhibits were produced in response to the plaintiff’s
Section 220 demand and are deemed incorporated by reference into the Complaint by
agreement of the parties. Defs.’ Ex. 2 (Confidentiality Agreement) § 7(h); see
Amalgamated Bank v. Yahoo! Inc., 132 A.3d 752, 797 (Del. Ch. 2016). Pincites to exhibits
refer to the pagination added by the defendants.
2
Compl. ¶ 1.
3
Because the business remained the same, this opinion refers to the enterprise as “BGC,”
unless there is reason to specify the pre- or post-Reorganization entity (i.e., Old BGC or
New BGC).
4
Defs.’ Ex. 1 (Sched. 14A, filed on May 26, 2023 (“Proxy”)) 17.
2
Cantor Fitzgerald, L.P. continues to hold a majority of BGC’s voting power—as it

did pre-Reorganization. The same Board of Directors and executive officers

oversaw BGC’s business both before and after the Reorganization.5

The Reorganization changed BGC’s corporate structure. Beforehand, BGC

was an umbrella partnership corporation (or Up-C). Afterward, BGC became a full

C corporation.

B. Old BGC’s Up-C Structure

An Up-C structure, in its most basic form, consists of a parent holding

corporation and a non-public operating subsidiary (typically a limited liability

company or limited partnership). For tax purposes, the operating business is a

pass-through entity, meaning that its profits and losses are passed directly to its

owners without being taxed at the entity level.6

Publicly-traded Old BGC sat atop a pass-through limited partnership, BGC

Holdings, L.P.7 Old BGC and BGC Holdings together owned 100% of two

non-public operating partnerships: (1) BGC Partners, L.P., which holds BGC’s U.S.

5
Proxy 27; see, e.g., Compl. ¶¶ 11-13. Two directors left the Board in December 2022,
after the Reorganization was approved but before it closed. Defs.’ Ex. 3 (Sched. 14A, filed
on Sept. 28, 2023) 13.
6
See generally Joshua Ford Bonnie & William R. Golden, Up-C Initial Public Offering
Structures: Overview, Practical Law, https://www.stblaw.com/docs/default-
source/related-link-pdfs/up-c-initial-public-offering-structures-overview.pdf (last visited
Apr. 8, 2025).
7
Compl. ¶ 21; see Proxy 10.
3
business, and (2) BGC Global Holdings, L.P., which holds BGC’s non-U.S.

business.8

The limited partners of BGC Holdings were Cantor and certain BGC founders

and employees. These limited partners participated in the economics of the

operating companies through their ownership of limited partnership (LP) units in

BGC Holdings.9 Old BGC’s stockholders, by contrast, participated in the economics

of the operating companies indirectly through their shares of Old BGC.10

Old BGC’s structure took roughly the following form:11

8
Compl. ¶ 21; see Defs.’ Ex. 3 at 115; Defs.’ Ex. 4 (Form 8-K, filed Apr. 7, 2008) 7. As
part of the 2008 transaction that created the Up-C structure, Cantor, Old BGC, and other
parties executed a Separation Agreement that gave Cantor a one-time right to cause Old
BGC to become a wholly owned subsidiary of a new holding company. Defs.’ Ex. 4 at
Ex. 2.4 (“Separation Agreement”) § 4.09.
9
Compl. ¶ 23; see Proxy 2.
10
Proxy 2.
11
Dkt. 34 (Defs.’ Jan. 9, 2025 Hr’g Presentation) 7.
4
1. Old BGC’s Common Stock

Old BGC had two classes of common stock. Class A common shares were

held by public stockholders and had one vote per share.12 Class B common shares

were held exclusively by Cantor and had ten votes per share.13 Cantor could convert

the Class B shares into Class A shares on a one-for-one basis at any time.14 The

classes were otherwise identical.15

Because of its ownership of high-vote Class B shares, Cantor held 57% of

BGC’s total voting power.16 Howard Lutnick was the Chairman and CEO of BGC

during the events at issue in this action.17 He recently stepped down from those roles

when he was confirmed as the United States Secretary of Commerce.18 At the time

of the Reorganization, Lutnick held a controlling interest in Cantor’s managing

general partner, CF Group Management, Inc., which gave him effective control over

Cantor and BGC both before and after the Reorganization.19

12
Compl. ¶ 22.
13
Id.
14
Id.
15
Id.
16
Id. ¶ 18.
17
Proxy 103; Defs.’ Ex. 3 at 10.
18
See Howard Lutnick Confirmed as 41st United States Secretary of Commerce; Steps
down from his positions at Cantor Fitzgerald, L.P., Cantor (Feb. 18, 2025),
https://www.cantor.com/howard-lutnick-confirmed-as-41st-united-states-secretary-of-
commerce-steps-down-from-his-positions-at-cantor-fitzgerald-l-p/.
19
Compl. ¶ 7; see Defs.’ Ex. 3 at 135.
5
2. BGC Holdings’ LP Units

Cantor also owned 58.2 million LP units of BGC Holdings, which were

exchangeable for shares of Old BGC common stock.20 Cantor had the right, under

BGC Holdings’ Second Amended and Restated Agreement of Limited Partnership

(the “Partnership Agreement”), to exchange its LP units for shares of Old BGC

common stock.21 Cantor’s LP units were “exchangeable for shares of BGC Partners

Class B Common Stock” in the first instance.22 If there were not enough Class B

shares authorized and unissued for a full exchange, Cantor would receive Class A

shares for the balance of its LP units.23

By the time the Reorganization was being negotiated, BGC’s Audit

Committee had already approved the issuance of 23.6 million additional shares of

Class B common stock.24 If Cantor had exercised its one-time exchange right, it

would have been entitled to 23.6 million shares of Class B common stock and 34.6

million shares of Class A common stock.25 That exchange would have increased

20
Proxy 31.
21
See Defs.’ Ex. 5 (Form 8-K, filed Dec. 19, 2017) Ex. 10.1 (“Partnership Agreement”).
22
Id. § 1.01 (defining Cantor’s LP units as defined as “Exchangeable Limited Partnership
Interests”); see also Proxy 30-31.
23
Partnership Agreement § 8.10(d).
24
See Proxy 56.
25
Id. at 35.
6
Cantor’s voting power to 68.4%.26 Any further issuances of Class B common stock

