Corporate

Dismissal Denied for Disinterested Directors When Entire Fairness Applies to Transaction

 In re Cornerstone Therapeutics Inc. Stockholders Litigation, Cons. C.A. No. 8922-VCG (Del. Ch. Sept. 10, 2014) [an enhanced version of this opinion is available to lexis.com subscribers].

This Chancery decision is noteworthy for its analysis of the applicable standard for a motion to dismiss members of a special committee when the challenged transaction would otherwise be subject to the entire fairness standard. This opinion provides a helpful review of the history of the standard and a discussion of when the burden of proof shifts to the plaintiff even when that standard applies, though initially the burden rests with the defendant.

The opinion also features one of the first applications of the recent Supreme Court opinion in M&F Worldwide, highlighted here, which provides that a deal with a controlling shareholder, in order to enjoy the business judgment rule standard of review, be conditioned ab initio on a majority of the minority approval, and approval by an independent special committee.

 Read more Delaware business litigation case summaries and commentary on Delaware Corporate and Commercial Litigation Blog, a blog hosted by Francis G.X. Pileggi, of Eckert Seamans.

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