Woodruff Sawyer
MONTH-IN-BRIEF (May 2025)
Court of Chancery Dismisses Entire Fairness Case at Pleading Stage
By Lisa Stark, Delaware Corporate Counsel
In a rare move, the Delaware Court of Chancery dismissed a case challenging a $250 million capital investment by a controlling stockholder in exchange for preferred stock. The transaction was negotiated between the controller and a fully informed special committee of disinterested and independent directors, and it was subject to entire fairness review. As noted by the Court, the application of entire fairness typically “will preclude dismissal of a complaint on a Rule 12(b)(6) motion to dismiss.” However, here, the Court found that the complaint failed to allege facts about the price or process used to approve the capital investment that demonstrated a lack of fairness. In so finding, the Court departed from another recent Chancery Court opinion by declining to fault a special committee for negotiating a success-based fee for its investment banker.