beyond the 23.6 million shares previously authorized required the Audit

Committee’s approval.27

C. The Reorganization Proposal
In June 2019, Lutnick told Old BGC’s Board that BGC management was

contemplating “a potential change by BGC to a pure corporate structure from the

existing partnership structure.”28

Because of standing contractual arrangements, BGC could not undertake this

sort of transaction without Cantor’s consent.29 Changing from an Up-C to a

C corporation would, however, eliminate certain benefits to Cantor from its indirect

ownership of BGC’s operating entities.30

Several months later, in November, BGC’s Audit Committee formed a special

committee to negotiate with Cantor about the proposed corporate conversion.31 The

special committee consisted of the same four outside directors who made up the

26
Id.
27
Id. at 56.
28
Compl. ¶ 25.
29
Proxy 55-56; see Separation Agreement § 4.09; see also Compl. ¶ 84.
30
See Proxy 59 (listing potential “several adverse consequences to Cantor” from a
corporate conversion transaction).
31
Compl. ¶ 28.
7
Audit Committee: David Richards, Linda Bell, William Moran, and Stephen

Curwood.32

Discussions were postponed due to the COVID-19 pandemic.33 They

resumed in April 2021 when Cantor sent a draft term sheet to BGC’s Board.34 The

term sheet contemplated that BGC would use a pair of mergers to replace Old BGC’s

Up-C structure with a single Delaware corporation.35 It proposed that “public [Old

BGC] stockholders w[ould] hold an equal or greater percentage of the fully diluted

share count of [New BGC] as of immediately after the [m]ergers as compared to

what they held as of immediately prior to the [m]ergers.”36

The term sheet was provided to both the Audit and Compensation Committees

of BGC’s Board.37 By end of June 2021, the Board had formed a “Joint Committee”

of the same four directors who made up the original special committee.38 The Joint

32
Id. ¶¶ 2 n.2, 28. The plaintiff alleges that these four directors were beholden to Lutnick.
Id. ¶¶ 9-10. This court rejected similar allegations about Bell, Moran, and Curwood in a
separate case involving a different BGC transaction. See In re BGC P’rs, Inc. Deriv. Litig.,
2022 WL 3581641, at *17, *21 (Del. Ch. Aug. 19, 2022), aff’d, 303 A.3d 337 (Del. 2023);
see also In re BGC P’rs Inc. Deriv. Litig., 2021 WL 4271788, at *6 (Del. Ch. Sept. 20,
2021).
33
Compl. ¶¶ 39-40.
34
Id. ¶ 43.
35
Id.
36
Id.
37
Id. ¶ 44.
38
Id. ¶¶ 52-53; see Proxy 56-57.
8
Committee met five times between April 30 and June 16, 2021, before its purpose

and mandate were formally defined by the Board on June 28.39

The Joint Committee engaged Debevoise & Plimpton LLP as its counsel and

Houlihan Lokey, Inc. as its financial advisor.40 Debevoise had worked with Old

BGC on multiple prior transactions; Houlihan was selected on the recommendation

of Debevoise.41 The Joint Committee also consulted the Compensation Committee’s

outside consultants.42

D. Negotiations Over Cantor’s LP Unit Exchange

The Joint Committee began negotiations with Cantor in August 2021.43 The

main sticking point was Cantor’s insistence that it be able to exchange all of its BGC

Holdings LP units for shares of BGC Class B common stock, rather than for a mix

of Class A and B shares. Cantor believed that BGC should authorize the issuance

of sufficient Class B shares—above the 23.6 million previously authorized by the

Audit Committee—for this purpose.44

39
Compl. ¶¶ 46-53.
40
Id. ¶¶ 29, 37, 46, 50.
41
Id. ¶ 17.
42
Id. ¶ 54.
43
Id. ¶¶ 60-61.
44
See Proxy 59.
9
Houlihan advised the Joint Committee that if all of Cantor’s LP units were

exchanged for Class B shares, Cantor would have approximately 70% of the

post-Reorganization company’s voting power.45 But if the Joint Committee refused

Cantor’s demand and only the previously-authorized 23.6 million Class B shares

were available, Cantor would have approximately 68% of the post-Reorganization

company’s voting power.46 The difference would give Cantor a cushion to maintain

its control if additional shares of common stock were issued in the future.47

During the fall of 2021, the Joint Committee sought concessions from Cantor

in exchange for the increased voting power Cantor desired.48 Cantor rejected nearly

all proposals.49 It insisted that it would not allow the Reorganization to proceed

unless it could convert its LP units entirely into shares of Class B stock.50

With Cantor unwilling to relent on its demand, the Joint Committee turned its

focus to different structures and terms for the conversion. In June 2022, it sent

Cantor a counterproposal contemplating that (1) 23.6 million of Cantor’s LP units

would convert into Class B shares, and (2) Cantor’s remaining LP units would

45
Compl. ¶ 64.
46
Id.; see supra notes 24-27 and accompanying text.
47
Compl. ¶¶ 65, 67.
48
Id. ¶¶ 66-75.
49
Id. ¶¶ 93-95.
50
Id.
10
convert into Class A shares, but could later convert into Class B shares if BGC issued

“a material amount of new equity” to fund an acquisition within a set time after the

Reorganization.51 Cantor said that a threshold of 10 million shares of new equity

was “generally acceptable” for this purpose, but the Joint Committee felt that it was

too low.52 In September, the Joint Committee sent Cantor a revised term sheet with

a threshold of “the greater of (1) $100 million of shares of new equity and (2) 25

million shares of new equity.”53 Cantor responded with a $75 million threshold; the

Joint Committee “folded.”54

E. Reorganization Approval and Implementation

On November 14, 2022, the Joint Committee recommended that the Board

approve the Reorganization.55 The Board, including Lutnick, did so the next day.56

