It’s certainly been interesting to watch the last several years of opinions from the Delaware Supreme Court. A July 2018 opinion adds to the list of interesting opinions because it limits the circumstances under which business judgment deference will be allowed. The opinion is Elizabeth Morrison v. Ray Berry et. al., which was first issued on July 9, 2018, and then revised on July 27. The opinion is drawing ample commentary from corporate lawyers and litigators. For example, the comments below are the introduction to a commentary from Cooley on August 7, 2018. Also tote the emphasis of the authors regarding the burden of proof:

“In Elizabeth Morrison v. Ray Berry et. al., (dated July 9, 2018), the Delaware Supreme Court reversed the Delaware Chancery Court’s dismissal of deal litigation based on obtaining a cleansing vote under Corwin/Volcano because the defendants failed to show “as required under Corwin” that the vote was fully informed. The deal litigation arose from the sale of The Fresh Market to a private equity buyer through a cash tender offer that involved The Fresh Market’s founder and his son, who owned collectively 9.8% of The Fresh Market shares, rolling over their equity. The plaintiffs contend that the founder and his son teamed up with the private equity buyer to purchase The Fresh Market at a discount by inducing the board to run a process that gave the private equity buyer an improper bidding advantage. The plaintiffs used a Delaware General Corporation Law Section 220 books-and-records demand and then Section 220 litigation to seek and obtain board minutes and emails with the founder’s counsel that the plaintiffs then used as evidence in the post-closing fiduciary duty case. The Delaware Supreme Court found that a reasonable stockholder would find the following information that was not included in the Schedule 14D-9 to be material, and therefore, the tender was not fully informed and the business judgment rule was not invoked:”

 

How much disclosure of deal dirty laundry is necessary in order to fully inform a Corwin/Volcano cleansing vote?