default rule in Delaware

2024Entity law generally deploys three standards of review: a default standard that is highly deferential to the fiduciary, an intermediate standard under which the fiduciary must show that its actions were reasonable, and an onerous standard under which the fiduciary must show that its actions neither harmed the beneficiary nor conferred any undeserved benefit on the fiduciary.86 Delaware’s default standard of review is the business judgment rule. 87 The business judgment rule presumes that “in making a business decision the directors of a corporation acted on an informed basis, in good faith and

2021“Section 141 of the Delaware General Corporation Law empowers the board of directors of a Delaware corporation to manage the corporation’s business and affairs.”143 When exercising this authority, directors owe unremitting fiduciary duties of loyalty and care to the company’s stockholders. 144 The default standard of review guiding this court’s determination of whether directors violated those fiduciary duties, the business judgment rule, affords corporate fiduciaries a 142 Tornetta v. Musk, 2019 WL 4566943 , at *1 (Del. Ch. Sept. 20, 2019). 143 Larkin v. Shah, 2016 WL 4485447 , at *8 (Del. Ch

2024For instance, during contested director elections and other contests for control, directors might be improperly 90 In re Tesla Motors, Inc. S’holder Litig., 298 A.3d 667 , 700 (Del. 2023) (citing Weinberger v. UOP, Inc., 457 A.2d 701, 711 (Del. 1983)) [hereinafter In re Tesla Motors]. 91 Id. 92 Id. 22 motivated to preserve their positions rather than to act in the best interest of the corporation and its stockholders.93 Recognizing the inherent potential for conflicts, a reviewing court will apply an enhanced scrutiny standard of review.94 And where a controlling stockholder transacts with the

2021“Section 141 of the Delaware General Corporation Law empowers the board of directors of a Delaware corporation to manage the corporation’s business and affairs.”143 When exercising this authority, directors owe unremitting fiduciary duties of loyalty and care to the company’s stockholders. 144 The default standard of review guiding this court’s determination of whether directors violated those fiduciary duties, the business judgment rule, affords corporate fiduciaries a 142 Tornetta v. Musk, 2019 WL 4566943 , at *1 (Del. Ch. Sept. 20, 2019). 143 Larkin v. Shah, 2016 WL 4485447 , at *8 (Del. Ch

2023When former joint clients sue one another “the default rule is that all communications made in the course of the joint representation are discoverable.” In re Teleglobe Commc’ns Corp., 493 F.3d 345, 366 (3d Cir. 2007) (applying Delaware law).

2022When former co-clients become adverse and “sue one another, the default rule is that all communications made in the course of the joint representation are discoverable.” In re Teleglobe Commc’ns Corp., 493 F.3d 345, 366 (3d Cir. 2007) (applying Delaware law and citing Delaware Rule of Evidence 502(d)(6)); see also In re Sutton, 1996 WL 659002 , at *5 (Del. Super. Aug. 30, 1996) (describing Delaware Rule of Evidence 502(b)(5) as “providing that where an attorney jointly represents two clients who later become adversarial parties in litigation, one party cannot assert attorney-client privilege t

2026Corp., 2017 WL 1437308 , at *17 (Del. Ch. Apr. 14, 2017) (explaining that for directors to act loyally to advance the best interests of the corporation means that they must seek “to promote the value of the corporation for the benefit of its stockholders”); see generally Unocal Corp. v. Mesa Petroleum Co., 493 A.2d 946, 955 (Del. 1985) (“[C]orporate directors have a fiduciary duty to act in the best interests of the corporation’s stockholders.”); eBay Domestic Hldgs., Inc. v. Newmark, 16 A.3d 1, 34 (Del. Ch. 2010) (explaining that directors’ fiduciary duties include “acting to promote the valu

2017Ch. 2011). 148 Cede & Co. v. Technicolor, Inc., 634 A.2d 345, 361 (Del. 1993) (quoting Sinclair Oil Corp. v. Levien, 280 A.2d 717, 720 (Del. 1971)); see also eBay Domestic Holdings, Inc. v. Newmark, 16 A.3d 1, 36 (Del.

