Under Delaware law, stockholders typically lose standing to pursue derivative claims when a merger extinguishes their status as stockholders under the continuous ownership rule. In Parnes v. Bally Entertainment Corp., the Delaware Supreme Court held that a plaintiff whose status as a stockholder was extinguished in a merger may still pursue breach of fiduciary duty claims post-merger if the stockholder directly attacks the fairness or validity of a merger (722 A.2d 1243, 1245 (Del. 1999)). In those circumstances, the stockholder alleges an injury to the stockholders, not the corporation, and may pursue that direct claim even after the merger has been consummated.

Under Parnes and several subsequent cases applying it, the court held that the plaintiff in this case did not state any direct claims because the plaintiff did not allege that the equity awards at issue impacted the transaction between Fox and Disney. Specifically, the plaintiff's claims lacked any factual allegations that the Murdochs' receipt of the equity awards was causally linked to:

Rather, the plaintiff's complaint focused on the internal process undertaken by the compensation committee, which the plaintiff alleged was hasty and superficial.

The court observed that the plaintiff initially filed derivative claims against the defendants, and the plaintiff's amended complaint of direct claims was based on the same facts as the initial complaint, with no additional allegations to suggest that the defendants' harmed the transaction. The gravamen of the plaintiff's complaint was that the compensation committee was not justified in awarding the Murdochs $82.4 million in additional equity compensation when their then-existing holdings in Old Fox were already substantial enough to incentivize them to facilitate the transaction. The court stated that the plaintiff was aware it was the company that suffered harm and that the plaintiff amended its complaint when faced with the prospect of losing standing to assert derivative claims.

The plaintiff also alleged that the equity awards violated the equal treatment clause of Old Fox's certificate of incorporation. The court held that here, too, the plaintiff did not state a direct claim because the plaintiff did not allege that the per share consideration received by the top executives was different from that received by the other stockholders of Old Fox.

Section 327 of the Delaware General Corporation Law includes a contemporaneous ownership requirement for bringing derivative actions on behalf of a corporation. The court held that the plaintiff did not meet this requirement, and therefore lacked standing to bring a derivative claim, because the plaintiff was not a stockholder of New Fox at the time of the transaction, and became a New Fox stockholder through the transaction, not by operation of law.