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Summaries and analysis of recent Delaware court decisions concerning business-related litigation.
Morris James Blogs
Chancery Applies Corwin Doctrine to Medium-Form Merger Absent Controller Conflict
Under the well-known Corwin doctrine, when a transaction not subject to the entire fairness standard of review is approved by a fully informed, uncoerced vote of the disinterested stockholders, the business judgment rule applies. Corwin's cleansing effect applies not just to affirmative votes in favor of long-form mergers, but also to acceptance of tender offers for medium-form mergers, like the merger in this case. This Corwin dismissal is notable for its unique facts—the target's substantial blockholder (34%) with voting control (84.5%). But, as this decision explains, the mere existence of a controlling stockholder does not give rise to entire fairness review and take a case outside of Corwin. For that to happen, the transaction must also involve some sort of disabling conflict for the controller. Here, the complaint lacked specific factual allegations to sustain the plaintiffs' theory that the controller had an emergency liquidity need and thus received a unique benefit from tendering. In this regard, the Court found insufficient plaintiffs’ conclusory contention that the controller needed to liquidate his position as part of his estate planning and wealth management strategy following his retirement because his holdings made up most of his net worth.