2026Co. of Ill., 1995 WL 1312656 , at *4 (Del. Super. Aug. 30, 1995)). 118 Ingres Corp. v. CA, Inc., 8 A.3d 1143, 1145 (Del. 2010) (“The reason is that the McWane principle is a default rule of common law, which the parties to the litigation are free to displace by a valid contractual agreement.”). 119 Id. at 1146 . 26 The APA provides a partially exclusive forum selection clause, which restricts the parties to a limited number of fora to file suit.120 It states: Any legal suit, action or proceeding arising out of or based upon this Agreement or the transactions contemplated hereby may be institut

2026Co. of Ill., 1995 WL 1312656 , at *4 (Del. Super. Aug. 30, 1995)). 118 Ingres Corp. v. CA, Inc., 8 A.3d 1143, 1145 (Del. 2010) (“The reason is that the McWane principle is a default rule of common law, which the parties to the litigation are free to displace by a valid contractual agreement.”). 119 Id. at 1146 . 26 The APA provides a partially exclusive forum selection clause, which restricts the parties to a limited number of fora to file suit.120 It states: Any legal suit, action or proceeding arising out of or based upon this Agreement or the transactions contemplated hereby may be institut

2025The default rule does not apply to written or recorded confessions or incriminating statements a defendant makes directly (by his own hand or mouth) when those statements are admissible as trial exhibits without the use of § 3507 or even when the State uses § 3507 to admit a defendant’s statement.80 This Court further noted that “it will almost always be within a trial judge’s discretion to allow the defendant’s written or recorded confession or incriminating statement to be admitted as a trial exhibit that goes into the jury room during deliberations.”81 In Lewis, four § 3507 witness statemen

2025The default rule does not apply to written or recorded confessions or incriminating statements a defendant makes directly (by his own hand or mouth) when those statements are admissible as trial exhibits without the use of § 3507 or even when the State uses § 3507 to admit a defendant’s statement.80 This Court further noted that “it will almost always be within a trial judge’s discretion to allow the defendant’s written or recorded confession or incriminating statement to be admitted as a trial exhibit that goes into the jury room during deliberations.”81 In Lewis, four § 3507 witness statemen

2024First, there is an identifiable decision-making context where the realities of the situation can subtly undermine the decisions of even an independent and disinterested fiduciary.92 “Inherent in these situations are subtle structural and situational conflicts that do not rise to a level sufficient to trigger entire fairness review, but also do not comfortably permit expansive judicial deference,” under the business judgment rule.93 Second, the decision under review involves the fiduciary 89 In re Dollar Thrifty S’holder Litig., 14 A.3d 573, 598 (Del. Ch. 2010). 90 Trados II, 73 A.3d at 43 ; se

2020Unless one of the rule’s elements is rebutted, “the court merely looks to see whether the business decision made was rational in the sense of being one logical approach to advancing the corporation’s objectives.” In re Dollar Thrifty S’holder Litig., 14 A.3d 573, 598 (Del.

2024The default standard of review is the business judgment rule, which is a “presumption that in making a business decision[,] the directors of a corporation acted on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the 81 8 Del. C. § 141(a). 82 Malone v. Brincat, 722 A.2d 5, 9 (Del. 1998) (“One of the fundamental tenets of Delaware corporate law provides for a separation of control and ownership.”). 83 Id. 84 Stone ex rel.

2024The default standard of review is the business judgment rule, which is a “presumption that in making a business decision[,] the directors of a corporation acted on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the 81 8 Del. C. § 141(a). 82 Malone v. Brincat, 722 A.2d 5, 9 (Del. 1998) (“One of the fundamental tenets of Delaware corporate law provides for a separation of control and ownership.”). 83 Id. 84 Stone ex rel.

2022Read in its entirety, Section 7.2 deals with both the transfer of membership interests and the acquisition of 185 Id. at 9 (emphasis added) (citing 6 Del. C. 18-301(b)(1)); see also Perry v. Neupert, 2019 WL 719000 , at *31 (Del. Ch. Feb. 15, 2019) (“As with Section 18-702(b), Section 18-301 defers in the first instance to the operative LLC agreement. [In this case], [t]he Company’s LLC agreement did not address the admission of new members, so the default rule applies.”); Elf Atochem N. Am., Inc. v. Jaffari, 727 A.2d 286, 291 (Del. 1999) (“The basic approach of the Delaware Act is to provide

2022Read in its entirety, Section 7.2 deals with both the transfer of membership interests and the acquisition of 185 Id. at 9 (emphasis added) (citing 6 Del. C. 18-301(b)(1)); see also Perry v. Neupert, 2019 WL 719000 , at *31 (Del. Ch. Feb. 15, 2019) (“As with Section 18-702(b), Section 18-301 defers in the first instance to the operative LLC agreement. [In this case], [t]he Company’s LLC agreement did not address the admission of new members, so the default rule applies.”); Elf Atochem N. Am., Inc. v. Jaffari, 727 A.2d 286, 291 (Del. 1999) (“The basic approach of the Delaware Act is to provide