On May 26, 2023, BGC issued a proxy statement that gave an overview of the

Reorganization’s negotiating history.57 It also explained public stockholders’ rights

before and after the Reorganization.58

51
Compl. ¶ 86 (quoting proposal).
52
Id. ¶ 85; see id. ¶¶ 87-88.
53
Id. ¶ 88; Proxy 54.
54
Compl. ¶ 90.
55
Id. ¶ 102.
56
Id. ¶ 8.
57
Proxy 54-56.
58
Id. at 123-26.
11
A majority of BGC’s public stockholders voted in favor of the

Reorganization.59 The Reorganization was not conditioned on a majority-of-the-

minority vote.60

The Reorganization closed on July 1, 2023.61 It was effectuated through three

separate merger transactions. First, BGC Holdings merged with its subsidiary, BGC

Holdings Merger Sub, LLC, with the merger sub surviving as a subsidiary of Old

BGC.62 Second, BGC Partners II, Inc.—a wholly owned subsidiary of New BGC—

merged with Old BGC, with Old BGC surviving as a direct subsidiary of New

BGC.63 Third, BGC Partners II, LLC—a wholly owned subsidiary of New BGC—

merged with BGC Holdings Merger Sub, LLC.64 In the end, Old BGC and BGC

Holdings became wholly owned subsidiaries of New BGC.

59
See Defs.’ Ex. 11 (Form 8-K, filed July 3, 2023) 7.
60
See Compl. ¶¶ 49, 71 & n.4.
61
Defs.’ Ex. 11 at 2.
62
Defs.’ Ex. 3 at 90-91.
63
Id.
64
Id.
12
New BGC’s structure took roughly the following form:65

Two exchange transactions were intrinsic to this Reorganization. One

transaction involved the exchange of shares of Old BGC common stock for shares

of New BGC common stock. Shares of Old BGC Class A common stock converted

into New BGC Class A common stock on a one-for-one basis.66 Cantor’s 45.9

million shares of Old BGC Class B common stock converted into 45.9 million shares

of New BGC Class B common stock.67 Another transaction involved the exchange

of Cantor’s 58.2 million LP units in BGC Holdings for 58.2 million shares of New

BGC Class B common stock.68 Cantor also exercised purchase rights granted by

65
Dkt. 34 (Defs.’ Jan. 9, 2025 Hr’g Presentation) 8.
66
Proxy 56.
67
Id. at 56, 80.
68
Id.
13
BGC Holdings’ Partnership Agreement to acquire another 5.7 million exchangeable

LP units that converted into Class B shares.69 In total, Cantor held approximately

110 million shares of New BGC Class B common stock after the Reorganization.70

As a result of these transactions, Cantor’s total voting power over BGC

increased from 57.7% to 75.6%.71 This increase was about 7.2% higher than

Cantor’s voting power would have been “if Cantor had exchanged its exchangeable

limited partnership interests in BGC Holdings for [BGC] common stock absent the

corporate conversion.”72 Although BGC’s minority stockholders continued to hold

the same number of shares before and after the Reorganization, their collective

voting power decreased from 42.3% to 24.4%.73

F. This Litigation

On February 16, 2024, Martin J. Siegel brought this putative class action on

behalf of himself and Class A stockholders of Old BGC whose shares were

69
Id.
70
Id. at 80.
71
Id. at 35. The plaintiff alleges that the Reorganization increased Cantor’s voting power
to 68.4%. Based on BGC’s proxy statement and other documents incorporated by
reference into the Complaint, this figure appears to be an error. See Compl. ¶ 4 (alleging
that Cantor’s voting power increased to 68.4% after the Reorganization, “further cementing
Cantor’s control over the Company”); see also id. ¶¶ 103, 111.
72
Proxy 55.
73
Id. at 3 (“[Holders of BGC Partners Class A common stock will receive an equal number
of shares of BGC Group Class A common stock . . . .”); see id. at 35.
14
exchanged for Class A shares of New BGC in the Reorganization.74 His suit follows

a production of books and records from BGC under 8 Del. C. § 220. He alleges a

single breach of fiduciary duty against Cantor and Lutnick.75

The defendants moved to dismiss the Complaint on April 22, 2024.76 Briefing

on the motion was complete by August 16.77 After oral argument on January 9,

2025, the motion was taken under advisement.78

II. ANALYSIS

The plaintiff alleges that Cantor (as BGC’s controlling stockholder) and

Lutnick (as its “ultimate controller”) breached their fiduciary duties by undertaking

a Reorganization that benefitted Cantor and harmed public stockholders.79 The

defendants have moved to dismiss this claim under Court of Chancery Rule 23.1.80

They argue that the claim is derivative and that the plaintiff neglected to plead

demand futility. In response, the plaintiff insists that his claim is direct.

74
Compl. 1; id. ¶¶ 124-26.
75
Id. ¶¶ 123-25.
76
Opening Br. in Supp. of Defs.’ Mot. to Dismiss the Verified Class Action Compl. (Dkt.
15) (“Defs.’ Opening Br.”).
77
Pl.’s Answering Br. in Opp’n to Defs.’ Mot. to Dismiss (Dkt. 21) (“Pl.’s Answering
Br.”) Defs.’ Reply Br. in Support of Their Mot. to Dismiss the Verified Class Action
Compl. (Dkt. 31) (“Defs.’ Reply Br.”).
78
See Dkt. 33.
79
Compl. ¶ 1.
80
The defendants’ motion is also brought under Rule 12(b)(6). See Dkt. 15 (Mot.). Their
opening brief focuses on their Rule 23.1 arguments. See Defs.’ Opening Br. 34.
15
I begin by applying the Tooley test and conclude that the plaintiff’s claim is

derivative. I go on to consider each of the plaintiff’s arguments for treating his claim

as direct. None succeed. Because the plaintiff neither made a demand nor pleaded

demand futility, the Complaint is dismissed under Rule 23.1.

