In 2008, Riverstone became interested in the single-family home rental business.

At the time of the transaction at issue, Riverstone’s majority stockholder was CAS Capital Limited (“CAS”). CAS, in turn, was controlled by two of Riverstone’s five directors, Nicholas and Peter Gould. In March 2012, Riverstone formed an investment fund, which it pitched to institutional investors, including Blackstone Group LP (“Blackstone”). Blackstone, in turn, agreed to

“help execute” Riverstone’s business plan, which included forming a limited partnership known as Invitation Homes. Although Riverstone never received an ownership interest in Invitation Homes, all but one of its directors were given the opportunity to, and did, acquire a stake in Invitation Homes. On May 20, 2014, two of Riverstone’s stockholders informed Riverstone that its directors and officers breached their fiduciary duties by usurping Riverstone’s corporate opportunity to invest in Invitation Homes and demanded that all their individual equity interests in Invitation Homes be transferred to Riverstone.

CASE QUESTIONS

1. Did the directors of Riverstone breach their fiduciary duties to the corporation when they acquired an ownership interest in Investment Homes? Why or why not?

2. How likely is it that a court will apply the enhanced scrutiny test to these facts?