MFW framework in Delaware

2026The defendants argue that they properly implemented the MFW framework.89 If so, then a version of the business 87 Id. 88 Id. at 537 n.13. 89 Kahn v. M & F Worldwide Corp., 88 A.3d 635 (Del. 2014). 34 judgment rule applies under which the only remaining claim is waste.90 That exception is more theoretical than real, because to state a claim for waste, the terms of the transaction must be so extreme “that no rational person acting in good faith could have thought the [transaction] was fair to the minority.”91 “At that point in the analysis, two groups of rational people—the committee and the min

2026The defendants argue that they properly implemented the MFW framework.89 If so, then a version of the business 87 Id. 88 Id. at 537 n.13. 89 Kahn v. M & F Worldwide Corp., 88 A.3d 635 (Del. 2014). 34 judgment rule applies under which the only remaining claim is waste.90 That exception is more theoretical than real, because to state a claim for waste, the terms of the transaction must be so extreme “that no rational person acting in good faith could have thought the [transaction] was fair to the minority.”91 “At that point in the analysis, two groups of rational people—the committee and the min

2022Merely because the Separation Committee recommended that the Board and stockholders vote to approve the Separation does not render the Separation Committee controlled.219 At bottom, Hallandale’s challenge to the Separation Committee is grounded in Hallandale’s belief that the Separation was a bad deal for Old Match stockholders: “[b]ut the Delaware Supreme Court has clarified that this court’s role in applying the MFW framework is limited to a process analysis, not second guessing the ultimate ‘give’ and ‘get.’”220 It is not reasonably conceivable that the Separation Committee acted with a “co

2022Merely because the Separation Committee recommended that the Board and stockholders vote to approve the Separation does not render the Separation Committee controlled.219 At bottom, Hallandale’s challenge to the Separation Committee is grounded in Hallandale’s belief that the Separation was a bad deal for Old Match stockholders: “[b]ut the Delaware Supreme Court has clarified that this court’s role in applying the MFW framework is limited to a process analysis, not second guessing the ultimate ‘give’ and ‘get.’”220 It is not reasonably conceivable that the Separation Committee acted with a “co

2021See In re MFW S’holders Litig., 67 A.3d 496, 504 (Del. Ch. 2013) (noting that one purpose of the MFW framework was to remedy a doctrinal situation in which “there is no feasible way for defendants to get [cases] dismissed on the pleadings”), aff’d, Kahn v. M & F Worldwide Corp., 88 A.3d 635 (Del. 2014); In re Books-a-Million, Inc. S’holders Litig., 2016 WL 5874974 , at *8 n.2 (Del. Ch. Oct. 10, 2016) (same), aff’d, 164 A.3d 56 (Del. 2017); Tornetta v. Musk, 2019 WL 4566943 , at *12 n.114 (Del. Ch. Sept. 20, 2019) (same).120 In MFW, the Delaware Supreme Court held that the business judgment rul

2021See In re MFW S’holders Litig., 67 A.3d 496, 504 (Del. Ch. 2013) (noting that one purpose of the MFW framework was to remedy a doctrinal situation in which “there is no feasible way for defendants to get [cases] dismissed on the pleadings”), aff’d, Kahn v. M & F Worldwide Corp., 88 A.3d 635 (Del. 2014); In re Books-a-Million, Inc. S’holders Litig., 2016 WL 5874974 , at *8 n.2 (Del. Ch. Oct. 10, 2016) (same), aff’d, 164 A.3d 56 (Del. 2017); Tornetta v. Musk, 2019 WL 4566943 , at *12 n.114 (Del. Ch. Sept. 20, 2019) (same).120 In MFW, the Delaware Supreme Court held that the business judgment rul

2021See In re MFW S’holders Litig., 67 A.3d 496, 504 (Del. Ch. 2013) (noting that one purpose of the MFW framework was to remedy a doctrinal situation in which “there is no feasible way for defendants to get [cases] dismissed on the pleadings”), aff’d, Kahn v. M & F Worldwide Corp., 88 A.3d 635 (Del. 2014); In re Books-a-Million, Inc. S’holders Litig., 2016 WL 5874974 , at *8 n.2 (Del. Ch. Oct. 10, 2016) (same), aff’d, 164 A.3d 56 (Del. 2017); Tornetta v. Musk, 2019 WL 4566943 , at *12 n.114 (Del. Ch. Sept. 20, 2019) (same).120 In MFW, the Delaware Supreme Court held that the business judgment rul

2021See In re MFW S’holders Litig., 67 A.3d 496, 504 (Del. Ch. 2013) (noting that one purpose of the MFW framework was to remedy a doctrinal situation in which “there is no feasible way for defendants to get [cases] dismissed on the pleadings”), aff’d, Kahn v. M & F Worldwide Corp., 88 A.3d 635 (Del. 2014); In re Books-a-Million, Inc. S’holders Litig., 2016 WL 5874974 , at *8 n.2 (Del. Ch. Oct. 10, 2016) (same), aff’d, 164 A.3d 56 (Del. 2017); Tornetta v. Musk, 2019 WL 4566943 , at *12 n.114 (Del. Ch. Sept. 20, 2019) (same).120 In MFW, the Delaware Supreme Court held that the business judgment rul

