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Sjunde AP-Fonden v. Activision Blizzard, Inc., C.A. No. 2022-1001-KSJM (Del. Ch. Oct. 2, 2025)
In this decision, Chancellor McCormick largely denied defendants’ motions to dismiss stockholder claims challenging Microsoft’s acquisition of Activision Blizzard. The opinion analyzed (1) the application of Revlon and the pleading burden for transaction-process claims, and (2) the heightened standard for pleading aiding-and-abetting liability after the Delaware Supreme Court’s recent decisions in Columbia Pipeline and Mindbody.
The litigation arises from an acquisition allegedly negotiated “under the cloud of breaking news of [alleged] pervasive sexual harassment at [the target company]”, which allegedly depressed the target’s value and created pressure to sell the company.* Plaintiff alleged that the CEO and a small, self-selected group of directors opened discussions with Microsoft, negotiated a price range below the Board-approved standalone value, and pushed the Board to approve the deal while simultaneously negotiating key personal protections, including an extension of the CEO’s employment contract and enhanced indemnification. The plaintiff alleged the sale process was “tilted” toward the CEO’s personal interests and not toward maximizing stockholder value.
Because this was a final-stage, cash-out merger, the Court held that the transaction was “presumptively subject to enhanced scrutiny under Revlon.” Thus, under this framework, the Court concluded that the plaintiff adequately pled a paradigmatic Revlon claim. Several allegations were key to the Revlon analysis: the CEO faced personal pressure and relied upon a subset of unempowered directors to negotiate the deal, excluding alternative bidders and controlling information flow to the full Board; a different strategic plan had been previously approved for the Company; and the Company revised its internal projections downward to align with Microsoft's offer.
The Court rejected Corwin cleansing because the Company’s proxy statements contained material omissions. The Court found that the plaintiff also stated a non-exculpated claim under Cornerstone for breach of fiduciary duties against each of the director defendants on the grounds that they allegedly failed to properly oversee and manage the sale process that involved a conflicted CEO.
Additionally, the Court analyzed the Delaware Supreme Court’s decisions in Mindbody and Columbia Pipeline, which clarified two key elements necessary to prove aiding and abetting. First, plaintiff must prove two types of knowledge with respect to the defendant: “knowledge that the primary party’s conduct was a breach” and “actual knowledge that their conduct was legally improper.” The Court emphasized that a plaintiff must prove both types—knowledge of a primary party’s misconduct is not enough. Second, the plaintiff must prove “substantial assistance,” particularly when the alleged aider-and-abettor is a third-party bidder, which receives some level of protection in negotiations with a potential target. A “failure to act” and “passive awareness” are insufficient.
Thus, the Court of Chancery reasoned, the Supreme Court in Mindbody and Columbia Pipeline raised the threshold for pleading aiding and abetting claims. The Court emphasized that the legal test for aiding and abetting was “difficult to prove.” Here, applying this legal test, the Court held that the plaintiff failed to allege that the acquirer knew that the CEO was breaching his fiduciary duties, that making a bid under these circumstances was wrongful, and that the acquirer substantially assisted in such breach.
As of this writing, the action remains pending in the Court of Chancery.
* The Editors note that this sentence was revised from the prior blog post to track and quote the Court’s actual language from its Memorandum Opinion. In his answer and counterclaim filed in the case, the Company’s CEO has denied the allegations, asserting that the Plaintiff’s complaint “knowingly paints a grossly distorted picture, focusing on a set of unsubstantiated, false, and ultimately abandoned claims regarding a purportedly troubled workplace environment at Activision,” and further positing that the Plaintiff’s alleged interest in a competitor suggested the “lawsuit was brought to advance ulterior motives and secure improper collateral advantages.” The CEO’s answer also alleges that “Activision’s financial performance post-closing . . . has been far below the ambitious targets contained in [Activition’s long range] plans” For additional information relating to the allegations against Activision, please see Order on Consent Decree dated January 17, 2024, CRD v. Activision Blizzard, Inc. (Superior Court of the State of California, Los Angeles, Case No. 21STCV26571 (stating that “No court or any independent investigation has substantiated any allegations that[] there has been systemic or wide spread harassment at Activision Blizzard” or that “Activision Blizzard’s Board of Directors, including its Chief Executive Officer, … , acted improperly with regard to the handling of any instances of workplace misconduct”), and related litigation.; The Editorial Board, Behind California’s Surrender on Activision Blizzard, The Wall Street Journal (December 20, 2024); SEC Form 10-Q, Activision Blizzard, Inc. (June 30, 2023); Activision Blizzard, Inc., The Transparency Report (May 2023).
