Clifford Chance
Delaware Supreme Court Rules Independent Directors May Rely on Section 102(b)(7) to Dismiss Claims Against Them in Controlling Stockholder Squeeze-out Mergers
15 May 2015
Yesterday, the Delaware Supreme Court, in an opinion authored by Chief Justice Strine, considered interlocutory appeals in two related cases, In re Cornerstone Therapeutics Inc. Stockholder Litigation, C.A. No. 8922-VCG and Leal v. Meeks, C.A. No. 7393–VCN, to decide a single legal question: Where a plaintiff challenges an interested transaction that is presumptively subject to entire fairness review (such as a squeeze-out merger by a controlling stockholder), must plaintiff plead a non-exculpated claim against disinterested, independent directors in order to survive a motion to dismiss?
Resolving conflicting prior rulings in the Chancery Court, the Supreme Court ruled in the affirmative, holding that "[a] plaintiff seeking only monetary damages must plead non-exculpated claims against a director who is protected by an exculpatory charter provision to survive a motion to dismiss, regardless of the underlying standard of review for the board's conduct – be it Revlon, Unocal, the entire fairness standard, or the business judgment rule."
