Delaware law has long provided that the decisions of disinterested and independent directors who receive no special benefit from a transaction ought not be the basis of personal liability in monetary damages. To subject directors who are independent of interested parties and who themselves receive no benefit in a transaction not otherwise shared with public stockholders would discourage quality individuals from serving on boards or committees of Delaware corporations and likely also reduce appropriate risk-taking. Nonetheless, the courts since two Delaware Supreme Court decisions in Emerald Partners v. Berlin, 726 A.2d 1215 (Del. 1999), in 1999 (Emerald I) and 2001, 787 A.2d 85 (Del. 2001) (Emerald II), often denied motions to dismiss brought by disinterested and independent directors if a plaintiff could plead facts sufficient to invoke the entire fairness standard of review.
In In re Cornerstone Therapeutics Stockholder Litigation, No. 564, 2014, and In re Zhongpin Stockholders Litigation, No. 706, 2014 (collectively, Cornerstone), a consolidated appeal, the Delaware Supreme Court clarified that if an exculpatory charter provision protects directors, the trial court should grant motions to dismiss by any director against whom a plaintiff cannot plead a non-exculpated claim. As explained below, while the decision should provide comfort to independent directors, controlling stockholders or conflicted directors against whom a plaintiff can plead a duty of loyalty claim are not affected by the Cornerstone decision.
