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Court Of Chancery Again Explains Revlon-Bad Faith Analysis

Posted In M&A

Houseman v Sagerman, C.A. 8897-VCG (April 16, 2014)

This decision expands on the holdings of recent Court of Chancery decisions, one of which held directors not liable for breaches of their duty of care in a Revlon case and another that held an investment advisor liable for aiding and abetting the directors' breaches of duty.  Thus, the Court explained that a typical exculpatory charter provision eliminates breaches of duty claims absent a "knowingly and completely failed" observance of a board's duty to get the best price for the sale of the company.  Only such a complete failure is enough to state a breach of the duty of loyalty.   Second, this decision limits the impact of the Rural Metro decision that held an investment advisor liable on an aiding and abetting claim.  Rather, the degree of culpability must be much greater for such a claim to survive.

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