In re Trados Inc. Shareholder Litigation

With respect to fiduciary duties, preferred stockholders do not stand ahead of common stockholders. To the extent preferred stockholders enjoy benefits associated with being preferred stockholders, those benefits are contractual in nature and not fiduciary. The rights of preferred stockholders are protected by contract. 

It is well understood that corporate directors have fiduciary duties to work in the best interests of the corporation and its residual claimants over the long-term. The common stockholders are the residual claimants. Where a board arranges a transaction in order to maximize the return to preferred stockholders at the expense of common stockholders, directors may violate their fiduciary duties.

In the case that follows, directors arranged a sale that benefitted preferred shareholders while the common shareholders got nothing.