Posts tagged Case Summaries

Delaware's Complex Civil Litigation Court: One Year Later

Edward M. McNally
This article was originally published in the Delaware Business Court Insider | May 18, 2011

On May 1, 2010, the Delaware Superior Court established a specialized "division" within that court to handle business disputes, known as the "Complex Civil Litigation Division" (or "CCLD"). The CCLD complements the Court of Chancery by offering a specialized business court to handle cases for monetary damages where jurisdiction would not exist in the Court of Chancery. Three specially assigned judges handle the cases assigned to the CCLD. Now that a year has passed, it is time to review the work of the CCLD and to assess its future. The CCLD is off to a good start, but remains an underutilized resource for businesses faced with civil litigation.

For a number of years, civil litigation involving business disputes has been plagued by inefficiency, escalating costs and delay. Three areas in particular caused much of the trouble with business litigation. First, discovery of electronically stored information caused litigation costs to escalate even beyond the amounts in dispute. Second, delays from crowded court dockets frustrated businesses with a problem to resolve. Third, discovery disputes over privileged communications and the testimony of expert witnesses that are often involved in business disputes also increased litigation costs and delays.

The CCLD addresses each of these areas of concern. It utilizes judges experienced in business disputes who, by a Case Management Order ("CMO") entered at the outset of litigation, keep the litigation on track to a fixed trial date. The CMO also controls the discovery process and the collateral disputes that otherwise often derail a case. Discovery of electronically stored information ("e-discovery") is subject to a set of guidelines that require litigants to cooperate in e-discovery and to reduce its costs. Other protocols are imposed to limit disputes over the discovery of privileged communications and expert witnesses, with the goal of further reducing litigation costs.

None of these special aspects of the CCLD are groundbreaking innovations. The Federal Rules of Civil Procedure, for example, require case management conferences and court orders establishing pretrial and trial schedules. Those rules also were recently amended to better control e-discovery and expert witness discovery. Federal Rule of Evidence 502 also was added to better control attorney-client privilege disputes. The CCLD has freely borrowed from these innovations of the federal courts.

Moreover, the CCLD for the most part has chosen to characterize its special procedures as guidelines for litigants to adopt or modify as they choose by their own agreements. Thus, the parties may opt out of the expert witness, e-discovery and privileged communication guidelines of the CCLD if they wish. The court has made it clear that it will accept any reasonable proposal the parties choose.

Now that the CCLD has been in place for one year, it makes sense to see if its new procedures for Delaware’s Superior Court have succeeded in resolving the problems confronting business litigation.

As the awareness of the CCLD has grown, business for the CCLD has picked up speed. To date, 49 substantial business disputes have been assigned to the CCLD and its three judges. Our review of the dockets of those 49 cases (together with our direct participation in 25 percent of these cases) leads us to conclude the CCLD is making progress, but is still an underutilized resource.

The 49 cases fall into four categories: (1) those matters diverted from the CCLD by voluntary settlement, bankruptcy stays or removal to federal court; (2) those matters just recently filed whose history is too short to be analyzed; (3) those matters subject to motions to dismiss; and (4) those matters being actually litigated. In our experience this breakdown is typical of business litigation. For example, the CCLD attracts many insurance coverage disputes that are usually resolved by determinations of the scope of an insurance policy, often in the context of a motion to dismiss. Full litigation including discovery is not common in those cases.

Of the cases actually going forward in the full litigation process, the large majority are subject to some form of CMO, including protocols on expert and privileged document discovery. Delays caused by discovery disputes seem to have been avoided, with savings in time and expense. Thus, as to those cases, the CCLD is working out as planned. Of course, a more complete review of how CCLD is working must await a significant number of CCLD cases going to trial or at least going through the full litigation process.

The mere existence of the CCLD protocols as guidelines also may be having a positive effect even if the parties to the litigation do not choose to explicitly adopt them. E-discovery is an example. The CCLD has a detailed set of "E-Discovery Plan Guidelines." Those guidelines require that the parties submit an "e-discovery" plan to the court, unless "the parties otherwise agree." The parties are reaching agreements on e-discovery and thus the guidelines are having their intended effect of reducing e-discovery costs.

