vestigial waste exception in Delaware

2018Plaintiff Has Adequately Pled that the Stockholder Vote Was Not Fully Informed In response to a motion to dismiss in which the defendant has raised a Corwin defense, the “plaintiff challenging the decision to approve a transaction must first identify a deficiency in the operative disclosure document, at which point the burden would fall to defendants to establish that the alleged deficiency fails as a matter of law in order to secure the cleansing effect of th[e] vote.”58 In this regard, Delaware law requires directors to “disclose fully and fairly all material information within the board’s c

2018Plaintiff Has Adequately Pled that the Stockholder Vote Was Not Fully Informed In response to a motion to dismiss in which the defendant has raised a Corwin defense, the “plaintiff challenging the decision to approve a transaction must first identify a deficiency in the operative disclosure document, at which point the burden would fall to defendants to establish that the alleged deficiency fails as a matter of law in order to secure the cleansing effect of th[e] vote.”58 In this regard, Delaware law requires directors to “disclose fully and fairly all material information within the board’s c

2022However, as the Delaware Supreme Court has explained, “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.” Singh v. Attenborough, 137 A.3d 151, 152 (Del. 2016).

2018A. The Controlling Stockholder Inquiry In the seminal Kahn v. Lynch Communications Systems, Inc., the Supreme Court observed that Delaware courts will deem a stockholder a controlling stockholder when the stockholder: (1) owns more than 50% of the voting power of a corporation or (2) owns less than 50% of the voting power of the corporation but “exercises control over the business affairs of the corporation.”208 Plaintiffs do not 206 Singh v. Attenborough, 137 A.3d 151 , 151–52 (Del. 2016) (noting that dismissal is typically the result when pleading stage business judgment deference applies “b

2022Kahn v. M&F Worldwide Corp., 88 A.3d 635 (Del. 2014) (quoting Sinclair Oil Corp. v. Levien, 280 A.2d 717, 720 (Del. 1971)). 90 Singh v. Attenborough, 137 A.2d 151, 152 (Del. 2016) (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 that is wasteful”). 91 Corwin, 125 A.3d at 312 (“[T]he doctrine applies only to fully informed, uncoerced stockholder votes, and if troubling facts . . . were not disclosed that would have been material

2022In any event, the Buckeye Defendants point to several disclosures in the Proxy that reveal the unitholder vote was fully informed.96 The disclosures reflect that 93 According to Plaintiff, his election to abandon his federal disclosure claims was a “strategic decision.” Id. 94 Report and Recommendation at 3. 95 The Buckeye Defendants argue that the District Court’s ruling is preclusive as a matter of collateral estoppel.

2022Kahn v. M&F Worldwide Corp., 88 A.3d 635 (Del. 2014) (quoting Sinclair Oil Corp. v. Levien, 280 A.2d 717, 720 (Del. 1971)). 90 Singh v. Attenborough, 137 A.2d 151, 152 (Del. 2016) (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 that is wasteful”). 91 Corwin, 125 A.3d at 312 (“[T]he doctrine applies only to fully informed, uncoerced stockholder votes, and if troubling facts . . . were not disclosed that would have been material

2022Kahn v. M&F Worldwide Corp., 88 A.3d 635 (Del. 2014) (quoting Sinclair Oil Corp. v. Levien, 280 A.2d 717, 720 (Del. 1971)). 90 Singh v. Attenborough, 137 A.2d 151, 152 (Del. 2016) (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 that is wasteful”). 91 Corwin, 125 A.3d at 312 (“[T]he doctrine applies only to fully informed, uncoerced stockholder votes, and if troubling facts . . . were not disclosed that would have been material