This post was prepared by Aimee M. Czachorowski.
An interlocutory appeal has recently been granted in the Delaware Court of Chancery case of In re Cornerstone Therapeutics, Inc., Cons. C.A. No. 8922-VCG (Del. Ch. Sept. 26, 2014), on the issue of when independent directors may be dismissed prior to trial. The next step in the process is for the Delaware Supreme Court to make their own independent determination about whether they will take the interlocutory appeal. This is an important issue in Delaware corporate litigation that is less settled than one would expect for such a common issue.
In a prior recent opinion highlighted on these pages, the Chancery Court declined to dismiss members of a special committee potentially exculpated from liability by a DGCL Section 102(b)(7) provision when the entire fairness standard is applied to review the transaction. The Court held that, pursuant to Emerald Partners v. Berlin, 787 A.2d 85 (Del. 2001), it could not determine whether the director defendants could be exculpated until after a decision had been made as to the entire fairness of the transaction.
The directors have now been granted an interlocutory appeal of that decision, in part because of the conflicting Chancery decisions on whether, under an entire fairness standard of review, exculpation under 102(b)(7) can be employed to dismiss them at the motion to dismiss stage, or whether they must await a full decision on the entire fairness of the transaction after trial.