Title: Singh v. Attenborough

State: delaware

Issuer: Delaware Supreme Court

Document:

IN THE SUPREME COURT OF THE STATE OF DELAWARE 
 
RAVINGER SINGH and DAVID PILL,  § 
 
§ 
 
 
Plaintiffs Below-Appellants, 
§ 
No. 645, 2015 
 
 
§ 
 
v. 
§ 
Court Below:  Court of Chancery 
 
 
§ 
of the State of Delaware 
NEALE ATTENBOROUGH,  
§ 
 
YUVAL BRAVERMAN, TERRY  
§ 
C.A. No. 9388-VCM 
BURMAN, DAVID F. DYER,  
§ 
 
KENNETH B. GILMAN, THEO 
§ 
 
KILLION, JOHN B. LOWE, JR., 
§ 
 
JOSHUA OLSHANSKY, BETH M.  
§ 
PRITCHARD, SIGNET JEWELERS 
§ 
 
LIMITED, and MERRILL, LYNCH,  
§ 
PIERCE, FENNER & SMITH, 
§ 
 
§ 
Defendants Below-Appellees. 
§ 
 
 
 
 
 
 
Submitted:   May 4, 2016 
Decided:   May 6, 2016 
 
Before STRINE, Chief Justice; HOLLAND, VALIHURA, and VAUGHN, 
Justices; and STOKES, Judge,* constituting the Court en banc. 
 
O R D E R 
 
This 6th day of May 2016, having considered this matter on the briefs filed 
by the parties and after oral argument: 
(1) 
We affirm the judgment of the Court of Chancery solely on the basis 
of its decision on reargument of October 29, 2015, finding that a fully informed, 
uncoerced vote of the disinterested stockholders invoked the business judgment 
                                          
 
* Sitting by designation under Del. Const. art. IV, § 12. 
2 
rule standard of review.1  But, we note that the reargument opinion‘s decision to 
consider post-closing whether the plaintiffs stated a claim for the breach of the 
duty of care after invoking the business judgment rule was erroneous.  Absent a 
stockholder vote and absent an exculpatory charter provision, the damages liability 
standard for an independent director or other disinterested fiduciary for breach of 
the duty of care is gross negligence, even if the transaction was a change-of-control 
transaction.2  Therefore, employing this same standard after an informed, 
uncoerced 
vote 
of 
the 
disinterested 
stockholders 
would 
give 
no 
standard-of-review-shifting effect to the vote.  When the business judgment rule 
standard of review is invoked because of a vote, dismissal is typically the result.3  
                                          
 
1 In re Zale Corp. Stockholders Litig., 2015 WL 6551418 (Del. Ch. Oct. 29, 2015); see also 
Corwin v. KKR Fin. Holdings LLC, 125 A.3d 304, 308–12 (Del. 2015) (affirming the Court of 
Chancery‘s finding that a fully informed, uncoerced vote of the disinterested stockholders 
invoked the business judgment rule standard of review). 
2 See, e.g., McMillan v. Intercargo Corp., 768 A.2d 492, 505 n.56 (Del. Ch. 2000) (explaining, in 
a case involving a post-closing damages claim attacking a change-of-control transaction, that 
―[i]n the absence of the exculpatory charter provision, the plaintiffs would still have been 
required to plead facts supporting an inference of gross negligence in order to state a damages 
claim‖). 
3 See In re Cornerstone Therapeutics Inc, Stockholder Litig., 115 A.3d 1173, 1175–76 (Del. 
2015) (―A plaintiff seeking only monetary damages must plead non-exculpated claims against a 
director who is protected by an exculpatory charter provision to survive a motion to dismiss, 
regardless of the underlying standard of review for the board‘s conduct—be it Revlon, Unocal, 
the entire fairness standard, or the business judgment rule.‖ (citations omitted)); Marciano v. 
Nakash, 535 A.2d 400, 405 (Del. 1987) (―[A]pproval by fully-informed disinterested . . . 
stockholders . . ., permits invocation of the business judgment rule and limits judicial review to 
issues of gift or waste with the burden of proof upon the party attacking the transaction.‖); 
Harbor Fin. Partners v. Huizenga, 751 A.2d 879, 881–82 (Del. Ch. 1999) (―The affirmative 
stockholder vote on the Merger was informed and uncoerced, and disinterested shares constituted 
the overwhelming proportion of the Republic electorate.  As a result, the business judgment rule 
standard of review is invoked and the Merger may only be attacked as wasteful.  As a matter of 
logic and sound policy, one might think that a fair vote of disinterested stockholders in support 
3 
That is because the vestigial waste exception has long had little real-world 
relevance,4 because it has been understood that stockholders would be unlikely to 
approve a transaction that is wasteful.  Certainly, there is no rational argument that 
waste occurred here. 
(2) 
Finally, we distance ourselves from the Court of Chancery‘s original 
decision of October 1, 2015, in terms of its handling of the claims against the 
board‘s financial advisor.5  We are skeptical that the supposed instance of knowing 
wrongdoing—the late disclosure of a business pitch that was then considered by 
the board, determined to be immaterial, and fully disclosed in the proxy—produced 
a rational basis to infer scienter.6  Furthermore, to the extent the Court of Chancery 
                                                                                                                                        
