The Delaware Supreme Court’s decision in Corwin v. KKR Financial Holdings, 125 A.3d 304 (Del. 2015), reaffirmed the power of fully-informed, uncoerced, disinterested stockholder approval to immunize M&A transactions against stockholder challenge. Under Corwin, where a noncontrolling stockholder transaction “has been approved by a fully informed, uncoerced majority of the disinterested stockholders,” the business judgment rule applies irrebuttably, leaving plaintiffs with a claim for waste. Since waste requires stockholder approval of an irrational deal, a Corwin-qualifying vote will likely result in dismissal. Corwin therefore sets a high bar for plaintiffs in post-closing fiduciary duty claims challenging M&A transactions.

The Delaware Court of Chancery has now dismissed numerous post-closing fiduciary duty claims under Corwin firmly establishing under Delaware corporate law the protection that stockholder approval affords M&A transactions. In its most-recent decision applying Corwin, In re Merge Healthcare Stockholders Litigation, C.A. No. 11388-VCG (Del. Ch. Jan. 30) (Glasscock, V.C.), the Court of Chancery held that a merger was approved by a fully-informed, uncoerced vote of a disinterested majority of the target company’s stockholders without the presence of a controller who extracted personal benefits. Accordingly, based on the Corwin-qualifying vote, the court dismissed the plaintiff stockholders’ post-closing fiduciary duty claims against the company’s directors.


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