Our Customer Alert goes over the Delaware Court of Chancery’s current issuance of an unusual post-trial choice discovering a CEO personably responsible for countless dollars in damages for breaching his fiduciary tasks by tilting his business’s sale procedure in favor of his favored acquiror and stopping working to reveal material truths about the sale procedure. Similarly uncommon, the Court of Chancery discovered the acquiror responsible for financial damages, on a joint basis with the CEO, for helping and abetting the CEO’s breaches of fiduciary responsibility in supplying insufficient disclosures to shareholders. The choice offers important insight into what Delaware courts anticipate of management and a board when offering a business, in addition to the dangers that can occur when a court identifies that a sale procedure and associated disclosures were inappropriate.
To name a few things, the case verifies that the Revlon teaching can and will be utilized by courts after the closing of an offer to discover misbehavior on the part of fiduciaries and to award damages. * Luckily for directors, officers, and purchasers, such damages are unusual. However the case is a suggestion that Revlon is not a teaching whose just vigor exists in the early phases of lawsuits when a court identifies whether to advise a deal.
* The energy of damages as a treatment in post-closing Revlon cases has actually been questioned by Delaware courts in previous judgments. See e.g., C&J Energ. Serv., Inc. v. City of Miami Gen. Empl. Ret. Trust, 107 A. 3d 1069, 1073 (Del. 2014) (keeping in mind that “an after-the-fact financial damages” award under Revlon was an “imperfect tool” for treating breaches of fiduciary responsibility in connection with a sale procedure).