2022See, e.g., id. (defining “Membership Interests” as “either Percentage Interest or Units, based on how ownership in the Company is expressed in Exhibit A,” which lists the “Members”); id. (defining “Percentage Interest” as “a percent ownership in the Company entitling the holder to an economic and voting interest in the Company” but defining a “Unit” as “a unit of ownership entitling the Member holding such Unit to an economic interest and a voting interest in the Company”). 192 6 Del. C. § 18-702(b)(1); see also Achaian, Inc. v. Leemon Family LLC, 25 A.3d 800 , 804-805 (Del. Ch. 2011) (“[I]t i

2022See, e.g., id. (defining “Membership Interests” as “either Percentage Interest or Units, based on how ownership in the Company is expressed in Exhibit A,” which lists the “Members”); id. (defining “Percentage Interest” as “a percent ownership in the Company entitling the holder to an economic and voting interest in the Company” but defining a “Unit” as “a unit of ownership entitling the Member holding such Unit to an economic interest and a voting interest in the Company”). 192 6 Del. C. § 18-702(b)(1); see also Achaian, Inc. v. Leemon Family LLC, 25 A.3d 800 , 804-805 (Del. Ch. 2011) (“[I]t i

2021Co. v. Vertin, 102 A.3d 155, 183 (Del.

2021Co. v. Vertin, 102 A.3d 155, 183 (Del.

2021Auth., 619 A.2d 1166, 1173 (Del. 1993) (presuming that a statute’s natural construction will not foment “mischievous or absurd results”). -16- delay its suit’s prosecution—hence its request that the Court find a full admission of liability or a default on the defense.

2021Auth., 619 A.2d 1166, 1173 (Del. 1993) (presuming that a statute’s natural construction will not foment “mischievous or absurd results”). -16- delay its suit’s prosecution—hence its request that the Court find a full admission of liability or a default on the defense.

2021“Section 141 of the Delaware General Corporation Law empowers the board of directors of a Delaware corporation to manage the corporation’s business and affairs.”143 When exercising this authority, directors owe unremitting fiduciary duties of loyalty and care to the company’s stockholders. 144 The default standard of review guiding this court’s determination of whether directors violated those fiduciary duties, the business judgment rule, affords corporate fiduciaries a 142 Tornetta v. Musk, 2019 WL 4566943 , at *1 (Del. Ch. Sept. 20, 2019). 143 Larkin v. Shah, 2016 WL 4485447 , at *8 (Del. Ch

2021“Section 141 of the Delaware General Corporation Law empowers the board of directors of a Delaware corporation to manage the corporation’s business and affairs.”143 When exercising this authority, directors owe unremitting fiduciary duties of loyalty and care to the company’s stockholders. 144 The default standard of review guiding this court’s determination of whether directors violated those fiduciary duties, the business judgment rule, affords corporate fiduciaries a 142 Tornetta v. Musk, 2019 WL 4566943 , at *1 (Del. Ch. Sept. 20, 2019). 143 Larkin v. Shah, 2016 WL 4485447 , at *8 (Del. Ch

2004Dec.20, 1994) (where party "intended to provide [plaintiff] with accurate information," and there was no evidence that party's misstatements were intentionally or recklessly made, plaintiff had not established scienter requirement). [78] These standards have been mostly articulated in the corporate context but the corporate standards often serve as the default rule in the alternative entity context unless they are preempted by valid contracting decisions. [79] E.g., Loudon v. Archer-Daniels-Midland Co., 700 A.2d 135, 137 (Del.1997) ("Delaware law of the fiduciary duties of directors ... establ

2004E.g., Loudon v. Archer-Daniels-Midland Co., 700 A.2d 135, 137 (Del.1997) ("Delaware law of the fiduciary duties of directors ... establish.es a general duty of directors to disclose to stockholders all material information reasonably available when seeking stockholder action.”). .

2024Entity law generally deploys three standards of review: a default standard that is highly deferential to the fiduciary, an intermediate standard under which the fiduciary must show that its actions were reasonable, and an onerous standard under which the fiduciary must show that its actions neither harmed the beneficiary nor conferred any undeserved benefit on the fiduciary.86 Delaware’s default standard of review is the business judgment rule. 87 The business judgment rule presumes that “in making a business decision the directors of a corporation acted on an informed basis, in good faith and

2017“The business judgment rule is the default standard of review” for evaluating the decisions of corporate fiduciaries.147 Under that rule, a decision made by informed and loyal corporate fiduciaries “will not be overturned by the courts unless it cannot be ‘attributed to any rational business purpose.’”148 The plaintiff bears the burden of proof in attempting to rebut the presumption created by the business judgment rule.149 A plaintiff seeking to rebut the presumption “‘assumes the burden 147 Reis v. Hazelett Strip-Casting Corp., 28 A.3d 442, 457 (Del.

