Chancery Court Finds that Although Alleged Disclosure Deficiency Prevents Application of Corwin, It Is Insufficient to Reasonably Imply Breach of the Duty of Loyalty
By: Michelle R. McCreery, Teresa Teng and Sean P. Boyle
In In re USG Corporation Stockholder Litigation, C.A. No. 2018-0602-SG (Del. Ch. Aug. 31, 2020), the Court of Chancery found that an alleged disclosure deficiency by a corporation’s board that is sufficient to prevent the application of the Corwin defense, alone, is insufficient to reasonably imply bad faith and a breach of the duty of loyalty. Further, the Court found that an allegation that a defendant failed to satisfy Revlon, by itself, is insufficient to plead a breach of the duty of loyalty; a pleading must also reasonably imply that the directors’ failure to satisfy Revlon was due to interestedness or bad faith.
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