Of course, as with anything new, there are some problems that the CCLD is working to address. Motions to dismiss a complaint sometimes delay assignment of a matter to the CCLD. If it was a defendant who requested assignment to the CCLD, that assignment was planned to occur after an answer to a complaint was filed. If there was no answer but instead a motion to dismiss, assignment was delayed in these cases. Motions to dismiss have also delayed entry of a CMO. That is understandable given that granting such a motion will save the court from entering a useless CMO. Such a delay in ultimate case disposition when a motion to dismiss is eventually denied is a problem in all civil litigation. The CCLD is expected to address these issues shortly.

Finally, the CCLD appears to be an underutilized resource as it passes its first-year anniversary. We are told that the CCLD judges are able to go to trial on almost any schedule the parties choose. While that capacity may not last forever, it is a big advantage to litigants. Given Delaware’s predominance as a corporate domicile where jurisdiction over Delaware entities is established, companies interested in efficient resolution of business disputes before specially-focused judges should more frequently file their claims in the CCLD. If businesses are serious about improving the efficiency and predictability of business litigation, they will choose the Delaware Superior Court’s CCLD more frequently. We are confident that as the CCLD’s reputation grows, its docket will grow as well.

Edward M. McNally (emcnally@morrisjames.com) is a partner at Morris James in Wilmington and a member of its corporate and fiduciary litigation group. He practices primarily in the Delaware Superior Court and Court of Chancery handling disputes involving contracts, business torts and managers and stakeholders of Delaware business organizations. The views expressed herein are his alone and not those of his firm or any of the firm’s clients.
 

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'Material Adverse Change' Clauses Protect Against Loss of Customers and Suppliers

Lewis H. Lazarus and Jason C. Jowers
This article was originally published in the Westlaw Journal Delaware-Corporate | May 4, 2011

In the article, Lewis H. Lazarus and Jason C. Jowers discuss the need for transactional and litigation attorneys who negotiate or litigate material adverse change clauses to focus on the particular language at issue as differences in phrasing could affect whether a seller is protected from a buyer's claim of breach.

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Ignoring Chancery Court's Guidance on How to Act in Merger Transactions Could Jeopardize Deals

Lewis H. Lazarus
This article was originally published in the Delaware Business Court Insider | May 04, 2011

The Delaware Court of Chancery, mindful of its role as a pre-eminent business court, works hard to communicate its expectations of officers and directors and their advisers.  That facilitates predictability.  Companies can be bought or sold with reduced risk that proposed transactions will be enjoined.  The corollary is that when advisers and their boards do not follow the rules, they put their clients’ transactions at risk.  Two recent cases illustrate that the Delaware Court of Chancery will not hesitate to enjoin a transaction where parties ignore clear guidance from prior opinions.

In its Feb. 14 decision in In re Del Monte Foods Co. Shareholders Litigation, the Court of Chancery enjoined a merger transaction from closing for 20 days and voided the deal protection terms that would have made a competing bid more expensive during that time period.  It did so because of conflicts of interest by the seller’s investment adviser.  The conflict arose because the seller’s investment adviser worked with the buyer to develop its merger proposal without telling the board, in apparent violation of a confidentiality agreement arising out of a previous failed effort to sell the company.  It then sought a role in providing buy-side financing.  All this while acting as financial adviser to the seller.

In enjoining the transaction the court relied on In re Toys "R" Us Inc. Shareholder Litigation, a 2005 case in which the court held that generally "it is advisable that investment banks representing sellers not create the appearance that they desire buy-side work, especially when it might be that they are more likely to be selected by some buyers for that lucrative role than by others."

Here the court found the investment adviser failed to disclose its conversations with prospective buyers or that it sought from the beginning to provide financing to the buyers.  This prevented the board from taking steps to protect the integrity of the process.  It also caused the seller to incur greater fees because once it was disclosed that the investment adviser sought to provide buy-side financing, the conflict required the board to obtain a new investment banker to opine on the fairness of the transaction.  Thus, while "the blame for what took place appears at this preliminary stage to lie with Barclays, the buck stops with the Board," the court said in Del Monte.

The remedy the court fashioned was unique — voiding the deal protection terms while enjoining the closing to permit a 20-day go-shop — but reflects the traditional equity power of the court to fashion a remedy tailored to the breach.  The court had no problem voiding the contractually bargained-for deal protection terms where the buyer knowingly participated in the board’s breach of fiduciary duty.  In so doing, the Del Monte court emphasized, "After Vice Chancellor [Leo] Strine’s comments about buy-side participation in Toys 'R' Us, investment banks were on notice."