A. The Tooley Test

The plaintiff alleges that Cantor and Lutnick breached their fiduciary duties

by “agreeing to and entering into the Reorganization without ensuring that the

Reorganization was entirely fair to [the plaintiff] and other public stockholders.” 81

Although the plaintiff styles his claim as a direct one, this court must “look beyond

the labels used to describe the claim, evaluating instead the nature of the wrong

alleged.”82 To do so, the court applies the test set out in Tooley v. Donaldson, Lufkin

& Jenrette, Inc.83 Under Tooley, the determination of whether a claim is direct or

derivative turns “solely on the following questions: (1) who suffered the alleged

harm (the corporation or suing stockholders, individually); and (2) who would

receive the benefit of any recovery or other remedy (the corporation or the

stockholders, individually)?”84

81
Compl. ¶ 125.
82
Sciabacucchi v. Liberty Broadband Corp., 2018 WL 3599997, at *7 (Del. Ch. July 26,
2018).
83
845 A.2d 1031 (Del. 2004).
84
Id. at 1033.
16
The answers to both questions indicate that the plaintiff’s claim is derivative.

The harm complained of is an overpayment to Cantor by BGC in the form of Class

B shares. The benefit of any recovery would flow to BGC, with its minority

stockholders benefitting indirectly and pro rata.

1. Who suffered the alleged harm?

The plaintiff claims that the Reorganization was unfair to BGC’s minority

stockholders because it “increased Cantor’s voting power” without Cantor paying

“adequate consideration.”85 The Complaint states that “the Reorganization allowed

Cantor, and therefore Lutnick, to materially increase their control over the Company.

By sharp contrast, any benefits bestowed upon Old BGC were, at best, nebulous.”86

This is a classic overpayment claim, which is “exclusively derivative.”87

In Brookfield Asset Management, Inc. v. Rosson, the Delaware Supreme Court

reached the same conclusion regarding a similar claim.88 There, minority

stockholder plaintiffs alleged that the corporation issued shares to its controlling

85
Compl. ¶ 103.
86
Id. ¶ 1; see also id. ¶¶ 91, 92, 94, 109 (faulting the Joint Committee for “acquiesc[ing]”
to Cantor in negotiating the Reorganization, including by not securing Cantor’s agreement
to bear more of the “expenses incurred by Old BGC/New BGC” or to “indemnify Old
BGC/New BGC for any and all material income taxes”); id. ¶ 113 (alleging that Houlihan
did not “perform a true ‘give-get’ analysis”).
87
See Brookfield Asset Mgmt., Inc. v. Rosson, 261 A.3d 1251, 1266-67 (Del. 2021).
88
Id. at 1259.
17
stockholder for an unfairly low price.89 The plaintiffs argued that the transaction

increased the controlling stockholder’s voting power, resulting in the dilution of

minority stockholder’s financial and voting interests.90

With respect to Tooley’s first prong, the court reasoned that the corporation

suffered the alleged “harm” of “overpayment (or over-issuance) of shares to the

controlling stockholder” because “the value of the entire corporate entity, of which

each share of equity represents an equal fraction,” was diminished.91 It explained

that “when a corporation exchanges equity for assets of a stockholder who is already

a controlling stockholder for allegedly inadequate consideration, the

dilution/overpayment claim is exclusively derivative.”92

Applying the Tooley test in this case leads to the same result. The plaintiff’s

claim, at bottom, is that BGC overissued high-vote Class B shares to Cantor—its

controlling stockholder.93 The resulting injury was to BGC, which “has a claim to

89
Id. at 1257-59. The plaintiffs also asserted an entrenchment claim, alleging that the stock
sale allowed Brookfield to expand its majority voting control from 51% to 65.3%, such
that a subsequent stock issuance by the company would not eliminate Brookfield’s majority
stockholder status. Id. at 1280.
90
Id. at 1260.
91
Id. at 1280.
92
Id. at 1266.
93
Compl. ¶ 103 (“[T]he Reorganization increased Cantor’s voting power . . . [and] public
stockholders did not receive adequate consideration for conferring this significant benefit
on Cantor.”).
18
compel the restoration of value of the overpayment” to Cantor.94 Any harm to the

minority stockholders “flowed indirectly to them in proportion to, and via, their

shares in” BGC.95

The plaintiff cannot demonstrate an injury to the minority stockholders “that

is not dependent on [this] prior injury to the corporation.”96 He asserts that minority

stockholders “receiv[ed] an unfairly low price for their shares.”97 But his claim

implicates a threshold harm to BGC: that BGC received inadequate consideration

from Cantor (primarily Cantor’s BGC Holdings LP units) in exchange for the

issuance of additional shares of BGC Class B common stock.98

Cantor received the Class B shares (and resulting increase in voting power)

from BGC—not public stockholders. If Cantor had paid “fair value” in exchange,

94
Brookfield, 261 A.3d at 1266.
95
Id. (“The economic and voting power dilution that allegedly harmed the stockholders
flowed indirectly to them in proportion to, and via, their shares in [the corporation], and
thus any remedy should flow to them in the same way, derivatively via the corporation.”).
96
Agostino v. Hicks, 2004 WL 44398, at *7 (Del. Ch. Mar. 11, 2004) (“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?”).
97
Pl.’s Answering Br. 20.
98
See Compl. ¶ 1.
19
the payment would have been made to BGC—not public stockholders. Thus, the

harm identified is a derivative one.99

2. Who would receive the benefit of any recovery?

Because BGC suffered the primary harm for its alleged overissuance of Class

B shares to Cantor, it “logically follow[s]” that BGC would receive the benefit of

any recovery.100 BGC, then, is the party with “a claim to compel the restoration of

the value of the overpayment.”101 BGC could, for example, demand additional

payment from Cantor.102 In fact, the Complaint expressly seeks “monetary,

99
See Erisman v. Zaitsev, 2021 WL 6134034, at *15 & n.152 (Del. Ch. Dec. 29, 2021)
(holding that dilution claims concerning an LLC’s issuance of new units to a target as
merger consideration were “exclusively derivative” (citing Brookfield, 261 A.3d at 1278));
New Enter. Assoc. 14 v. Rich, 292 A.3d 112, 156 (Del. Ch. 2023) (“[T]he Delaware
Supreme Court h[eld] definitively [in Brookfield] that claims for equity dilution are only
and always derivative.”).
100
Tooley, 845 A.2d at 1036.
101
Brookfield, 261 A.3d at 1266.
102
See id. at 1266 n.64 (observing that a potential remedy “could be cancelling the shares
and allowing the corporation to sell them for fair value or requiring the acquirer to pay fair
value for the shares”). One of the possible remedies identified by the plaintiff involves
converting some of Cantor’s Class B shares into Class A shares. If that were to occur, the
remedy would still not flow directly to BGC’s minority stockholders.
20
recessionary, and/or nominal damages to the Class and/or New BGC.”103 The

minority stockholders would benefit from that recovery pro rata.104

The plaintiff insists that any recovery could not be shared “pro rata among all

stockholders” because one significant stockholder—Cantor—was unharmed.105 But

the same was true of the controlling stockholder in Brookfield, whose voting power

increased from 51.0% to 65.3% in the challenged transaction.106 The Delaware

Supreme Court explained that only the corporation could compel the restoration of

value for the overissuance, and the minority stockholders would be “beneficiaries of

that recovery on [a] pro rata basis.”107 So too here.

