At page 152 Analyzing advisor liability and fiduciary duty standards19 citing casesobserving that dismissal will likely result “because the vestigial waste exception has long had little real-world relevance” since “it has been understood that stockholders would be unlikely to approve a transaction that is wasteful
- In re Investors Bancorp, Inc. Stockholder Litig., No. CA 12327-VCS (Del. Ch. Apr. 5, 2017).published “when the business judgment rule standard of review is invoked because of a vote, dismissal is typically the result. that is because the vestigial waste exception has long had little real-world relevance, because it has…”
- Elec. Last Mile Solutions, Inc. Stockholder Litig., No. 2022-0630-KSJM (Del. Ch. Jan. 27, 2026).published (Delaware has provided advisors with a high degree of insulation from liability by employing a defendant-friendly standard that requires plaintiffs to prove scienter and awards advisors an effective immunity from due-ca…)
- In re Mindbody, Inc., Stockholder Litig., 332 A.3d 349 (Del. 2024).published When an aiding and abetting claim is brought against a potential acquirer negotiating at arms’-length, participation should be the most difficult to prove.77 This is because Delaware law protects arms’-length negotiations and “a bidder’s a…
- FrontFour Capital Grp. LLC v. Brook Taube, No. CA 2019-0100-KSJM (Del. Ch. Mar. 22, 2019).published ([A]n advisor whose bad-faith actions cause its board clients to breach their situational fiduciary duties . . . is liable for aiding and abetting.)
- In re PLX Tech. Inc. Stockholders Litig., No. CA 9880-VCL (Del. Ch. Oct. 16, 2018).published([A]n advisor 117 “creating the informational vacuum” in which the board breaches its duty of care.561 When the aiding and abetting claim targets an unrelated third party, a court’s analysis of whether a secondary actor…)
- Judy Mesirov v. Enbridge Energy Co., No. CA 11314-VCS, 2018 WL 4182204 (Del. Ch. Aug. 29, 2018).published ([A]n advisor whose bad-faith actions cause its board clients to breach their situational fiduciary duties . . . is liable for aiding and abetting.)
- Calumet Capital Partners LLC v. Victory Park Capital Advisors LLC, 353 A.3d 88 (Del. Ch. 2026).publishedIn re Columbia Pipeline Gp., Inc. Merger Litig., 299 A.3d 393, 471 (Del. Ch. 2023) (“Where there is a duty to act, culpable participation can result from a conscious refusal to fulfill that duty.”), rev’d, 342 A.3d 324 (Del. 2025). 85 Colu…
- Goldstein v. Denner, No. 2020-1061-JTL, 2022 WL 1671006 (Del. Ch. May 26, 2022).published“the vestigial waste exception has long had little real-world relevance, because it has been understood that stockholders would be unlikely to approve a transaction that is wasteful”
- Walter E. Ryan, Jr. v. Buckeye Partners, L.P., No. 2021-0432-JRS (Del. Ch. Feb. 9, 2022).published(observing that dismissal will likely result “because the vestigial waste exception has long had little real-world relevance” since “it has been understood that stockholders would be unlikely to approve a transaction tha…)
- In re Columbia Pipeline Grp., Inc. Merger Litig., Cons. C.A. No. 2018-0484-JTL, 2021 WL 772562 (Del. Ch. Mar. 1, 2021).published A plaintiff can recover monetary damages for a breach of the duty of care only by establishing that the fiduciary was grossly negligent.21 In the corporate context, gross negligence means “reckless indifference to or a deliberate disregard…
Show 9 more citing cases
- Firefighters' Pension Sys. of the City of Kansas City v. Presidio, Inc., 251 A.3d 212 (Del. Ch. 2021).published Against this doctrinal backdrop, the presence of an exculpatory provision eliminates the prospect of liability for a breach of the duty of care, but it does not change how Delaware law operates in the personal liability setting. 6 In re Co…
- Elizabeth Morrison v. Ray Berry, CA No. 12808-VCG (Del. Ch. June 1, 2020).published RBC Capital Mkts., LLC v. Jervis, 129 A.3d 816 (Del. 2015) (“To satisfy the enhanced scrutiny test in the M & A context, the defendant directors must establish both (i) the reasonableness of ‘the decisionmaking process employed by the dire…
- In re Essendant, Inc. Stockholder Litig., Consolidated C.A. No. 2018-0789-JRS (Del. Ch. Dec. 30, 2019).published(analyzing an advisor’s duties in advising a board and stating, “To hold that an advisor can only be liable if it aids and abets a non-exculpated breach of fiduciary duty [] [is] erroneous.)
