## Facts

- Two family groups formed a 50/50 joint venture using a Delaware corporation, Gasoline, Ltd., to market designer jeans and related products.
- Gasoline’s board and stockholders became evenly split, creating a persistent deadlock that prevented effective corporate action.
- Gasoline was placed into custodial status under 8 Del. C. § 226 due to board deadlock and entered liquidation-related proceedings in the Court of Chancery.
- During the venture, entities controlled by one faction advanced approximately $2.5 million to Gasoline as loans.
- The loans were interested director transactions because the lenders were affiliated with directors/stockholders on the advancing side.
- In the liquidation proceeding, the Court of Chancery treated the advances as valid, enforceable corporate debts after evaluating the transactions under the intrinsic fairness (entire fairness) standard.
- The opposing faction appealed, arguing the loans were voidable because they were not approved under 8 Del. C. § 144(a) and that fairness had not been proven.

## Issues

1. Whether interested director loans not approved under any 8 Del. C. § 144(a) safe harbor are voidable as a matter of law.
2. Whether, absent § 144(a) approval, the interested directors met their burden to prove the loans were intrinsically (entirely) fair to the corporation.

## Decision

- The Delaware Supreme Court affirmed.
- Section 144 does not displace common-law intrinsic fairness review; it provides nonexclusive routes to validation.
- Failure to satisfy § 144(a) does not make an interested transaction automatically voidable; the transaction may stand if proven intrinsically fair.
- Given the 50/50 deadlock, the statutory ratification mechanisms were not practically available, making judicial fairness review necessary.
- The Court upheld the Chancery Court’s finding that the loans were entirely fair and enforceable corporate debts in liquidation.

## Legal Principles

- 8 Del. C. § 144(a) is not an exclusive statutory scheme for cleansing interested director transactions; common-law intrinsic (entire) fairness review remains available.
- When directors engage in self-dealing, the burden rests on the interested directors to prove entire fairness, including fair dealing and fair price.
- Corporate deadlock or interested control that prevents effective independent approval supports continued reliance on judicial fairness review rather than per se invalidation.
- An interested loan may be upheld where the record supports that the financing was necessary for corporate operations and the terms were comparable to those obtainable from unrelated lenders.

## Conclusion

The court held that interested director loans lacking § 144(a) approval are not automatically voidable; they remain enforceable if the interested directors carry the burden of proving intrinsic (entire) fairness, and the fairness finding here was supported by the record.


Marciano v. Nakash, 535 A.2d 400 (Del. 1987)