Three weeks later, in its March 4 decision in In re Atheros Communications Inc. Shareholders Litigation, the Court of Chancery enjoined another transaction where the board failed to disclose the nature and amount of the investment adviser’s fee.  In Atheros the court found that stockholders voting on a proposed merger transaction would find it important to know that the investment adviser who rendered the fairness opinion upon which the board relied would receive 98 percent of its fixed fee only if a transaction closed.  The court was not troubled by the contingent fee per se, but rather by the fact that more than 50 times the portion that was otherwise due would be received only if a transaction closed.  As the court held, "the differential between compensation scenarios may fairly raise questions about the financial adviser’s objectivity and self-interest."

An additional factor justifying the court’s entry of injunctive relief was that the board did not disclose how soon in the process the seller’s CEO, who actively participated in negotiating the transaction price, knew that he would be staying on and receiving compensation from the buyer.  The court thus required additional disclosure on this point, finding that information that the CEO knew he would receive an offer of employment from the buyer at the same time he was negotiating the offer price would be important to a reasonable stockholder in deciding how to vote.

Both of these cases demonstrate the vitality of the court’s observation in Del Monte, cited in Atheros, that "because of the central role played by investment banks in the evaluation, exploration, selection, and implementation of strategic alternatives, this court has required full disclosure of investment banker compensation and potential conflicts."

That guidance means that practitioners and advisers would be well-served to avoid conflicts, to counsel their clients to avoid them, and to disclose such conflicts promptly.  Boards must also ensure that possible conflicts on the part of management who participate in the sale negotiations are properly managed by the board and fully disclosed.  As these cases demonstrate, it is the board’s responsibility to manage the sale process and failure to follow clear guidance from the case law imperils prompt closing of potential transactions.

Lewis H. Lazarus (llazarus@morrisjames.com) is a partner at Morris James in Wilmington and a member of its corporate and fiduciary litigation group.  His practice is primarily in the Delaware Court of Chancery in disputes, often expedited, involving managers and stakeholders of Delaware business organizations.  The views expressed herein are his alone and not those of his firm or any of the firm's clients.
 

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Court of Chancery Discusses Rule 11 Sanctions

Katzman v. Comprehensive Care Corp., C. A. No. 5892-VCL (December 28, 2010)

In addition to providing a useful overview of advancement and indemnification, including the significant difference between these principles, this transcript offers useful guidance on when counsel should move for sanctions.  Vice Chancellor Laster strongly urged parties to think "twice, three times, four times" before moving for sanctions or fees under bad faith exceptions because such motions are inflammatory and make it difficult for counsel to litigate a case.  While acknowledging that his statements seemed inconsistent with statements he had made in prior cases where he referred to Rule 11 or shifted fees, Vice Chancellor Laster stated that a judge bringing up such matters has a less inflammatory effect on litigation and counsel's relations than when parties brought motions for sanctions.  He also noted that the type of conduct meriting sanctions was usually obvious from briefing on other issues, making it unnecessary for parties to bring motions.  A possible exception to this would be out of view discovery misconduct that parties would need to bring to the Court's attention.  In this case, however, the motion for sanctions was based on a party supposedly filing frivolous claims in an improper forum.  The Court denied the motion for sanctions and awarded fees to the party opposing the motion for sanctions.

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Delaware Supreme Court's Determination That Record Does Not Permit Interlocutory Review of Court of Chancery's CNX Gas Decision Leaves for Another Day Questions Concerning Standard of Review in Two-Step Unilateral Freeze-out Transactions

  In re CNX Gas Corp. Shareholders Litig., Consol. C.A. No. 5377-VCL (July 5, 2010)

The standard of review applicable to two-step unilateral freeze-out transactions remains uncertain following the Delaware Supreme Court’s decision[1] to deny interlocutory review of the Court of Chancery’s decision[2] to refrain from enjoining a majority shareholder’s tender offer even though the Court of Chancery had certified the Injunction Decision for interlocutory review[3]. In the Interlocutory Appeal Decision, the Court outlined its views of conflicts in the Court of Chancery’s determination of the appropriate standard of review as a factor that would justify interlocutory appeal. Although the Supreme Court declined interlocutory review, for practitioners seeking guidance among the competing standards, the Court of Chancery’s Interlocutory Appeal Decision provides a clear overview.