B. The Plaintiff’s Arguments

The plaintiff maintains that his claim is direct for several reasons. He asserts

that his claim (1) concerns a direct impairment of stockholder rights, (2) falls within

103
Compl. 46 (emphasis added); cf. Brookfield, 261 A.3d at 1266 (noting that the minority
stockholder plaintiffs sought recovery on behalf of the company). The plaintiff asserts that
this admission was “inadvertent” and states that he “will amend his Complaint to remove
the language if the Court desires.” Pl.’s Answering Br. 19 n.57. But he has opted not to
amend his pleading. Even if he had, removing this text would not turn a derivative claim
into a direct one.
104
See Brookfield, 261 A.3d at 1277 (“If the corporation recovers the overpaid funds, then
the minority shareholders are beneficiaries of that recovery on that same pro rata basis.”).
105
Pl.’s Answering Br. 20.
106
Brookfield, 261 A.3d at 1259.
107
Id. at 1277 (“In a corporate-overpayment-to-a-controlling shareholder claim, the
amount of the overpayment deprives the corporation of assets to which minority
shareholders only have a pro rata claim as residual claimants on the corporation’s assets.

21
an exception to the general rule for overpayment claims, and (3) is distinguishable

from Brookfield. None of these arguments change the reality that his claim is

derivative under Tooley.

1. Alleged Franchise Impairment

First, the plaintiff argues that “claims challenging interference with and/or

reduction of the stockholder voting franchise involve fundamentally direct harm.”108

This theory finds no support in our law.109 Stockholders lack a “fundamental” right

to any fixed percentage of the voting power.110 And “[d]ilution is not per se

If the corporation recovers the overpaid funds, then the minority shareholders are
beneficiaries of that recovery on the same pro rata basis.”).
108
Pl.’s Answering Br. 18.
109
The cases relied on by the plaintiff concern either personal rights held by stockholders
(i.e., redemption rights in the context of special purpose acquisition companies) or
challenges to stockholder rights plans. Id. Neither situation is apt. In the first type of
matter, the alleged harm could not have “run to the corporation” because the corporation
lacked a redemption right and public stockholders’ funds “did not belong to [the
corporation] until those stockholders opted not to redeem.” In re MultiPlan Corp.
S’holders Litig., 268 A.3d 784, 802 (Del. Ch. 2022); see also Laidlaw v. GigAcquisitions2,
LLC, 2023 WL 2292488, at *6 (Del. Ch. Mar. 1, 2023). In the other type, the court held
that the plaintiffs stated direct claims where poison pills “infringed on stockholders’
fundamental rights to sell and vote.” Williams Cos. S’holder Litig., 2021 WL 754593, at
*19-20 (Del. Ch. Feb. 26, 2021); see In re Gaylord Container Corp. S’holders Litig., 747
A.2d 71, 79 (Del. Ch. 1999) (recognizing that impairment of stockholders’ “voting power
or freedom” or “right to receive sales offers” gives rise to direct claims). But the plaintiff
here does not allege that the Reorganization imposed any restrictions on the minority
stockholders’ ability to vote or sell their shares.
110
See Williams, 2021 WL 754593, at *20 (“Modern corporate law recognizes that
stockholders have three fundamental, substantive rights: to vote, to sell, and to sue.”
(citation omitted)).
22
wrongful.”111 Were it otherwise, existing stockholders would have a cognizable

direct claim whenever a corporation issues new equity.

The plaintiff’s argument harkens back to the now-disregarded concepts of

“special injury” and “dual-natured claims.”112 Our law in this area has followed a

winding path. Walking the steps that led to its current state reveals the flaws in the

plaintiff’s position.

The “special injury” concept emerged in Elster v. American Airlines—a Court

of Chancery decision from 1953.113 Elster held that “where the alleged injury is to

both the corporation and to the stockholder, the stockholder must allege a ‘special

injury’ to maintain a direct action.”114 Forty years later, in In re Tri-Star Pictures,

Inc. Litigation, the Delaware Supreme Court explained that “[a] special injury is

established where there is a wrong suffered by plaintiff that was not suffered by all

stockholders generally or where the wrong involves a contractual right of the

stockholders, such as the right to vote.”115 There, minority stockholders’ dilution

111
Hindlin v. Gottwald, 2020 WL 4206570, at *4 (Del. Ch. July 22, 2020) (“As a matter
of basic arithmetic, shareholders are diluted every time a company issues new equity.”).
112
See Pls.’ Answering Br. 19-20.
113
100 A.2d 219, 222 (Del. Ch. 1953).
114
Tooley, 845 A.2d at 1037.
115
634 A.2d 319, 330 (Del. 1993).
23
claims were allowed to proceed as direct because the plaintiffs alleged a “special

injury.”116

Tooley explicitly overruled Tri-Star and rejected the “special injury”

concept.117 The court emphasized that the “proper analysis” should focus on “the

nature of the wrong and to whom the relief should go,” not whether a plaintiff

suffered any “special injury.”118

Nevertheless, the concept reemerged in Gentile v. Rossette, which was

decided two years after Tooley.119

In Gentile, a corporation’s CEO and controlling stockholder forgave a portion

of the company’s $3 million debt to him in exchange for additional equity that

allegedly exceeded the value of the debt.120 The CEO’s equity position in the

company rose from 61.19% to 93.49% because of the transaction, and the minority

stockholders suffered a corresponding decrease in voting power.121 Relying on

Id. (“[A] claim of stock dilution and a corresponding reduction in a stockholder’s voting
116

