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Albert Manwaring of Morris JamesAlbert Manwaring of Morris James ()

Under the Delaware Supreme Court’s decision in Corwin v. KKR Financial Holdings, 125 A.3d 304 (Del. 2015), business judgment review applies to cleanse a fiduciary challenge to a noncontrol transaction that was approved by an uncoerced, fully informed, disinterested stockholder vote. Absent a claim of waste, the result of a Corwin-qualifying stockholder vote is dismissal. The Corwin doctrine is premised on the rationale that when a disinterested majority of stockholders approve a transaction, the vote represents their determination that the transaction is in the corporate interest, and Delaware courts will avoid second-guessing the stockholders’ decision by applying the deferential business judgment rule.

While the Delaware courts have applied Corwin to dismiss a number of post-closing fiduciary challenges, firmly establishing the protection that stockholder approval can afford a transaction under Delaware law, the Court of Chancery has recently cautioned that Corwin “was never intended to serve as a massive eraser, exonerating corporate fiduciaries for any and all of their actions or inactions preceding their decision to undertake a transaction for which stockholder approval is obtained,” as in In re Massey Energy Derivative & Class Action Litigation, C.A. No. 5430-CB (Del. Ch. May 4) (Bouchard, C.).

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