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In re Cornerstone Therapeutics Inc. Stockholder Litigation
Delaware Supreme Court
115 A.3d 1173 (Del. 2015)
Through a merger, the controlling stockholder of Cornerstone Therapeutics Inc. obtained the remaining stock in the corporation that he did not previously own. Cornerstone’s certificate of incorporation contained an exculpatory provision, shielding independent directors from monetary damages and liability related to a breach of the fiduciary duty of care. Cornerstone stockholders (plaintiffs) sued to challenge the merger, naming the controlling stockholder and all directors who had approved the merger as defendants. Because the self-interested merger had not followed the steps necessary to invoke the business judgment rule, the entire-fairness standard applied to the court’s review. Cornerstone’s independent directors filed motions to dismiss. The Chancery Court of Delaware denied the motions based on its reading of the Delaware Supreme Court’s historical application of Delaware General Corporation Law § 102(b)(7). However, given its uncertainty with that ruling, the chancery court certified the question of independent-director liability to the Delaware Supreme Court for interlocutory review.
Rule of Law
Holding and Reasoning (Strine, C.J.)
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