Frank Reynolds, who has been covering Delaware corporate decisions for various national publications for over 35 years, prepared this article.

The Delaware Supreme Court, in a recent guidepost opinion, ruled that officer exculpation amendments to Fox Corp. and Snap Inc.’s charters did not require a separate class vote from those companies’ non-voting common stock classes because they changed no powers, preferences, or special rights of those stock classes in In re Fox Corp./Snap Inc. Section 242 Litig., Nos. 120 &121, 2023 (Del. Supr., Jan. 17, 2024).

The justices’ unanimous en banc ruling upheld the Court of Chancery’s summary judgment decision that the amendments did not deprive the non-voting stock classes of a unique, class-based power to sue their officers for damages for alleged breach of the duty of care. 

It was the high court’s first major clarification in decades regarding the parameters of Section 242(b)(2) to the “powers” in Section 102 of the Delaware General Corporation Law.

The justices upheld Chancery’s view on how two long-standing opinions govern the way the DGCL should operate in this area:

Hartford Accident & Indemnity Co. v. W.S. Dickey Clay Mfg. Co. 24 A.2d 315 (Del. 1942) hereinafter Dickey Clay]; 1993 WL 547187, and

Orban v. Field (Del. Ch. Dec. 30, 1993) [hereinafter Orban].

The high court affirmed Chancery’s reading that had found those decisions stated: “The powers, preferences, or special rights of class shares expressed in the charter include default provisions in the DGCL, which are part of every charter under Section 394. The ability to sue directors or officers for duty of care violations is an attribute of the Companies’ stock, but not a power, preference, or special right of the Class A common stock under Section 242(b)(2 )”


Both news-content generator Fox Corp. and social media content specialist Snap Inc. were multi-stock class companies that in 2022 adopted officer exculpation charter amendments allowed by recent Delaware legislation.   Both were sued by their respective non-voting common stockholder class and those actions were consolidated by the Court of Chancery, which granted the defendants’ joint summary judgment motion.

The Class A Stockholders claimed that the “plain language” of Section 242(b)(2) unambiguously required a class vote before adopting the exculpatory charter provisions. As they argued, stockholders have three fundamental “powers” – to vote, sell, and sue–and that power, according to Black’s Law Dictionary, includes “[t]he ability to act or not act[.]”4

The Companies countered that Sections 242(b)(2), 151(a), and 102(a)(4) – with their overlapping use of the terms “powers,” “preferences,” and “special rights” – must be read together—and when read together, “powers” cannot carry the powerful dictionary definition that the plaintiffs contend it must have. Chancery agreed, finding that the power to sue for breach of duty “is an attribute of the Companies’ stock, but not a power, preference, or special right of the Class A common stock under Section 242(b)(2).”

 The appeal.  

On appeal, the high court agreed that the “the stockholders’ rigid interpretation of “powers” upsets the balance between Sections 242(b)(1) and (2). Section 242(b)(2) is intended as a “safeguard” to protect the powers, preferences and special rights authorized by Section 151 and expressed in the charter. It is not a broad grant of the right to vote on any amendment affecting any attribute of stock ownership.”

Orban and Dickie Clay have final say

The justices noted that:

*In Orban, the Court of Chancery held that Section 242(b)(2) “makes clear that it affords a right to a class vote when the proposed amendment adversely affects the peculiar legal characteristics of that class of stock.”

* For seventy-five years, Dickey Clay has held that “rights incidental to stock ownership are not a peculiar characteristic of the shares of a class of stock” and “Section 242(b)(2) should be read considering other provisions of the DGCL.”

*In the nearly 40 years since 1986 and the adoption of Section 102(b)(7) for directors, no one has taken the position until this case that an exculpation amendment requires a class vote.