power is an individual claim.”).
117
See Tooley, 845 A.2d at 1035 (observing that the “special injury” concept is “amorphous
and confusing”); id. at 1038 n.21 (“In the Tri-Star case, however, this Court lapsed back
into the ‘special injury’ concept, which we now discard.”).
118
Id. at 1039.
119
906 A.2d 91 (Del. 2006).
120
Id. at 94.
121
Id. at 95.
24
Tri-Star, the Gentile court held that the minority stockholders stated a “dual-natured”

claim with both direct and derivative characteristics.122

The court observed that the plaintiffs’ claim was derivative as it pertained to

the corporation’s “overpayment (or ‘over-issuance’) of shares to the controlling

stockholder.”123 But it concluded that the claim was also direct based on the

“unique” harm minority stockholders suffered: the “extraction from the public

shareholders, and a redistribution to the controlling shareholder, of a portion of the

economic value and voting power embodied in the minority interest.”124 The Gentile

court formulated a test for such “dual-natured” claims:

A breach of fiduciary duty claim having this dual character arises
where: (1) a stockholder having majority or effective control
causes the corporation to issue “excessive” shares of its stock in
exchange for assets of the controlling stockholder that have a
lesser value; and (2) the exchange causes an increase in the
percentage of the outstanding shares owned by the controlling
stockholder, and a corresponding decrease in the share
percentage owned by the public (minority) shareholders.125

In Brookfield, the Delaware Supreme Court overruled Gentile and abrogated

“dual-natured” claims.126 The court rejected Gentile’s focus “on whether one group

122
Id. at 100.
123
Id.
124
Id.
125
Id. at 99-100.
126
Brookfield, 261 A.3d at 1277.
25
of stockholders (a controller) was impacted differently from another group (the

public or minority holders) as improperly relying on an aspect of Tri-Star’s special

injury concept.”127 It clarified that “Tooley’s first prong instead properly focuses on

who suffered the alleged harm and requires that the stockholder demonstrate that he

or she has suffered an injury that is not dependent on an injury to the corporation.”128

Here, the plaintiff asserts that BGC’s minority stockholders suffered an injury

from the Reorganization—a dilution in voting power—that was not shared by

Cantor, the majority stockholder.129 But his theory draws upon the same “special

injury” concept that Tooley eliminated.130 Similarly, the plaintiff maintains that

BGC’s minority stockholders “suffered reduced voting power by virtue of [Cantor]

increasing [its] voting control via the Reorganization.”131 This framing mirrors the

127
Id. at 1273.
128
Id.
129
See Pl.’s Answering Br. 20 (“Lutnick suffered no harm from the Reorganization.”).
130
See Tri-Star, 634 A.2d at 330 (“A special injury is established where there is a wrong
suffered by plaintiff that was not suffered by all stockholders generally . . . .”); Tooley, 845
A.2d at 1038 n.21 (“In the Tri-Star case, however, this Court lapsed back into the ‘special
injury’ concept, which we now discard.”); see also Brookfield, 261 A.3d at 1273 (“Gentile,
by focusing on whether one group of stockholders (a controller) was impacted differently
from another group (the public or minority holders), arguably relied on one aspect of Tri-
Star’s special injury concept.”).
131
Pl.’s Answering Br. 19.
26
“dual-natured” claim recognized in Gentile.132 After Brookfield, this concept is

foreclosed.133

2. The Parnes Exception

The Brookfield court confirmed that “[s]tockholders may sue on their own

behalf (and, in appropriate circumstances, as representatives of a class of

stockholders) to seek relief for direct injuries that are independent of any injury to

the corporation.”134 The plaintiff asserts that his claim falls into that exception. He

cites to Parnes v. Bally Entertainment Corp. and its progeny for the notion that

“challenges to the fairness of a merger itself are direct.”135 Under this precedent, he

contends, his claim is “classically direct” because it “attacks the fairness of the series

of mergers comprising the Reorganization . . . .”136

In Parnes, the Delaware Supreme Court observed that stockholder actions

attacking the fairness or validity of a merger can be maintained directly. 137 There,

the CEO of a merger target allegedly extracted “substantial sums of money” and

132
See Gentile, 906 A.2d at 99-100.
133
Brookfield, 261 A.3d at 1277.
134
Id. at 1272.
135
Pl.’s Answering Br. 21 & n.79 (citing cases).
136
Id. at 2; see also id. at 21 (“Plaintiff challenges the fairness of a series of mergers with
an unfair exchange ratio that resulted in the Company’s public stockholders suffering a
reduction in voting power.”).
137
722 A.2d 1243 (Del. 1999).
27
“valuable [target company] assets” from the acquirer during negotiations, despite

lacking the authority to demand them.138 The plaintiff—a former stockholder of the

target—alleged that other potential buyers “might have paid a higher price for [the

target] but were discouraged from bidding because they were unwilling to participate

in illegal transactions.”139

The court permitted the stockholder, whose derivative standing was

extinguished, to pursue a direct claim. It reasoned that “[a] stockholder who directly

attacks the fairness or validity of a merger alleges an injury to the stockholders, not

the corporation, and may pursue such a claim even after the merger at issue has been

consummated.”140

The plaintiff here draws upon this language from Parnes, characterizing his

claim as “a challenge to the validity of the [Reorganization] itself.”141 But the

exception recognized in Parnes is not so broad.142 As Chief Justice (then-Vice

Chancellor) Strine observed, a target stockholder pressing a direct claim under

138
Id. at 1245-46.
139
Id. at 1246.
140
Id. at 1245; see also Chaffin v. GNI Grp., Inc., 1999 WL 721569, at *3, 7-8 (Del. Ch.
Sept. 3, 1999) (applying Parnes to claims challenging target company directors’ alleged
receipt of “improper personal benefits” that “reduced the consideration received by [the
target]’s public shareholders,” and holding that the claims were direct).
141
Pl.’s Answering Br. 21 (quoting Chaffin, 1999 WL 721569, at *7).
142
In re NYMEX S’holder Litig., 2009 WL 3206051, at *10 (Del. Ch. Sept. 30, 2009)
(“Delaware Courts have interpreted the Parnes exception very narrowly.”).
28
Parnes must “allege facts showing that [a] side payment improperly diverted

proceeds that would have, if the defendant directors had acted properly, ended up in

the consideration paid to the target stockholders.”143

The circumstances outlined in the present Complaint stand in stark contrast to

scenarios where the Parnes exception has applied. The plaintiff—and the BGC

minority stockholders he seeks to represent—are not “target” stockholders.