- Richard J. Tornetta v. Elon Musk, 250 A.3d 793 (Del. Ch. 2019).publishedDefendant’s motion to dismiss Count IV is granted. 146 Huizenga, 751 A.2d at 892 . 147 Id. 148 Singh v. Attenborough, 137 A.3d 151, 152 (Del. 2016).
- Morrison v. Berry, 191 A.3d 268 (Del. 2018).publishedAnd, judges are just as ‘poorly positioned to evaluate the wisdom of’ stockholder-approved mergers under Section 251(h) as they are in the context of corporate transactions with statutorily required stockholder votes.” (quoting Corwin, 125…
- Matthew Sciabacucchi v. Liberty Broadband Corp., No. CA 11418-VCG, 2017 WL 2352152 (Del. Ch. May 31, 2017).publishedHoldings LLC, 125 A.3d 304 (Del. 2015). 3 See id. at 308–309; Singh v. Attenborough, 137 A.3d 151, 152 (Del. 2016). 4 Id. at 306. 3 stockholders in the face of the intentions of the controller renders the vote insufficient to ratify the tr…
- In re OM Grp., Inc. Stockholders Litig., No. CA 11216-VCS (Del. Ch. Oct. 12, 2016).published (noting that dismissal “is typically the result” in cases where a plaintiff has challenged a transaction on grounds of waste, a concept that has “little ‘real-world relevance’” in M&A transactions “because stockholders w…)
- City of Miami Gen. Employees' & Sanitation Employees' Ret. Trust v. Jerry M. Comstock, Jr., No. CA 9980-CB (Del. Ch. Aug. 24, 2016).published Neither argument has merit. 76 Singh v. Attenborough, 137 A.3d 151, 152 (Del. 2016) (ORDER). 77 Because I conclude that Corwin applies, I do not opine on defendants’ separate argument that Revlon does not apply because of certain control-l…
- Teamsters Local 677 Health Servs. & Ins. Plan v. Frank D. Martell, No. 2021-1075-NAC (Del. Ch. Feb. 1, 2023).published A stockholder vote is fully informed if the corporation’s disclosures “apprised stockholders of all material information and did not materially mislead them.” 109 A fact is material “‘if there is a substantial likelihood that a reasonable…
At page 151 Invoking business judgment rule standard of review11 citing cases“absent a stockholder vote and absent an exculpatory charter provision, the damages liability standard for an independent director or other disinterested fiduciary for breach of the duty of care is gross negligence, even if the transaction was a change-of-control transaction.”
- Pietro Campanella v. S. Kent Rockwell, No. 2021-1013-LWW (Del. Ch. Feb. 18, 2025).published(When the business judgment rule standard of review is invoked because of a vote, dismissal is typically the result.)
- Young Women's Christian Ass'n of Rochester & Monroe Cnty. v. Hatteras Funds, LP, 356 A.3d 459 (Del. Ch. 2026).published(Absent a stockholder vote and absent an exculpatory charter provision, the damages liability standard for an independent director or other disinterested fiduciary for breach of the duty of care is gross negligence, eve…)
- In re Columbia Pipeline Grp., Merger Litig., 299 A.3d 393 (Del. Ch. 2023).published(Absent a stockholder vote and absent an exculpatory charter provision, the damages liability standard for an independent director or other disinterested fiduciary for breach of the duty of care is gross negligence, eve…)
- In re Columbia Pipeline Grp., Inc. Merger Litig., Cons. C.A. No. 2018-0484-JTL, 2021 WL 772562 (Del. Ch. Mar. 1, 2021).published (Absent a stockholder vote and absent an exculpatory charter provision, the damages liability standard for an independent director or other disinterested fiduciary for breach of the duty of care is gross negligence, eve…)
- Firefighters' Pension Sys. of the City of Kansas City v. Presidio, Inc., 251 A.3d 212 (Del. Ch. 2021).published Against this doctrinal backdrop, the presence of an exculpatory provision eliminates the prospect of liability for a breach of the duty of care, but it does not change how Delaware law operates in the personal liability setting. 6 In re Co…
- In re Tesla Motors, Inc. Stockholder Litig., No. 12711-VCS (Del. Ch. Feb. 4, 2020).published First, Plaintiffs argue there is no genuine dispute of material fact that a majority of Tesla’s directors faced disabling conflicts with respect to the Merger.'4 Next, they argue there is no genuine dispute of material fact that the stockh…
- Aron English v. Charles K. Narang, No. CA 2018-0221-AGB, 2019 WL 1300855 (Del. Ch. Mar. 20, 2019).published Ch. 2016), aff’d, 156 A.3d 697 (2017) (TABLE). 21 Singh v. Attenborough, 137 A.3d 151, 151-52 (Del. 2016) (Strine, C.J.). 13 of disinterested stockholders tendered their shares in connection with the Transaction or that the Transaction was…
- In re Cyan, Inc. Stockholders Litig., No. CA 11027-CB (Del. Ch. May 11, 2017).publishedLLC, 125 A.3d 304, 308-09 (Del. 2015); Singh v. Attenborough, 137 A.3d 151, 151-52 (Del. 2016). 15 I also conclude that dismissal of Count II for quasi-appraisal logically follows from the dismissal of Count I.