2022GGP, 2021 WL 2102326 at *15 n.179 (citing Cede & Co. v. Technicolor, Inc., 634 A.2d 345, 363 (Del. 1993) (“This Court has never held that one director's colorable interest in a challenged transaction is sufficient, without more, to deprive a board of the protection of the business judgment rule presumption of loyalty.”); In re Alloy, Inc., 2011 WL 4863716 , at *8-9 (Del. Ch. Oct. 13, 2011) (holding that the allegation that an allegedly conflicted corporate fiduciary “was in a position” to influence other members of a special committee was inadequate to support an inference that the special com

2022GGP, 2021 WL 2102326 at *15 n.179 (citing Cede & Co. v. Technicolor, Inc., 634 A.2d 345, 363 (Del. 1993) (“This Court has never held that one director's colorable interest in a challenged transaction is sufficient, without more, to deprive a board of the protection of the business judgment rule presumption of loyalty.”); In re Alloy, Inc., 2011 WL 4863716 , at *8-9 (Del. Ch. Oct. 13, 2011) (holding that the allegation that an allegedly conflicted corporate fiduciary “was in a position” to influence other members of a special committee was inadequate to support an inference that the special com

2020In my opinion, however, this condition—and the overall MFW framework—was intended to ensure not only that members of a special committee must be independent in the sense of not being beholden to a controlling stockholder, 101 Id. at 645-46. 26 but also that the committee members must have no disabling personal interest in the transaction at issue.102 It is well established under Delaware law that directors are interested in a transaction if they “expect to derive any personal financial benefit” from the transaction “as opposed to a benefit which devolves upon the corporation or all stockholder

2020In my opinion, however, this condition—and the overall MFW framework—was intended to ensure not only that members of a special committee must be independent in the sense of not being beholden to a controlling stockholder, 101 Id. at 645-46. 26 but also that the committee members must have no disabling personal interest in the transaction at issue.102 It is well established under Delaware law that directors are interested in a transaction if they “expect to derive any personal financial benefit” from the transaction “as opposed to a benefit which devolves upon the corporation or all stockholder

2020Ch. 2002) (discussing the separate issues of independence and interestedness). 103 Aronson v. Lewis, 473 A.2d 805, 812 (Del. 1984) (citations omitted). 104 Orman, 794 A.2d at 23 (citing Cede & Co. v. Technicolor, Inc., 634 A.2d 345, 363 (Del. 1993)). 105 Pls.’ Answering Br. 60.

2020Ch. 2002) (discussing the separate issues of independence and interestedness). 103 Aronson v. Lewis, 473 A.2d 805, 812 (Del. 1984) (citations omitted). 104 Orman, 794 A.2d at 23 (citing Cede & Co. v. Technicolor, Inc., 634 A.2d 345, 363 (Del. 1993)). 105 Pls.’ Answering Br. 60.

2018Only then is it appropriate to reward the controller with pleadings-stage business judgment rule deference.87 The broad application of the MFW framework to a range of transactions involving controllers would parallel the evolution of MFW’s doctrinal predecessor, Kahn v. Lynch Commc’n Sys., Inc.88 In Lynch, our Supreme Court held, in the context of a parent-subsidiary merger, that “approval of the transaction by an independent committee of directors or an informed majority of minority shareholders shifts the burden of proof on the issue of fairness from the controlling or dominating shareholder

2018Only then is it appropriate to reward the controller with pleadings-stage business judgment rule deference.87 The broad application of the MFW framework to a range of transactions involving controllers would parallel the evolution of MFW’s doctrinal predecessor, Kahn v. Lynch Commc’n Sys., Inc.88 In Lynch, our Supreme Court held, in the context of a parent-subsidiary merger, that “approval of the transaction by an independent committee of directors or an informed majority of minority shareholders shifts the burden of proof on the issue of fairness from the controlling or dominating shareholder

2025Id. at 451.

2025Id. at 451.

2023After hearing extensive testimony and reviewing voluminous evidence, the trial court “searched during [its] deliberations for persuasive evidence that [Musk] exploited the coercion inherent in his status as a controller” to influence the Tesla Board.194 The court concluded that “any control [Musk] may have attempted to wield in connection with the Acquisition was effectively neutralized by a board focused on the bona fides of the Acquisition, with an indisputably independent director leading the way.”195 It amplified that holding, adding that “even assuming [Musk] had the ability to exercise c

2023Event Driven Master Fund Ltd., 177 A.3d 1, 12, 30 (Del. 2017) (noting that, although not a controlling stockholder, Michael Dell — who had 15% of the equity and pledged that his voting power would go to any higher bidder, voting in proportion to other shares — was available to all parties throughout the go-shop period). 59 board to form a special committee in a conflicted transaction. 192 Here, the price of not utilizing a special committee was being subjected to entire fairness review — an expensive, risky, and “heavy lift” in the litigation arena.193 Although Appellants argue that both MFW f