Although the relevant transaction was effected through several mergers, BGC was

not “acquired.” This is a crucial distinction from the Parnes line of cases.144 In an

acquisition, the acquiror pays consideration to the target’s stockholders in exchange

143
Golaine v. Edwards, 1999 WL 1271882, at *9 (Del. Ch. Dec. 21, 1999); see Blue v.
Fireman, 2022 WL 593899, at * 9 (Del. Ch. Feb. 28, 2022) (distilling the Parnes exception
as three “gating principles”: (1) “[t]he side transaction must divert assets stockholders were
otherwise going to receive”; (2) “[t]he side transaction’s effect on the merger’s price or
process must be material, so as to have affected the merger’s fairness”; and (3) “the
diversion must be improper, as gauged under essentially a merits inquiry, turning on
whether the side transaction was a product of misconduct like a breach of fiduciary duty”);
see also Houseman v. Sagerman, 2014 WL 1600724, at *13 (Del. Ch. Apr. 16, 2014); In
re Straight Path Commc’ns Inc. Consol. S’holder Litig., 2018 WL 3120804, at *11 (Del.
Ch. June 25, 2018); Brokerage Jamie Goldenberg Komen Rev Tru U/A 06/10/08 Jamie L.
Komen Trustee For Komen v. Breyer, 2020 WL 3484956, at *11 (Del. Ch. June 26, 2020).
144
See, e.g., Parnes, 722 A.2d at 1244 (Hilton’s acquisition of Bally); Chaffin, 1999 WL
721569, at *3 (399 Venture Partners’ acquisition of GNI); Straight Path, 2018 WL
3120804, at *7 (Verizon’s acquisition of Straight Path); Oliver v. Boston Univ., 2000 WL
1091480, at *5 (Del. Ch. July 18, 2000) (Ligand Pharmaceuticals Inc.’s acquisition of
Seragen, Inc.); Blue, 2022 WL 593899, at *4 (TPCO Holding Corp.’s acquisition of Left
Coast Ventures, Inc.); In re Ply Gem Indus., Inc. S’holders Litig., 2001 WL 755133, at *1
(Del. Ch. June 26, 2001) (Nortek, Inc.’s acquisition of Ply Gem Industries, Inc.).
29
for their shares. In the Reorganization, there was no acquiror paying consideration

to the minority stockholders. BGC’s corporate structure merely changed.

Further, unlike the cases relied on by the plaintiff, there was no side payment

that diverted value from minority stockholders.145 BGC’s purchase of Cantor’s LP

interests was not a side deal. It was one of two primary exchanges intrinsic to the

Reorganization.146 The additional shares of Class B stock issued to Cantor were not

“assets” that BGC’s public “stockholders were otherwise going to receive.”147

145
Pl.’s Answering Br. 19-21 & n.66; see Parnes, 722 A.2d at 1245 (describing a side
transaction that involved the buyer paying the target’s CEO “substantial sums of money,”
and noting that other potential acquirers “might have paid a higher price” but were
unwilling to make side payments to the CEO); Chaffin, 1999 WL 721569, at *3
(considering a side transaction that involved the buyer approving cash bonuses and loan
forgiveness for certain target company directors); Oliver, 2000 WL 1091480, at *5
(addressing a side transaction that involved the buyer paying a “bribe” to the target’s
controlling stockholders, which “came out of the funds that otherwise would have been
paid to plaintiffs and the rest of the purported class”); Ply Gem, 2001 WL 755133, at *3
(evaluating a side transaction where the buyer paid $22 million to the target’s CEO and
forgave his $17 million debt to the company, which led the buyer to reduce the per share
price it was willing to by $0.75 to meet the CEO’s demands; Straight Path, 2018 WL
3120804, at *12, *19 (discussing a side transaction involving the target settling an
indemnification claim “potentially worth hundreds of millions of dollars” against its
controlling stockholder for only $10 million (plus some proceeds from a sale of assets),
which had “the effect of depriving [the target’s] stockholders of one-fifth of the merger
consideration”).
146
See supra notes 66-70 and accompanying text.
147
Blue, 2022 WL 593899, at *9.
30
There was no sale of the company, change of control, or diversion of

consideration from the minority. BGC public stockholders sold nothing.148 They

retained derivative standing after the Reorganization.149 The Parnes exception is

inapplicable in these circumstances.

3. Brookfield’s Application

Finally, the plaintiff strives to distinguish Brookfield by arguing that it is

limited to the specific context of a corporation “raising capital by issuing new

equity.”150 Not so. Delaware courts have interpreted Brookfield to hold that dilution

claims are derivative, regardless of the nature or purpose of the underlying

transaction.151

The plaintiff recognizes that Brookfield applies to “assets-for-stock” cases.152

He argues that his claim is nevertheless direct because the Reorganization did not

148
The Tooley analysis can take on heightened significance in the post-merger context,
where stockholders “typically lose standing to pursue derivative claims when a merger
extinguishes their status.” Komen, 2020 WL 3484956, at *7; see also Blue, 2022 WL
593899, at *5. That is not the case here.
149
See infra Section II.C.
150
Pl.’s Answering Br. 25; see also id. at 3 (“Unlike the private placement in Brookfield,
the Reorganization was not effectuated to fundraise by issuing new equity.”).
151
See, e.g., New Enter. Assocs., 292 A.3d at 156 (“[T]he Delaware Supreme Court h[eld]
definitively that claims for equity dilution are only and always derivative.”); Erisman v.
Zaitsev, 2021 WL 6134034, at *15 & n.152 (Del. Ch. Dec. 29, 2021) (applying Brookfield
in holding that a dilution claim arising from an LLC’s issuance of new units to a target as
merger consideration was derivative, and noting that “dilution claims are exclusively
derivative”).
152
Pl.’s Answering Br. 25.
31
involve an exchange of assets for stock.153 Instead, he insists, the relevant exchange

involved Cantor taking voting power from BGC’s minority stockholders without

giving them anything in return.154 This is a mischaracterization of the

Reorganization.

