Page 26 - Delaware Lawyer - Winter 2020

FEATURE
Samuel L.Closic
Courts Refocus on
Corwin and its progeny have changed the landscape of judicial review in post-closing damages cases
Announcements of corporate mergers and transactions have long led to stockholder litigation. The Delaware Supreme Court’s 2015 decision in Corwin v. KKR Financial Holdings, LLC1 established a new standard in post- closing money damages cases, holding that where a stockholder challenges a merger or other corporate transaction, “a fully informed, uncoerced vote of the disinterested stockholders” would afford directors the benefit of the business judgment rule, as opposed to requiring defendants to meet the enhanced scrutiny standard articulated in Revlon v. MacAndrews & Forbes Holdings, Inc.2 Under Corwin, a stockholder vote is deemed fully informed if the stockholders are provided with all material facts.3
24 DELAWARE LAWYER WINTER 2020
In the years following Corwin, a number of stockholder actions were dismissed
4
in its wake. While Corwin touted the
cleansing effect of a fully informed vote, the Supreme Court stopped short of providing bright-line standards or tests for determining what level of disclosure would, or would not, suffice for a stock- holder vote to be “fully informed.”5 This uncertainty has led to Corwin’s frequent interpretation by the Supreme Court and the Court of Chancery, and more fre- quent clarification of when Corwin is ap- propriately invoked.
Post-Corwin Supreme Court Guidance
In the post-Corwin era, Delaware courts have focused their attention not just on the plain text of a company’s dis- closures, but also on the reasonable infer- ences that can be drawn therefrom.
The Supreme Court first provided further instruction on the standards for ascertaining materiality and evaluating alleged disclosure violations in 2018’s Appel v. Berkman.6 In Appel, the Court examined a company’s disclosures to stockholders while seeking approval of
the Materiality
of Disclosure Claims