## Facts

- Volcano Corporation (Volcano), a Delaware medical-device company, agreed to be acquired by Koninklijke Philips N.V. (Philips) in an all-cash deal valued at $18 per share.
- Philips structured the acquisition as a two-step transaction: a first-step tender offer followed by a back-end merger under 8 Del. C. § 251(h), which permits completion of a merger without a separate stockholder vote once the tender threshold is met.
- Stockholders tendered approximately 89.1% of Volcano’s outstanding shares into the tender offer, satisfying the conditions to close and enabling the § 251(h) second-step merger.
- Before the final $18-per-share agreement, Volcano had declined an earlier, higher ($24-per-share) indication from Philips several months earlier.
- After the transaction was announced, former Volcano stockholders filed fiduciary-duty claims against Volcano’s directors, challenging the board’s approval of the sale process and price.
- Plaintiffs also sued Volcano’s financial advisor, Goldman, Sachs & Co. (Goldman), for aiding and abetting, alleging conflicts of interest and deal-related incentives.
- A set of allegations focused on Goldman’s interests tied to “call spread” transactions related to Volcano convertible notes, including the termination economics at closing and how those interests were described in deal disclosures.
- Plaintiffs sought to stop the deal and/or recover damages, contending that the decision to tender was not fully informed due to alleged disclosure deficiencies.
- Defendants moved to dismiss under Court of Chancery Rule 12(b)(6), arguing that stockholders’ tendering constituted fully informed, uncoerced, disinterested approval that, under Corwin, required business-judgment review.

## Issues

1. Whether Corwin cleansing applies to a two-step tender offer and § 251(h) merger when a majority of the outstanding shares tender in a vote-like decision.
2. Whether plaintiffs pleaded a reasonable inference that stockholders were not fully informed (due to material disclosure defects) or were coerced, such that Corwin would not apply.
3. If Corwin applies, whether plaintiffs stated a viable claim for corporate waste based on the $18-per-share merger consideration.
4. Whether an aiding-and-abetting claim against the financial advisor can survive absent a non-exculpated fiduciary breach by the directors.

## Decision

- The Court of Chancery granted defendants’ Rule 12(b)(6) motions and dismissed the complaint in full.
- The court held that Corwin’s cleansing doctrine can apply to a § 251(h) transaction where a majority of the outstanding shares tender, because the tender decision functions like stockholder approval when it is fully informed, uncoerced, and disinterested.
- The court found plaintiffs did not plead material disclosure problems that would make the tender decision uninformed, including with respect to alleged banker conflicts and other challenged disclosures.
- With Corwin applicable, the court applied business-judgment review and treated the case as viable only if plaintiffs could plead waste; they did not.
- Because the complaint did not plead an underlying fiduciary breach that survived dismissal, the aiding-and-abetting claim against Goldman was dismissed as well.
- The Delaware Supreme Court affirmed the dismissal without opinion.  

## Legal Principles

- When a transaction that is not controller-led is approved by a fully informed, uncoerced, disinterested stockholder majority, Corwin applies and results in irrebuttable business-judgment review in post-closing damages litigation, leaving only waste as a practical path to relief.
- For Corwin, a majority tender of outstanding shares in a first-step tender offer followed by a § 251(h) merger can be treated as the functional equivalent of a stockholder vote.
- To plead around Corwin at the motion-to-dismiss stage, plaintiffs must allege facts supporting a reasonable inference of coercion or a material misstatement or omission that significantly altered the total mix of information available to stockholders deciding whether to tender.
- Once business-judgment review applies under Corwin, challenges to price and process generally fail unless the complaint pleads corporate waste—i.e., consideration so inadequate that no rational person could view it as fair to the corporation.
- Aiding-and-abetting liability requires, among other elements, an underlying fiduciary breach; when director-duty claims are dismissed, related aiding-and-abetting claims typically fall with them.

## Conclusion

In *In re Volcano Corp. Stockholder Litigation*, the Court of Chancery held that stockholders’ majority tender into a § 251(h) two-step acquisition can cleanse fiduciary-duty claims under *Corwin* when the tender decision is fully informed and uncoerced, resulting in business-judgment review and dismissal of post-closing challenges absent a well-pleaded waste claim; with no surviving director breach, the aiding-and-abetting claim against Goldman was also dismissed, and the Delaware Supreme Court affirmed without opinion.


In re Volcano Corp. Stockholder Litigation, 143 A.3d 727 (2016), aff'd without opinion, 156 A3d. A.3d 697 (2017)