Delaware Courts Reaffirm High Bar for Personal Liability of Disinterested Directors - from The Harvard Law School Corporate Governance Blog
This article, provided by Gar Bason, Phillip Mills and Justine Lee of Davis Polk and Wardwell and posted to the Harvard Law School Corporate Governance Blog by Jim Naughton, co-editor, comments on two recent Chancery Court decisions in Delaware:
“However, in his discussion V.C. Strine goes beyond the facts of the Lear case in comments that seem directed at Lyondell:
Boards may have to choose between acting rapidly to seize a valuable opportunity without the luxury of months, or even weeks, of deliberation—such as a large premium offer—or losing it altogether. . . . Courts should therefore be extremely chary about labeling what they perceive as deficiencies in the deliberations of an independent board majority over a discrete transaction as not merely negligence or even gross negligence, but as involving bad faith.“
The authors also pointedly comment on Vice Chancellor Noble's post-decision letter, issued in late August:
“in declining to certify interlocutory appeal of his decision in Lyondell, V.C. Noble appeared eager to allay concerns that the decision may have raised, declaring that “the reports of the death of Section 102(b)(7) (and the consequent possibility for the ‘resuscitation’ of a Van Gorkom-esque liability crisis) in Delaware law are greatly exaggerated both with regard to the application of Lyondell’s exculpatory charter provision in this case, and certainly with regard to the application of a Section 102(b)(7) provision defense in any other case.” ”