2021“Section 141 of the Delaware General Corporation Law empowers the board of directors of a Delaware corporation to manage the corporation’s business and affairs.”143 When exercising this authority, directors owe unremitting fiduciary duties of loyalty and care to the company’s stockholders. 144 The default standard of review guiding this court’s determination of whether directors violated those fiduciary duties, the business judgment rule, affords corporate fiduciaries a 142 Tornetta v. Musk, 2019 WL 4566943 , at *1 (Del. Ch. Sept. 20, 2019). 143 Larkin v. Shah, 2016 WL 4485447 , at *8 (Del. Ch

2020Instead, the default standard of review is the business judgment rule, which presumes that “in making a business decision the directors of a corporation acted on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the company.” Aronson v. Lewis, 473 A.2d 805, 812 (Del. 1984), overruled on other grounds by Brehm v. Eisner, 746 A.3d 244 , 253–54 (Del. 2000).

2026Corp., 2017 WL 1437308 , at *17 (Del. Ch. Apr. 14, 2017) (explaining that for directors to act loyally to advance the best interests of the corporation means that they must seek “to promote the value of the corporation for the benefit of its stockholders”); see generally Unocal Corp. v. Mesa Petroleum Co., 493 A.2d 946, 955 (Del. 1985) (“[C]orporate directors have a fiduciary duty to act in the best interests of the corporation’s stockholders.”); eBay Domestic Hldgs., Inc. v. Newmark, 16 A.3d 1, 34 (Del. Ch. 2010) (explaining that directors’ fiduciary duties include “acting to promote the valu

2024For instance, during contested director elections and other contests for control, directors might be improperly 90 In re Tesla Motors, Inc. S’holder Litig., 298 A.3d 667 , 700 (Del. 2023) (citing Weinberger v. UOP, Inc., 457 A.2d 701, 711 (Del. 1983)) [hereinafter In re Tesla Motors]. 91 Id. 92 Id. 22 motivated to preserve their positions rather than to act in the best interest of the corporation and its stockholders.93 Recognizing the inherent potential for conflicts, a reviewing court will apply an enhanced scrutiny standard of review.94 And where a controlling stockholder transacts with the

2026Section 9(1) provides that 213F “[i]f any Party brings an action to enforce its rights under [the PSA], the prevailing party shall be entitled to recover its costs and expenses, including reasonable legal fees, incurred in connection with such action, including any appeal of such action.” 215 214F CAC does not dispute that Mr. Fellerman is entitled to attorney’s fees and expenses under the PSA if Mr. Fellerman prevails in this action. 216 215F Mr. Fellerman is correct that Section 9(1) provides an exception to the default American Rule and entitles him to reasonable attorney’s fees and expense

2026None of the established situations in which enhanced scrutiny applies are present in this case, rendering that standard inapplicable.”); see also In re Rural Metro Corp., 88 A.3d 54, 84 (Del. Ch. 2014) (“In this case, the Board approved a sale of Rural to Warburg for cash.

2025No. 2025-0402-LM August 29, 2025 “’Delaware courts have interpreted Section 18-305 by looking to cases interpreting similar Delaware statues concerning corporations and partnerships,’ such as Section 220 of the Delaware General Corporation Law.” 86 This Court may look beyond the formation documents of the company and the financial information relied on to establish an individual’s status which qualifies them for inspection as “the Court of Chancery in making its determination of a person’s status as a stockholder of record, is empowered to examine all pertinent evidence with the view of reachi

2025For example, Section 11.4 does not say that Manager elections “shall only be appointed at the annual meeting” or that “no appointments shall be made except at the annual meeting.” Cf. Manti Hldgs., 261 A.3d at 1222 (“The best way to save investors the trouble of determining whether a corporation departed from a default rule [of the DGCL] would be to make that rule mandatory . . . .”); Coinmint, 261 A.3d at 901. 117 The term “annual meeting” is not defined in the 2008 LLC Agreement.

2025Although the AMA contains an arbitration clause instead of a forum selection clause, both serve a similar function.61 “An arbitration provision is, in effect, a specialized kind of forum selection clause, so the same principles apply.”62 Thus, the Court adopts the Flotek court’s sound reasoning and finds the Terra Subs—as non-signatories subject to another forum selection clause— are not bound by the SPA’s Delaware Forum Provision.63 60 Id. at 1092. 61 Nat’l Indus.