recent developments in delaware corporate law - Greenberg Traurig ...

208 Delaware Law Review Volume 7:2
II. PRACTICAL IMPLICATIONS
Pundits and practitioners have scrutinized recent decisions of the Delaware courts,
sifting for evidence that Delaware’s judiciary has raised the bar on corporate governance
standards post-Enron or in response to Sarbanes-Oxley. Some speculate that evidence of
heightened scrutiny of directors can be dredged from the Court of Chancery’s decision in
Oracle denying a special litigation committee’s motion to terminate insider trading claims
against their fellow directors because of the special committee members’ social ties to the
defendant-directors precluded a finding of independence. Others glean a trend toward less
judicial deference to board special committees from the Supreme Court’s decision in Krasner
v. Moffett reversing the Court of Chancery’s 12(b)(6) dismissal on business judgment
grounds of a shareholder class action challenging a merger of “sister” companies in which
five of the seven directors who approved the merger were conflicted. 136 Are decisions such
as Oracle and Krasner a harbinger of a shift in the Delaware judiciary toward yet higher
expectations of corporate directors
A review of the recent decisions summarized above suggests that they are not.
Rather, if anything, these decisions are significant for their reaffirmation of and fidelity
to long-standing Delaware precedents on a variety of corporate topics and the courts’
reluctance to entertain new or expanded causes of action against directors. For example,
in MONY, Vice Chancellor Lamb reaffirmed the Delaware Supreme Court’s 1989 decision
in Barkan v. Amsted Industries, Inc. 137 that a board can fulfill its duty to obtain the
best transaction reasonably available by entering into a merger agreement with a single
bidder, establishing a “floor” for the transaction, and then testing the transaction with a
post-agreement market check.
In Hollinger, Vice Chancellor Strine reaffirmed the Delaware Supreme Court’s
1985 decision in Moran v. Household International, Inc., 138 holding that “various sections
of the DGCL … gave directors wide statutory authority to issue a rights plan, even if the
136. Krasner, 826 A.2d at 279. The Supreme Court determined that to shift their burden
of entire fairness, the defendants must prove that the merger was approved by a truly independent
committee with real bargaining power — a fact-intensive burden that could not be satisfied at the
pleading stage.
137. 567 A.2d 1279 (Del. 1989).
138. 500 A.2d 1346 (Del. 1985).