In 2024, Delaware courts continued to address important areas of corporate law, particularly regarding controlling stockholders. Several of those high-profile decisions were decided at the trial level and are now on appeal. In 2025, we will be watching as the Delaware Supreme Court addresses issues including aiding and abetting, nominal damages, non-ratable benefits for controlling stockholders, executive compensation, ratification and attorney’s fees.
Aiding and Abetting and Nominal Damages
In 2023, the Court of Chancery, in a post-trial opinion, held an officer of a target company personally liable for breach of fiduciary duties.1 The court found that the CEO improperly skewed the sales process in favor of the third-party buyer and that the company failed to disclose those interactions to its stockholders. The court awarded $1 per share in damages for each of the sales process and disclosure claims, though the class was limited to a total of $1 per share in damages. The Court of Chancery characterized the $1 per share in damages as “nominal” damages for the disclosure claims. Additionally, the court found the third-party buyer liable for aiding and abetting the CEO’s disclosure violations — but not the sales process violations — and imposed joint and several liability on the third-party buyer for the nominal damages award.
In December 2024, the Delaware Supreme Court reversed the Court of Chancery’s aiding and abetting holding and declined to reach the issue of nominal damages.
The court stated that an aiding and abetting claim brought against a buyer in this context is among the hardest to prove, and that it has never held a third-party arm’s-length buyer liable for aiding and abetting a breach of fiduciary duty. However, the court also acknowledged that its decision could be different under “different facts or legal arguments,” and noted that an appeal in the Columbia Pipeline2 case as an example of a matter that “addresses similar issues with different facts.”
What we’re watching: Further development of aiding and abetting claims after Mindbody, including the Delaware Supreme Court’s decision in Columbia Pipeline and whether the court addresses nominal damages.
Non-Ratable Benefits for Controlling Stockholders
In 2024, the Court of Chancery denied a motion to dismiss and held that entire fairness applied to a conversion of a Delaware corporation (TripAdvisor) to a Nevada corporation.3 The plaintiffs alleged that the directors and controlling stockholder received a non-ratable benefit because (i) minority stockholders have “fewer litigation rights” under Nevada law, (ii) the conversion was not fair to the minority and (iii) the conversion was not subject to MFW protections.
The Court of Chancery found it reasonably conceivable that the conversion conferred a non-ratable benefit on the controller under a theory that stockholders of Nevada corporations have less litigation rights than those of a Delaware corporation. As a result, it held that the plaintiff had adequately alleged that the conversion was not entirely fair because it was “reasonably conceivable that the stockholders do not possess at least the substantial equivalent of what they possessed before.” The Court of Chancery stated that litigation rights are “first-class rights” and noted that the role of equity in protecting these rights “has become more important” after the Delaware Supreme Court’s decision in In re Fox Corporation/Snap Inc.4 In Fox/Snap, the Delaware Supreme Court held that the Delaware corporation statute governing charter amendments did not mandate a separate vote for each class of stock when corporations with multiple classes amended their charters to authorize exculpation of monetary damages for officers, rejecting a similar argument about the loss of litigation rights for a certain class of stockholders.
What we’re watching: The upcoming decision from the Delaware Supreme Court, including its views of scope of potential non-ratable benefits for controlling stockholders and the interplay, if any, between this case and Fox/Snap.
Executive Compensation, Ratification and Attorney’s Fees
This year, the Court of Chancery, in a series of opinions, resolved litigation challenging Elon Musk’s 2018 equity compensation plan for his work at Tesla. The plan was approved by Tesla’s stockholders, and although Musk achieved the plan’s performance milestones, the equity grant remained “unexercised and undisturbed.” In a post-trial opinion, the Court of Chancery ruled in favor of the plaintiffs after finding that Musk exercised transaction-specific control over the negotiation of the plan and the entire fairness standard of review applied.5 As a remedy, the Court of Chancery ordered the rescission of the entire compensation plan.
Following the post-trial opinion, Tesla held a second vote on the compensation plan. The company’s stockholders overwhelmingly approved the same plan. The defendant moved to revise the post-trial opinion based on the second vote. Separately, class counsel filed a $5.6 billion fee petition.
In a separate opinion, the Court of Chancery denied the motion to revise.6 It held, among other things, that common-law ratification cannot be raised after a post-trial opinion, and such ratification alone cannot reduce the relevant standard of review in this context to business judgment.
In the same opinion, the Court of Chancery denied the class counsel’s $5.6 billion fee request and instead awarded $345 million. It stated that the original fee request generated an “insurmountable windfall problem.” To avoid this problem, the Court of Chancery valued the recission by using the grant date fair value of the compensation plan.
What we’re watching: We expect these decisions to be appealed and are closely watching the Delaware Supreme Court’s analysis of both the post-trial opinion and the rulings on ratification and the award of attorney’s fees.
Key Points
- The Delaware Supreme Court reversed a Court of Chancery decision that held a third-party buyer liable for aiding and abetting, reinforcing that an aiding and abetting claim is among the hardest claims to bring under Delaware law. This ruling comes as another Court of Chancery decision finding aiding and abetting liability is currently on appeal to the Delaware Supreme Court.
- The Court of Chancery denied a motion to dismiss and held that a controlled company’s reincorporation from Nevada to Delaware was subject to the entire fairness standard of review. That decision is currently on appeal to the Delaware Supreme Court in a rare grant of interlocutory appeal.
- The litigation regarding Tesla’s compensation plan for Elon Musk is now resolved at the trial level. The Court of Chancery applied entire fairness and, following trial, rescinded the compensation plan. Following a second vote by stockholders approving the plan, the court declined to revise its post-trial opinion and awarded $345 million in attorney’s fees.
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1 In re Mindbody, Inc. S’holder Litig., 2023 WL 2518149 (Del. Ch. Mar. 15, 2023), aff’d in part, rev’d in part, --- A.3d ---, 2024 WL 4926910 (Del. Dec. 2, 2024). See “Court Finds Mindbody CEO Liable Under Revlon and That Buyer Aided and Abetted Disclosure Violations.”
2 In re Columbia Pipeline Group, Inc. Merger Litig., 299 A.3d 393 (Del. Ch. 2023). See “Real World Examples Where Conflicts Tainted a Deal Process, and Other Deals That Were Insulated From Conflicts.”
3 Palkon v. Maffei, 311 A.3d 255 (Del. Ch. 2024). See “Under Control: Recent Delaware Decisions on Controller Transactions, Standards of Review and Disclosure Obligations.”
4 In re Fox Corp./Snap Inc., 312 A.3d 636 (Del. 2024).
5 Tornetta v. Musk, 310 A.3d 430 (Del. Ch. 2023).
6 Tornetta v. Musk, --- A.3d ---, 2024 WL 4930635 (Del. Ch. Dec. 2, 2024).
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