Delaware really does have an “irrebuttable business judgment rule”

The Delaware Chancery Court recently handed a decision in In re OM Group Stockholders Litigation, the latest one in a series of decisions interpreting the standard set forth in Corwin v. KKR Financial Holdings, LLC. These decisions continue Corwin’s standard that there really is an “irrebuttable business judgment rule” in Delaware that bars challenges to a merger approved by a majority of the fully-informed, disinterested and uncoerced stockholders, in the absence of a conflicted controlling stockholder.  If such conditions are met, a merger triggers the business judgment rule and effectively precludes almost any claim the merger was improper.

In the OM Group decision, Vice Chancellor Slights rejected each of the alleged disclosure violations and explained when proxy disclosures are sufficient to invoke Corwin.  Vice Chancellor Slights held that Corwin applied and that the board’s decision was protected by the business judgment rule.  “Even accepting all of its allegations as true, I conclude that the complaint must be dismissed because a majority of the fully informed, uncoerced, disinterested stockholders voted to approve the merger and plaintiffs have not alleged that the transaction amounted to waste,” his opinion said.

As always, we encourage interested parties and potential clients to reach out to our firm’s attorneys with any questions.