Delaware Supreme Court - Notable Cases

Notable Cases

• Cheff v. Mathes (1964): First time Delaware Supreme Court addressed problems of board of director conflict of interest in a takeover setting. In this case, the court applied intermediate scrutiny to the board of director's decision to pay a bidder greenmail, stating that directors must have "reasonable grounds to believe a danger to corporate policy and effectiveness existed by stock ownership. irectors satisfy their burden by showing good faith and reasonable investigation"

• Smith v. Van Gorkom (1985): Expanded the modern doctrine of the business judgment rule to include the duty of care, often called negligence. Under the general business judgment rule, a Delaware court will not second-guess the decisions of a board of directors absent a breach of one of three fiduciary duties: good faith, due care, or loyalty. A plaintiff may overcome the business judgment rule – and receive a more favorable level of scruity under the "entire fairness" standard – if the plaintiff can show that the directors' decision lacked any rational basis (sometimes called waste).

• Unocal v. Mesa Petroleum(1985): a board of directors may only try to prevent a take-over where it can be shown that there was a threat to corporate policy and the defensive measure adopted was proportional and reasonable given the nature of the threat.

• Revlon v. McAndrews & Forbes Holdings, Inc. (1986): If a company is up for sale, the board of directors has a duty to maximize the value of that sale for the shareholder's benefit.

• Mills Acquisition Co. v. Macmillan, Inc. (1989): A board of directors may refuse a takeover attempt without submitting the matter to a vote of shareholders.

• Paramount v. QVC (1993):If a board of directors is about to consider selling, dissolving, or transferring control of a corporation, they are prohibited from considering non-shareholder interests and have a duty to maximize shareholder value.

• John Doe No. 1 v. Cahill (2005): An anonymous blogger's IP address will not be revealed via a Doe subpoena directed to his or her internet service provider in a defamation suit, unless the plaintiff has alleged facts sufficient to overcome summary judgment. This decision has the practical effect of prohibiting SLAPP suits or similar litigation designed to quell dissent or unpopular comment. Cahill was the first suit of its kind in the nation; amicus curiae briefs were filed on behalf of the anonymous blogger by the American Civil Liberties Union and the Electronic Frontier Foundation.

• Unitrin, Inc. v. American General Corp. (1995): Directors' power to block hostile takeovers