Leal v. Meeks

115 A.3d 1173 (2015)

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Nature of the Case

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Facts

Both mergers were negotiated by special committees of independent directors, were ultimately approved by a majority of the minority stockholders and were at substantial premiums to the pre-announcement market price. P filed suit contending that the directors had breached their fiduciary duty by approving transactions that were unfair to the minority stockholders. In Cornerstone Therapeutics Inc., the independent director defendants moved to dismiss on the grounds that Ps had failed to plead any non-exculpated claim against them. Ds argued that Ps still bore the burden to plead non-exculpated claims against the independent directors. Ds also pointed out that in a number of cases the Court of Chancery dismissed claims against independent directors when Ps failed to plead non-exculpated claims for breaches of fiduciary duty, notwithstanding the applicability of entire fairness review to the transaction. Ps contend that they could defeat the independent directors' motions to dismiss solely by establishing that the underlying transaction was subject to the entire fairness standard. In Emerald Partners this Court determined that the plaintiffs had sufficiently pled duty of loyalty claims against the disinterested directors that were 'intertwined' with their duty of care claims. In Emerald II, the Court stated that 'when entire fairness is the applicable standard of judicial review, a determination that the director defendants are exculpated from paying monetary damages can be made only after the basis for their liability has been decided,' on a fully-developed factual record. The Court of Chancery concluded that it was bound to deny the motion because its reading of the Emerald II decision was the one advocated by the plaintiffs. In each case, the Court of Chancery did not analyze Ps' duty of loyalty claims against the independent directors because it determined that it was required to deny their motions to dismiss regardless of whether such claims had been sufficiently pled. The Court of Chancery in each case recommended certification of an interlocutory appeal to this Court to determine whether its reading of precedent was correct.