Delaware Business Litigation Report

Court Of Chancery Applies Corwin Doctrine To Dismiss Non-Exculpated Duty of Care Claims

In Re Merge Heathcare Inc. Stockholders Litigation, C.A. 11388-VCG (January 30, 2017)

Under the Corwin doctrine, approval by a majority of the fully-informed, uncoerced, disinterested stockholders invokes the business judgment rule so long as the transaction does not involve a controlling stockholder extracting personal benefits. This decision explains that law very well. More interestingly, however, the decision also applies Corwin to a complaint alleging a violation of the duty of care. That is unusual because almost all Delaware corporations have a duty of care exculpation clause in their charters and the result is that post-closing damages cases against directors usually focus on alleging a violation of the duty of loyalty. Why that should make a difference under Corwin is not clear but at least this decision seems to settle the issue and Corwin applies to duty of care claims as well.

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