In two recent post-trial decisions, the Delaware Court of Chancery found that officers of a target company had breached their fiduciary duties in connection with a sale process by acting for personal gain, rather than to maximize stockholder value, that the target boards did not sufficiently manage the officers’ conflicts of interest that infected the sale process, and that the acquirors were liable for aiding and abetting certain of the sell-side fiduciary breaches.  

In the first of the decisions, In re Mindbody Stockholder Litigation, C.A. No. 2019-0442-KSJM, 2023 WL 2518149 (Del. Ch. Mar. 15, 2023), the court found that the target company’s founder and CEO, due primarily to frustration from an inability to monetize his stock holdings, set a sale process in motion largely without the target board’s knowledge, then tilted that process toward a preferred bidder because he believed it offered him the best post-acquisition financial upside, and that the target board neither knew about the CEO’s conflicts nor managed them effectively.  The court further found that the CEO breached his duty of disclosure by failing to disclose the full extent of his interactions with the acquiror, and that the acquiror aided and abetted this breach by failing to correct the material omissions in the target’s proxy materials, as required under the merger agreement. The court suggested that the acquiror may have been found liable for aiding and abetting the sell-side sale process breaches of fiduciary duty if not for a “procedural foot fault” by plaintiffs in not asserting such a claim until the close of trial.