MCG Capital v. Jenzabar

Summary

Hearing on motion to dismiss in investor suit seeking to halt millions of dollars in payment to Jenzabar executives. Jenzabar makes software for higher education institutions, including its "Total Campus Management" solution. MCG is Jenzabar's primary investor.

MCG asserted that the payments would be both a breach of contract and a breach of fiduciary duty.

Among the issues in the case was whether preferred stockholders like MCG had standing to bring a derivative suit. Jenzabar claimed that MCG had no interest in the residual valuation of the corporation.

MCG also asserted that its interests were aligned with the common shareholders, and would adequately pursue the derivative claims because MCG was trying to bring money back into the corporation, and wanted the corporation to be healthy.

Jenzabar asserted that the alleged fiduciary duty breach was not pled, and the compensation of executives was a quintessential example of an area where the board was entitled to exercise its judgment. Standing was not warranted, according to Jenzabar, because the preferred shareholders did not share a right with the common stockholders.

View a free video clip from the case:
Daniel Halston argues on behalf of the Plaintiff, MCG Capital -- Clip 1