of the transaction would dispose of the case altogether because a waste claim must be supported 
by facts demonstrating that ‗no person of ordinary sound business judgment‘ could consider the 
merger fair to Republic and because many disinterested and presumably rational Republic 
stockholders voted for the Merger.‖ (quoting Saxe v. Brady, 184 A.2d 602, 610 (Del. Ch. 
1962))). 
4 See Huizenga, 751 A.2d at 901 (―If fully informed, uncoerced, independent stockholders have 
approved the transaction, they have . . . made the decision that the transaction is ‗a fair 
exchange.‘  As such, it is difficult to see the utility of allowing litigation to proceed in which the 
plaintiffs are permitted discovery and a possible trial, at great expense to the corporate 
defendants, in order to prove to the court that the transaction was so devoid of merit that each 
and every one of the voters comprising the majority must be disregarded as too hopelessly 
misguided to be considered a ‗person of ordinary sound business judgment.‘  In this day and age 
in which investors also have access to an abundance of information about corporate transactions 
from sources other than boards of directors, it seems presumptuous and paternalistic to assume 
that the court knows better in a particular instance than a fully informed corporate electorate with 
real money riding on the corporation‘s performance.‖ (quoting Michelson v. Duncan, 407 A.2d 
211, 224 (Del. 1979))); Lewis v. Vogelstein, 699 A.2d 327, 336 (Del. Ch. 1997) (―Courts are 
ill-fitted to attempt to weigh the ‗adequacy‘ of consideration under the waste standard or, ex post, 
to judge appropriate degrees of business risk.‖). 
5 In re Zale Corp. Stockholders Litig., 2015 WL 5853693 (Del. Ch. Oct. 1, 2015), opinion 
amended on reargument, 2015 WL 6551418 (Del. Ch. Oct. 29, 2015). 
6 See RBC Capital Mkts, LLC v. Jervis, 129 A.3d 816, 862 (Del. 2015). 
4 
purported to hold that an advisor can only be held liable if it aids and abets a 
non-exculpated breach of fiduciary duty, that was erroneous.  Delaware has 
provided advisors with a high degree of insulation from liability by employing a 
defendant-friendly standard that requires plaintiffs to prove scienter and awards 
advisors an effective immunity from due-care liability.  As held in RBC Capital 
Markets, LLC v. Jervis, however, an advisor whose bad-faith actions cause its 
board clients to breach their situational fiduciary duties (e.g., the duties Revlon 
imposes in a change-of-control transaction) is liable for aiding and abetting.7  The 
advisor is not absolved from liability simply because its clients‘ actions were taken 
in good-faith reliance on misleading and incomplete advice tainted by the advisor‘s 
own knowing disloyalty.8  To grant immunity to an advisor because its own clients 
were duped by it would be unprincipled and would allow corporate advisors a level 
of unaccountability afforded to no other professionals in our society.  In fact, most 
professionals face liability under a standard involving mere negligence, not the 
second highest state of scienter—knowledge—in the model penal code.9  Nothing 
in this record comes close to approaching the sort of behavior at issue in RBC 
                                          
 
7 See id. at 865 (finding, in the context of a change-of-control transaction, that ―[t]he claim for 
aiding and abetting was premised on [the financial advisor]‘s ‗fraud on the Board,‘ and that RBC 
aided and abetted the Board‘s breach of duty where, for [the financial advisor]‘s own motives, it 
‗intentionally duped‘ the directors into breaching their duty of care.  The record evidence amply 
supports the trial court‘s conclusion that [the financial advisor] purposely misled the Board so as 
to proximately cause the Board to breach its duty of care.‖ (quoting Goodwin v. Live Entm’t, 
Inc., 1999 WL 64265, at *28 (Del. Ch. Jan. 25, 1999), aff’d, 741 A.2d 16 (Del. 1999))). 
8 See id. at 861–66. 
9 See MODEL PENAL CODE § 2.02 (AM. LAW INST., 1980). 
5 
Capital Markets; nonetheless, we distance ourselves from the Court of Chancery‘s 
earlier memorandum opinion in this case.  Having correctly decided, however, that 
the stockholder vote was fully informed and voluntary, the Court of Chancery 
properly dismissed the plaintiffs‘ claims against all parties. 
NOW, THEREFORE, IT IS ORDERED that the October 29, 2015 judgment 
of the Court of Chancery is AFFIRMED. 
BY THE COURT: 
 
 
 
 
 
 
/s/ Leo E. Strine, Jr. 
 
 
 
 
 
 
Chief Justice