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Supreme Court Clarifies When Independent Directors May Be Dismissed From Case

Posted In Fiduciary Duty

In re Cornerstone Therapeutics Inc. Stockholder Litigation, No. 564, 2014 (May 14, 2015)

This important Supreme Court decision clarifies when independent, disinterested directors may be dismissed from litigation, even when an interested transaction is under attack. When the complaint only alleges a breach of the duty of care by the independent disinterested directors, they should be dismissed when the company has a director exculpation provision in its certificate of incorporation.  This applies even if the transaction itself will be reviewed under the entire fairness standard. Thus, the Court’s prior decisions in the Emerald Partners case that some thought prohibited dismissal of the independent disinterested directors in such circumstances is now clarified.



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