 

Three Choices

 

The Court of Chancery will apply one of three standards of review to a unilateral two-step freeze-out transaction: (i) entire fairness unless the transaction is structured to simulate arms’ length third party approvals by both the board and the stockholders (“Cox Communications[4] test” or “Unified Standard”)[5]; (ii) no substantive review as long as the transaction is subject to a non-waivable majority of the minority condition; the controlling stockholder promises to consummate a short-form merger at the same price if it obtains more than 90% of the shares; the controlling stockholder makes no retributive threats; and the independent directors have free rein and adequate time to react to the tender offer (“Pure Resources[6] test” or “Hybrid Standard”); and (iii) no substantive review for entire fairness unless the transaction is structurally coercive (“Siliconix[7] test”).

 

Standard of Review May Determine Outcome

 

As the Court noted in its Interlocutory Appeal Decision, the standard the court applies may be outcome-determinative.  Thus, the Court of Chancery in its Interlocutory Appeal Decision states that the outcome in Siliconix would have differed because had either the Hybrid or Unified Standard applied, the Siliconix defendants would have failed both tests, primarily because the controlling stockholder did not commit to a cash-out merger on the same terms as the tender offer.  The Interlocutory Appeal Decision also noted similar deficiencies in other cases that preceded and followed Siliconix and were not substantively reviewed, but would not have passed muster under the Hybrid or Unified standards.

 

Cases Differ in What Constitutes “Inherent Coercion”

 

The Interlocutory Appeal Decision also identified conflicts in the case law concerning whether inherent coercion is present when a controlling stockholder tenders to buy the stock held by minority stockholders. The Court noted that certain cases pre- and post-Siliconix held that unlike in a cash-out merger by a controlling stockholder, a controlling shareholder’s tender offer was not coercive as long as the majority shareholder did not unduly pressure the minority such as by threatening to de-list if the tender offer failed. But the Court of Chancery in other cases found no distinction between the inherent coercion that the Delaware Supreme Court has recognized in single-step freeze-out transactions by controlling stockholders and that present when a majority shareholder tenders for the shares it does not own. Compare Siliconix and Pure Resources. The Court also noted that the Injunction Decision, Cox Communications and Pure Resources may conflict with Kahn v. Lynch Communication Systems Inc., 638 A.2d 1110 (Del. 1994) over the effect that protective devices such as independent director or majority of minority approval may have on the standard of review. Lynch held that the possibility of retribution if the stockholders defied the wishes of the majority stockholder required the application of the more searching entire fairness standard of review even if the transaction were negotiated with a committee of independent directors and approved by a majority of fully informed minority stockholders. By contrast, Pure Resources, Cox Communications and the Injunction Decision would allow for the application of business judgment review if the controlling stockholder’s transaction is negotiated and approved by disinterested and independent directors and a fully informed majority of the minority stockholders.

 

Cases Differ in Role of the Board in Responding
to a Tender Offer by a Controlling Stockholder

 

The Court also pointed out a conflict in the proper role of the board under the past decisions.  The Siliconix line of cases holds that the target board has no necessary role, the Pure Resources line of cases provide for an advisory role, and the Injunction Decision holds that the target board has the same role responding to a controlling stockholder’s tender offer as it does in responding to a third-party tender offer.  The Court emphasized that its holding in the Injunction Decision was grounded on its understanding of the board-centric foundation of Delaware corporate law with which the Siliconix line of cases was inconsistent.

 

Court Cites Scholarly Research Finding that Stockholders
Receive Greater Consideration in Single-Step Freeze-outs

 

Finally, the Court cited scholarly work indicating that stockholders receive greater consideration in single-step freeze-outs and in negotiated two-step freeze-outs than in unilateral two-step freeze-outs.  The Court thus concluded that:

All else equal, a legal regime that makes it easier for controllers to freeze out stockholders will increase the number of transactions but result in lower premiums. Conversely, a legal regime that imposes greater procedural requirements will enable target stockholders to receive higher premiums but reduce the overall level of transactional activity. Either approach is legitimate and defensible. Either approach could result in the greatest aggregate benefits for stockholders, depending on the typical premium and overall level of deal activity.

Interlocutory Appeal Decision at *12.