- In re Paramount Gold & Silver Corp. Stockholders Litig., No. CA 10499-CB (Del. Ch. Apr. 13, 2017).publishedNor do plaintiffs allege that the Merger, which involved a stock-for-stock exchange and was approved by a majority independent and disinterested board, should be subject to either a Revlon or an entire fairness standard of review.13 Plaint…
- In re Solera Holdings, Inc. Stockholder Litig., No. CA 11524-CB, 2017 WL 57839 (Del. Ch. Jan. 5, 2017).publishedI turn to that question next. approved by a majority of the shares held by disinterested stockholders . . . in a vote that was fully informed.”). 29 Id. at 313. 30 Singh v. Attenborough, 137 A.3d 151, 151-52 (Del. 2016). 31 Clark Aff.
At page 153 Liability standards for advisor bad faith actions5 citing cases“having correctly decided, however, that the stockholder vote was fully informed and voluntary, the court of chancery properly dismissed the plaintiffs' claims against all parties.”
- In re Mindbody, Inc., Stockholder Litig., 332 A.3d 349 (Del. 2024).published (In fact, most professionals face liability under a standard involving mere negligence, not the second highest state of scienter—knowledge—in the model penal code.)
- Elizabeth Morrison v. Ray Berry, CA No. 12808-VCG (Del. Ch. June 1, 2020).published RBC Capital Mkts., LLC v. Jervis, 129 A.3d 816 (Del. 2015) (“To satisfy the enhanced scrutiny test in the M & A context, the defendant directors must establish both (i) the reasonableness of ‘the decisionmaking process employed by the dire…
- Aron English v. Charles K. Narang, No. CA 2018-0221-AGB, 2019 WL 1300855 (Del. Ch. Mar. 20, 2019).published Ch. 2016), aff’d, 156 A.3d 697 (2017) (TABLE). 21 Singh v. Attenborough, 137 A.3d 151, 151-52 (Del. 2016) (Strine, C.J.). 13 of disinterested stockholders tendered their shares in connection with the Transaction or that the Transaction was…
- Paul Berger v. James Fox, No. 2025-1183-BWD (Del. Ch. July 24, 2026).published(Having correctly decided . . . that the stockholder vote was fully informed and voluntary, the Court of Chancery properly dismissed the plaintiffs’ claims against all parties.)
- In re Volcano Corp. Stockholder Litig., 143 A.3d 727 (Del. Ch. 2016).published Harbor Fin., 751 A.2d at 901 (citing Michelson, 407 A.2d at 224); see also Attenborough, 2016 WL 2765312, at *1 . 92 .