The Reorganization involved BGC exchanging additional Class B shares for

Cantor’s LP units—and its consent to the Reorganization.155 Cantor also gave up

certain benefits and contractual rights it enjoyed under the Up-C structure.156

Cantor’s LP interests (and the associated benefits) are the “assets” it relinquished in

exchange for additional Class B shares.157 The plaintiff’s claim, then, hinges on

153
Id. at 26 (“Old BGC did not pay—let alone overpay—for any assets in granting Cantor
increased voting power.”); id. at 18 (“[T]he Company did not pay Lutnick for any assets in
connection with the Reorganization”).
154
Id. at 18 (“Old BGC stockholders (including Plaintiff and the Class) suffered a reduction
in their voting power in the post-Reorganization Company without obtaining adequate
consideration.”); id. at 23 (distinguishing the Reorganization from a “Revlon sale
process”); see also supra note 103 and accompanying text (noting that the Complaint seeks
damages and relief on behalf of New BGC).
See supra note 29 and accompanying text (noting that Cantor’s consent was required);
155

Compl. ¶¶ 61-62.
156
See supra notes 8, 30 and accompanying text (discussing the tax consequences of BGC
Holdings being a pass-through entity and the contractual rights Cantor had in BGC
Holdings); see also Proxy 59 (“Cantor could bear additional taxes because this equity stake
would be in a corporation that pays taxes . . . as opposed to a partnership with pass-through
taxation; and . . . distributions from BGC Holdings to its limited partners are mandatory
whereas distributions from the holding company to its stockholders would be subject to
board approval.”).
157
See, e.g., Fleer Corp. v. Topps Chewing Gum, Inc., 539 A.2d 1060, 1062 (Del. 1988)
(“The rights arising out of contracts have long been recognized as property rights.”);
Delaware Open MRI Radiology Assocs., P.A. v. Kessler, 898 A.2d 290, 327-28 (Del. Ch.

32
whether BGC gave Cantor too many Class B shares—that is, whether it overpaid

Cantor—in exchange.

Brookfield is on point. It decisively confirms that the plaintiff’s claim is

derivative under the Tooley test.

C. Demand Futility

The plaintiff was not deprived of derivative standing when the Reorganization

closed.158 The Reorganization amounted to a “corporate reshuffling.”159 It

2006) (holding that stockholders who were “involuntarily deprived of . . . the favorable tax
treatment that accompanies [a pass-through entity]” as a result of a squeeze-out merger
“should receive compensation for those expected benefits”).
158
See Lewis v. Ward, 852 A.2d 896, 901-02 (Del. 2004) (recognizing that derivative
standing survives post-merger “if the merger is in reality merely a reorganization which
does not affect plaintiff’s ownership in the business enterprise” (citation omitted)); see also
Schreiber v. Carney, 447 A.2d 17, 22 (Del. Ch. 1982) (holding that a plaintiff whose shares
were exchanged in a reorganization for shares in a newly-created holding company retained
derivative standing because “the merger had no meaningful effect on the plaintiff’s
ownership of the business enterprise” and the “structure of the old and new companies
[was] virtually identical”); Bamford v. Penfold, L.P., 2020 WL 967942, at *29 (Del. Ch.
Feb. 28, 2020) (applying the reorganization exception when “corporate reshuffling” did
not result in changes in the parties’ “economic interests”); Harris v. Harris, 2023 WL
115541, at *11 (Del. Ch. Jan. 6, 2023) (applying the reorganization exception when the
transaction “can be regarded as the epitome of a corporate reshuffling,” which involved the
company merging into a newly-created shell corporation, and the surviving entity “held
only the assets that the Company brought to the transaction”).
159
See Lewis, 852 A.2d at 904 (pointing to “equitable concerns that have caused Delaware
courts to allow a plaintiff [derivative] standing following a mere corporate
reorganization”). The plaintiff seems to acknowledge as much by using the term
“Reorganization” in his Complaint to describe the Up-C conversion. See, e.g., Compl. 1
(defining the corporate conversion transaction as the “Reorganization”); cf. Komen, 2020
WL 3484956, at *15 (declining to apply the reorganization exception when “the Complaint
d[id] not allege that [a] spinoff was a mere reorganization”).
33
“reorganize[d] and simplif[ied] the organizational structure of the BGC entities.”160

Class A stockholders’ economic interests were unchanged.161

To maintain his derivative claim, the plaintiff must satisfy Rule 23.1. Because

he did not make a pre-suit demand on BGC’s Board, he must establish that a demand

on the BGC Board would have been futile.162 He made no attempt to do so.163

III. CONCLUSION

The plaintiff’s claim is derivative under Tooley. He did not make a demand

on BGC’s Board. He did not plead demand futility. The Complaint is therefore

dismissed under Rule 23.1.

160
Proxy 2.
161
Compl. ¶ 112 (quoting Houlihan’s final presentation to the Joint Committee, which
stated that the Reorganization was “value neutral” to public stockholders); cf. In re Match
Grp., Inc. Deriv. Litig., 315 A.3d 446, 474 (Del. 2024) (declining to apply the
reorganization exception because the transaction left the “public stockholders holding
equity in a company with different ownership and inferior assets than the company in
which they chose to invest” (citation omitted)).
162
See Ct. Ch. R. 23.1; see also United Food & Com. Workers Union & Participating Food
Indus. Emps. Tri-State Pension Fund v. Zuckerberg, 262 A.3d 1034, 1058-59 (Del. 2021)
(setting out the three-part demand futility test that the court must apply).
163
The plaintiff chose not to amend his complaint after the defendants argued that his
Complaint lacked any demand futility allegations.
34