 

Supreme Court Declines Interlocutory Appeal
So Foregoing Differing Approaches Will Remain

 

            Notwithstanding the Court of Chancery’s delineation of the conflicts in the lower court concerning the proper standard to apply, on July 8, 2010 the Delaware Supreme Court determined in its discretion that the application for interlocutory review should be denied “based upon the current state of the record.” CNX Gas III at *1. In the absence of definitive guidance, practitioners would be well-advised to review the Court’s Interlocutory Appeal Decision for a concise statement of the standards of review that may apply to unilateral two-step freeze-out transactions with controlling stockholders.

 

  

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District Court Applies Stone v. Ritter in Rule 23.1 Case

King v. Baldino, C.A. No. 08-54-GMS-MPT (D. Del. Aug. 26, 2009).

This memorandum order issued by Magistrate Mary Pat Thynge is an example of the continued judicial reluctance to impose liability on boards of directors for alleged failures in oversight responsibility, where the plaintiff fails to plead that the board was on notice, through “red flags,” of corporate misconduct. The Magistrate applied Delaware law on oversight liability as set out in Stone v. Ritter, 911 A.2d 362 (Del. 2006) to find that the plaintiff failed to plead demand futility and comply with Federal Rule of Civil Procedure Rule 23.1.

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Superior Court: Action May Proceed Against Licensor Despite First-Filed Actions

STMicroelectronics N.V. v. Agere Sys., Inc., C.A. No. 08C-09-099 MMJ (Del. Super. May 19, 2009) (applying New York law per choice of law provision)

This case illustrates the series of events that may arise when a subsidiary is party to a licensing agreement, but its parent is not.

Here, the licensor sued the parent company for patent infringement in the Eastern District of Texas and before the International Trade Commission.  In response, the parent and subsidiary brought this action in Delaware, claiming that the filing of the patent infringement actions, though only naming the non-signatory parent, violated the licensing agreement’s covenant not to sue.

The Superior Court permitted the claim to move forward, denying the defendant-licensors’ McWane motion on the basis that the Delaware action did not present the same legal and factual issues as the first-filed proceedings.  Further, the Court denied the defendants’ motion to dismiss for failure to state a claim and for lack of standing on the basis that additional discovery was necessary to resolve those issues.

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Licensor's Action to Recover Royalties Overcomes Motion to Dismiss in Superior Court

Boyce Thompson Institute For Plant Research v. MedImmune, Inc., C.A. No. 07C-11-217 JRS (Del. Super. May 19, 2009) (applying New York law per choice of law provision)

This opinion discusses some interesting contractual interpretation and jurisdictional issues arising out of a licensing agreement.  The dispute arose because the licensees denied any obligation to pay royalties to the licensor for products they are manufacturing in a country where, they claim, the licensor does not hold a patent.

The Superior Court found that the contract was ambiguous on whether “covered” products included those that were protected by the licensor anywhere or only those that were protected by a patent in the locations where they were manufactured.  In any case, the Court denied the licensees’ motion to dismiss on the basis that there was no evidence presented to rule out the possibility that the licensees are, in fact, infringing on the patent by their acts in this other country.

The Court also raised the issue of whether it had subject matter jurisdiction to decide the case.  While the Court deferred resolution of the issue, it noted that, if the contract claim requires the Court to determine whether the patent was infringed, then it would likely follow that patent law is a “necessary element” of the breach of contract claim and the federal courts have exclusive subject matter jurisdiction.

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"Handshake Agreement" Overcomes Motion to Dismiss in Superior Court

Sunstar Ventures, LLC v. Tigani, C.A. No. 08C-04-042 JAP (Del. Super. April 30, 2009)

This case illustrates the exception to the statute of frauds of "substantial part performance."

The seller of a $5MM home, and other items, brought a breach of contract action, because the buyer backed away.   The buyer moved to dismiss on the grounds that there was no meeting of the minds, and, in any case, the statute of frauds bars enforcement of such a handshake agreement.

But the Superior Court denied the motion to dismiss, holding, among other things, that the fact that the buyer took possession and began making modifications to the home supported an inference that there was substantial part performance, an exception to the statute of frauds.