When the business judgment rule standard of review is invoked because of a vote, dismissal is typically the result. That is because the vestigial waste exception has long had little real-world relevance, because it has been understood that stockholders would be unlikely to approve a transaction th…
- In re Investors Bancorp, Inc. Stockholder Litig., No. CA 12327-VCS (Del. Ch. Apr. 5, 2017).published (When the business judgment rule standard of review is invoked because of a vote, dismissal is typically the result. That is because the vestigial waste exception has long had little real-world relevance, because it has…)
- In re Xura, Inc. Stockholder Litig., No. CA 12698-VCS (Del. Ch. Dec. 10, 2018).published(When the business judgment rule standard of review is invoked because of a vote, dismissal is typically the result)
Other citing cases
- Voigt v. Metcalf, No. 2018-0828-JTL, 2020 WL 614999 (Del. Ch. Feb. 10, 2020).published
- In re Anaplan, Inc. Stockholders Litig., No. 2022-1073-NAC (Del. Ch. June 21, 2024).published
- John H. Kihm v. David M. Mott, No. 2020-0938-MTZ, 2021 WL 3883875 (Del. Ch. Aug. 31, 2021).published
- Maz Partners LP v. Shear (In Re PHC, Inc. S'holder Litig.), 894 F.3d 419 (1st Cir. 2018).published
- In re Riverstone Nat'l, Inc. Stockholder Litig., No. CA 9796-VCG (Del. Ch. July 28, 2016).published
v.
Neale ATTENBOROUGH, Yuval Braverman, Terry Burman, David F. Dyer, Kenneth B. Gilman, Theo Killion, John B. Lowe, Jr., Joshua Olshansky, Beth M. Pritchard, Signet Jewelers Limited, and Merrill, Lynch, Pierce, Fenner & Smith, Defendants Below-Appellees
ORDER
Leo E. Strine, Jr., Chief JusticeThis 6th day of May 2016, having considered this matter on the briefs filed by the parties and after oral argument: .
(1) We affirm the judgment of the Court of Chancery solely on the basis of its decision on reargument of October 29, 2015, finding that a fully informed, uncoerced vote of the' disinterested stockholders invoked the business judgment rule standard of review.' [1] But, we note that the reargument opinion’s decision to consider post-closing' whether the plaintiffs stated a claim for the breach of the duty of care after invoking the. business judgment rule was erroneous. Absent a stockholder vote and absent an exculpatory charter provision, the damages liability standard for an independent director or other disinterested fiduciary for breach of the duty of care is gross negligence, even if the transaction was a .change-of-control transaction. [2] Therefore, employing this same standard after an informed, uncoerced vote of the disinterested stockholders would give no standard-of-review-shifting effect to the vote. ■ When thd business judgment rule standard of review is invoked because of a[*152] vote, dismissal is typically the result. [3] That is because the vestigial waste exception has long had little real-world relevance, [4] because it has been understood that stockholders would be unlikely to approve a transaction that is wasteful. Certainly, there is no rational argument that waste occurred here.
(2) Finally, we distance ourselves from the Court of Chancery’s original decision of October 1, 2015, in terms of its handling of the claims against the board’s financial advisor. [5] . We are skeptical that the supposed instance of knowing wrongdoing— the late disclosure of a business pitch that was then considered by. the board, determined to. be immaterial, and fully disclosed in the proxy — produced a rational basis to infer scienter. [6] Furthermore, to the extent the Court of Chancery purported to hold that an advisor can only be held liable if it aids and abets a non-exculpated breach of fiduciary duty, that was erroneous. Delaware has provided advisors with a high degree of insulation from liability by employing a defendant-friendly standard that requires plaintiffs to prove scien-ter and awards advisors an effective immunity from due-care liability. As held in RBC Capital Markets, LLC v. Jervis, how[*153] ever, an advisor whose bad-faith actions cause its board clients to breach their situational fiduciary duties (e.g., the duties Revlon imposes in a change-of-control transaction) is liable for aiding and abetting. [7] The advisor is not absolved from liability simply because its clients’ actions were taken in good-faith reliance-on misleading and incomplete advice tainted by the advisor’s own knowing disloyalty. [8] To grant immunity to an advisor because its own clients were duped by it would be unprincipled and would allow corporate ad-visors a level of unaccountability afforded to no other professionals in our society. In fact, most’ professionals face liability under a standard involving mere negligence, not the second highest state of scienter — knowledge—in the model penal code. [9] Nothing in this record comes close to approaching the sort of behavior at issue in RBC Capital Markets-, nonetheless, we distance ourselves from the Court of Chancery’s earlier memorandum opinion in this case. Having correctly decided, however, that the stockholder vote was fully informed and voluntary, the Court of Chancery properly dismissed the plaintiffs’ claims against all parties.
