## Facts

- Cornerstone Therapeutics Inc. was a publicly traded Delaware corporation.
- A controlling stockholder pursued a going-private merger to acquire the minority shares it did not already own.
- Because the controller stood on both sides of the merger, the transaction was presumptively subject to entire fairness review.
- The merger negotiations involved a special committee of independent directors.
- The merger was approved by a majority of the minority stockholders, but the controller did not condition its initial proposal from the outset on both special committee approval and a majority-of-the-minority vote, so business judgment review under M&F Worldwide did not apply.
- Cornerstone’s certificate of incorporation contained a DGCL § 102(b)(7) provision exculpating directors from monetary liability for duty-of-care breaches.
- Stockholders filed a post-closing class action seeking monetary damages and sued the controlling stockholder and all directors, including independent directors covered by the exculpatory provision.

## Issues

1. In a damages action challenging a controller transaction presumptively reviewed for entire fairness, must a plaintiff plead a non-exculpated fiduciary claim against each independent, disinterested director protected by DGCL § 102(b)(7) to survive that director’s motion to dismiss?
2. Does the application of entire fairness, by itself, prevent dismissal at the pleading stage of exculpated independent directors?

## Decision

- The Delaware Supreme Court reversed the Court of Chancery’s denial of the independent directors’ motions to dismiss and remanded.
- The court held that a plaintiff seeking only monetary damages must plead a non-exculpated claim against each director protected by a § 102(b)(7) provision, regardless of whether the transaction is reviewed under entire fairness, Revlon, Unocal, business judgment, or another standard.
- Entire fairness as the operative standard of review does not, by itself, keep exculpated independent directors in the case through discovery or trial.

## Legal Principles

- The applicable standard of review for a transaction and the availability of monetary liability for an individual director are distinct inquiries.
- A DGCL § 102(b)(7) charter provision bars monetary claims against directors for duty-of-care violations; plaintiffs must plead a reasonably conceivable non-exculpated theory (typically loyalty or bad faith) to obtain damages from an exculpated director.
- When seeking damages, plaintiffs must plead director-by-director facts supporting a rational inference that a particular director acted with disqualifying self-interest, lacked independence due to an interested party’s influence, or acted in bad faith.
- Delaware precedent does not require that exculpated independent directors remain defendants through an entire-fairness case absent well-pleaded non-exculpated claims.

## Conclusion

The Delaware Supreme Court held that in post-closing damages suits challenging controller transactions subject to entire fairness, independent directors protected by a § 102(b)(7) provision are entitled to dismissal unless the complaint pleads non-exculpated loyalty or bad-faith misconduct as to each director.


In re Cornerstone Therapeutics Inc. S'holder Litig., 115 A.3d 1173 (Del. 2015)