Publications

On May 29, Chancellor Strine issued an important decision in the In re MFW Shareholders Litigation case, dismissing challenges to a going-private merger with a controlling stockholder based on a business judgment rule standard of review.  For decades, going-private mergers with controlling stockholders have been subject to review under Delaware’s rigorous “entire fairness” standard, which requires the court to make its own determination as  to the procedural and substantive fairness of a transaction.  In this regime, defendants could shift the burden of proof to the plaintiffs by obtaining approval of either a special committee or a majority of the unaffiliated stockholders, but generally would not be able to obtain a resolution of the case without a full evidentiary hearing or trial.  In MFW, where the merger was subject to both special committee approval and approval of the unaffiliated stockholders, Chancellor Strine distinguished prior case law and concluded that “when a controlling stockholder merger has, from the time of the controller’s first overture, been subject to (i) negotiation and approval by a special committee of independent directors fully empowered to say no, and (ii) approval by an uncoerced, fully informed vote of a majority of the minority investors, the business judgment rule standard of review applies.”