NOW, THEREFORE, IT IS ORDERED that the October 29, 2015 judgment of the Court of Chancery is AFFIRMED.
. In re Zale Corp. Stockholders Litig., 2015 WL 6551418 (Del.Ch. Oct. 29, 2015); see also Corwin v. KKR Fin. Holdings LLC, 125 A.3d 304, 308-12 (Del.2015) (affirming the Court of Chancery's finding that a fully informed, uncoerced vote of the disinterested stockholders invoked the business judgment rule standard of review).
. See, e.g., McMillan v. Intercargo Corp., 768 A.2d 492, 505 n, 56 (Del.Ch.2000) (explaining, in a case involving a post-closing damages claim attacking a change-of-control transaction, that "[i]n the absence of. the exculpatory chatter provision, the plaintiffs would still have been required to plead facts supporting an inference of gross negligence in order to state a damages claim").
.See In re Cornerstone Therapeutics Inc., Stockholder Litig., 115 A.3d 1173, 1175-76 (Del.2015) ("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.” (citations omitted)); Marciano v. Nakash, 535 A.2d 400, 405 (Del.1987) ("[Ajpproval by fully-informed disinterested ... stockholders ..., pérmits invocation of the business judgment rule and limits judicial review to issues of gift or waste with , the burden of proof upon the party attacking the transaction.”); Harbor Fin, Partners v. Huizenga, 751 A.2d 879, 881— 82 (Del.Ch.1999) ("The affirmative stockholder vote on the Merger, was informed and uncoerced, and disinterested shares constituted the overwhelming proportion of the Republic electorate. As'a result,'the business judgment rule standard of review is invoked and the Merger may only be attacked as wasteful. As a matter of logic and sound policy, one might think that a fair vote of disinterested stockholders in support of the transaction would dispose of the case altogether because a waste claim must be supported by facts demonstrating that ‘no person of ordinary sound business judgment’ could - consider the merger fair to Republic and because many disinterested and presumably rational Republic stockholders voted for the Merger.” (quoting Saxe v. Brady, 184 A.2d 602, 610 (Del.Ch.1962))).
. See Huizenga, 751 A.2d at 901 ("If fully informed, uncoerced, independent stockholders have approved the transaction, they have ... made the decision that the transaction is ‘a fair exchange.’ As such, it is difficult to see the utility of allowing litigation to proceed in which the plaintiffs are permitted discovery and a possible trial, at great expense to the corporate defendants, in order to prove to the court that the transaction was so devoid of merit that each and every one of the voters comprising the majority must, be disregarded as too hopelessly misguided to be considered a ‘person of ordinary sound business judg- ■ ment.’ Ih this day and age in which investors also haVé access to an abundance of information about • corporate transactions from sources other than boards of directors, it seems presumptuous and paternalistic to assume that the court knows better in a particular instance than a fully informed corporate electorate , with'real motrey riding on the corporation's performance.” (quoting Michelson v. Duncan, 407 A.2d 211, 224 (Del.1979))); Lewis v. Vogelstein, 699 A.2d 327, 336 (Del.Ch.1997) ("Courts are ill-fitted to attempt to weigh the ‘adequacy’ of consideration under the waste standard or, ex post, to judge appropriate degrees of business risk. ”).
. In re Zale Corp. Stockholders Litig., 2015 WL 5853693 (Del.Ch. Oct. 1, 2015), opinion amended on reargument, 2015 WL 6551418 (Del.Ch. Oct. 29, 2015).
. See RBC Capital Mkts., LLC v. Jervis, 129 A.3d 816, 862 (Del.2015).
. See id. at 865 (finding, in the-context of a change-of-control transaction, that "[t]he claim for aiding and abetting was premised on [the financial advisor]'s 'fraud on the Board,’ and that RBC aided and abetted the Board's breach of duty where, for [the financial advisor]’s own motives, it 'intentionally duped’ the directors into breaching their duty of care. The record evidence amply supports the trial court’s conclusion that [the financial advisor] purposely misled the Board so as to proximately cause the Board to breach its duty of care.” (quoting Goodwin v. Live Entm’t, Inc., 1999 WL 64265, at *28 (Del.Ch. Jan. 25, 1999), aff'd, 741 A.2d 16 (Del.1999))).
. See id. at 861-66.
. See Model Penal Code § 2.02 (Am. Law Inst., 1980).