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Delaware Supreme Court Holds Directors Entitled to Dismissal in Entire Fairness Case Unless Plaintiffs Allege Non-Exculpated Breach
14 May 2015
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In re Cornerstone Therapeutics Inc. S’holder Litig
., Nos. 564, 2014 & 706, 2014 (Del. May 14, 2015), the Supreme Court of Delaware held that directors subject to exculpatory charter provisions under DGCL §102(b)(7) are entitled to be dismissed from lawsuits seeking only monetary damages unless the plaintiff has alleged a claim for a breach of the duty of loyalty, even where the challenged transaction is subject to entire fairness review.
The Delaware Supreme Court’s decision is welcome news to independent directors. In addition to allowing Delaware courts to dismiss claims for monetary damages against independent directors at an early stage, the decision provides consistency of treatment of directors regardless of whether their actions are subject to business judgment review, intermediate scrutiny under
, or entire fairness review.
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