2023After hearing extensive testimony and reviewing voluminous evidence, the trial court “searched during [its] deliberations for persuasive evidence that [Musk] exploited the coercion inherent in his status as a controller” to influence the Tesla Board.194 The court concluded that “any control [Musk] may have attempted to wield in connection with the Acquisition was effectively neutralized by a board focused on the bona fides of the Acquisition, with an indisputably independent director leading the way.”195 It amplified that holding, adding that “even assuming [Musk] had the ability to exercise c

2023After hearing extensive testimony and reviewing voluminous evidence, the trial court “searched during [its] deliberations for persuasive evidence that [Musk] exploited the coercion inherent in his status as a controller” to influence the Tesla Board.194 The court concluded that “any control [Musk] may have attempted to wield in connection with the Acquisition was effectively neutralized by a board focused on the bona fides of the Acquisition, with an indisputably independent director leading the way.”195 It amplified that holding, adding that “even assuming [Musk] had the ability to exercise c

2023For this statement to work, the high court must not have intended to give deference to deal price in the controller squeeze-out context. 332 --- A.3d ----, 2023 WL 3854008 (Del. June 6, 2023). 333 Id. at *21; see also id. at *14, 20, 34, 47-48 (emphasizing the unitary nature of the analysis). 334 Id. at *33 (quoting In re Orchard Enters., Inc. S’holder Litig., 88 A.3d 1, 30 (Del. Ch. 2014) (emphasis added)). 335 Tesla, --- A.3d ----, 2023 WL 3854008 , at *33 (internal quotation marks omitted). 61 Accordingly, this decision foregoes the MFW analysis urged by Respondent.

2022See, e.g., Crane, 2017 WL 7053964 , at *12-21 (applying MFW to a stock reclassification on a motion to dismiss); see also Tornetta v. Musk, 250 A.3d 793 , 800 (Del. Ch. 2019) (reasoning that the MFW framework could apply to review a challenge to executive compensation paid to a controlling stockholder); In re Martha Stewart Living Omnimedia, Inc. S’holder Litig., 2017 WL 3568089 , at *18– 19 (Del. Ch. Aug. 18, 2017) (holding MFW framework applicable to claims alleging controlling stockholder obtained a non-ratable benefit in a sale to an unaffiliated third party); In re Books-A-Million, Inc. S

2022See, e.g., Crane, 2017 WL 7053964 , at *12-21 (applying MFW to a stock reclassification on a motion to dismiss); see also Tornetta v. Musk, 250 A.3d 793 , 800 (Del. Ch. 2019) (reasoning that the MFW framework could apply to review a challenge to executive compensation paid to a controlling stockholder); In re Martha Stewart Living Omnimedia, Inc. S’holder Litig., 2017 WL 3568089 , at *18– 19 (Del. Ch. Aug. 18, 2017) (holding MFW framework applicable to claims alleging controlling stockholder obtained a non-ratable benefit in a sale to an unaffiliated third party); In re Books-A-Million, Inc. S

2022GGP, 2021 WL 2102326 at *15 n.179 (citing Cede & Co. v. Technicolor, Inc., 634 A.2d 345, 363 (Del. 1993) (“This Court has never held that one director's colorable interest in a challenged transaction is sufficient, without more, to deprive a board of the protection of the business judgment rule presumption of loyalty.”); In re Alloy, Inc., 2011 WL 4863716 , at *8-9 (Del. Ch. Oct. 13, 2011) (holding that the allegation that an allegedly conflicted corporate fiduciary “was in a position” to influence other members of a special committee was inadequate to support an inference that the special com

2022GGP, 2021 WL 2102326 at *15 n.179 (citing Cede & Co. v. Technicolor, Inc., 634 A.2d 345, 363 (Del. 1993) (“This Court has never held that one director's colorable interest in a challenged transaction is sufficient, without more, to deprive a board of the protection of the business judgment rule presumption of loyalty.”); In re Alloy, Inc., 2011 WL 4863716 , at *8-9 (Del. Ch. Oct. 13, 2011) (holding that the allegation that an allegedly conflicted corporate fiduciary “was in a position” to influence other members of a special committee was inadequate to support an inference that the special com

2022Oct. 9, 2007)); Emerald P’rs, 726 A.2d at 1224 . 289 The Trade Desk, 2022 WL 3009959 , at *23 (citing Crane, 2017 WL 7053964 , at *21). 290 Id. at *23 (“Under the version of the business judgment rule earned by proper implementation of the MFW framework, only a well-pleaded claim for waste may survive.” (citing Dell, 2020 WL 3096748 , at *14)). 291 Voigt, 2020 WL 614999 , at *10 (citing Singh v. Attenborough, 137 A.3d 151 , 152 & n.3 (Del. 2016) (ORDER)). 292 Larkin v. Shah, 2016 WL 4485447 , at *21 (Del.

2022They argue that the business judgment rule should apply because the Separation followed the MFW framework, and Plaintiffs have failed to plead sufficient non-conclusory facts that Emerald P’rs v. Berlin, 726 A.2d 1215, 1224 (Del. 1999) (“Issues not briefed are deemed 88 waived.”). 25 any of the elements of that framework were not satisfied.89 Alternatively, Defendants argue the Separation was entirely fair.