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Spear Complaint Not Fatally Speculative

Spear Pharm. Inc. v. William Blair & Co. LLC, C.A No. 07-821-JJF (D. Del. Apr. 27 2009)

The district court denied motions to dismiss the complaint and found the Supreme Court’s decision in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) instructive. In Twombly, the Supreme Court considered whether a complaint that alleged conspiracy to restrain trade, in violation of the Sherman Antitrust Act, but lacked factual context suggesting an agreement, as distinct from identical, independent action, should be dismissed. The district court concluded that, under Twombly and Third Circuit precedent, the complaint was not “fatally speculative” and should not be dismissed. Unlike the Twombly complaint, where the allegations mentioned no specific time, place, or person involved in the alleged conspiracies, the Spear complaint cited an individual, a time frame, and a temporal sequence of events supporting the allegations.

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District Court Denies Motion for Summary Judgment Based on Void Ab Initio Defense

Lynch v. Coinmaster USA, Inc., C.A. No. 06-365-JJF (D. Del. Mar. 30, 2009)

In this opinion, the court denied a broad application of the ultra vires doctrine. Seeking damages for breach of an employment agreement with Coinmaster USA, Inc., the plaintiff claimed that he was owed outstanding monthly pay, a termination fee, profits, and stock options. Moving for summary judgment, the defendants argued, inter alia, that the agreement was void ab initio in light of the plaintiff’s pre-existing employment agreement with Coinmaster Gaming PLC, a company related to Coinmaster USA, Inc. The defendants cited Solomon v. Armstrong, 747 A.2d 1098 (Del. Ch. 1999), noting that ultra vires acts are void ab initio. Although the court was not entirely clear on the defendants’ position, the court ascertained that the defendants were arguing that the plaintiff, by contracting with Coinmaster USA, Inc. for additional compensation, breached the Coinmaster Gaming PLC agreement and, hence, breached a fiduciary duty to Coinmaster PLC. Under Solomon, the defendants claimed that such a contract is ultra vires and, therefore, void ab initio.     

Rejecting the defendants' argument, the court found that the Coinmaster USA, Inc. agreement was not void ab initio. Delaware law severely restricts the categories of claimants who can raise the ultra vires defense. The defendants cited no cases, and the court could not identify any authority, suggesting that such a contract was ultra vires and, hence, void ab initio merely because it conflicts with a contract involving a third party. Finding that Solomon does not stand for this proposition, the court denied the defendants’ motion for summary judgment with respect to the plaintiff’s breach of contract claim.  

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Court of Chancery Holds When There Is No Contribution There Is No Fee

In re William Lyon Homes Shareholders Litigation, C.A. No. 2015-VCN (Del Ch. April 4, 2009)

This decision deals with when a plaintiff may receive a fee when a merger price is increased after he files suit and then his case is mooted. The general rule applied here is that while the defense has the burden of proving the plaintiff did not contribute to the increased price, when the merger consideration was increased without any help from the plaintiff, there is no fee. In short, no help, no fee.

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Court of Chancery Upholds Right of "Beneficial" Member to Sue in LLC Case

Mickman v. American International Processing LLC, C.A. No. 3869-VCP (Del. Ch. April 1, 2009)

In the case of an LLC, unlike with a Delaware corporation, the statutory definitions of who may seek court relief have not been broadened. Generally, only a member or manager has those rights, and membership is determined by the LLC operating agreement. This decision holds that a plaintiff may prove she is a member entitled to enforce membership rights by extrinsic evidence, such as a tax return listing her as a member.

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Court of Chancey Explains Class Release Rules

In re Countrywide Corporation Shareholders Litigation, C.A. No. 3464-VCN (Del. Ch. March 31, 2009)

This decision provides an excellent outline of what claims may be released in a class action settlement. Here the objectors to the settlement had a damage claim unique to them but that the proposed settlement would have released. The Court held that the objectors needed to be given the right to opt out of the settlement or the release that was part of the settlement must be more limited so as to not affect their rights in their individual claim.

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Court of Chancery Limits Use of Interested Directors' Votes

Sutherland v. Sutherland, C.A. No. 2399-VCL (Del. Ch. March 23, 2009)

This decision is a good outline of the effect of Section 144 of the Delaware General Corporation Law ("DGCL") that permits transactions to be judged on their merits, even if they are with interested directors. After explaining that law, the Court went on to hold that a certificate of incorporation provision that permitted interested directors' votes to be used to invoke the business judgment rule would be in violation of the DGCL and, thus, invalid.

This is important, because it means that, at least in a Delaware corporation, there are limits on what exculpation can be provided to directors in a certificate of incorporation. The law may well be different in an LLC or LP, of course.

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