## Facts

- At Home Corporation was formed to provide high-speed internet access over cable lines; Cox and Comcast acquired minority equity stakes and board representation.
- A Master Distribution Agreement (MDA) made Cox, Comcast, and another major cable company exclusive distribution partners and a primary revenue source for At Home (including a 35% revenue share to At Home).
- After AT&T acquired the major cable company, At Home’s charter was amended to require approval by four of five “Series B” directors for board action, giving Cox and Comcast, acting together, a veto through their two Series B designees.
- In March 2000, At Home entered a set of transactions with AT&T, Cox, and Comcast that allegedly provided unique benefits to the cable companies at At Home’s expense.
- At Home later suffered financial distress and entered bankruptcy; a bondholder representative brought a derivative fiduciary-duty action challenging the March 2000 transactions.
- Defendants (Cox, Comcast, affiliated entities, and their At Home board designees) moved to dismiss, disputing controlling-stockholder status and the sufficiency of the fiduciary-duty allegations.

## Issues

1. Whether Cox and Comcast, despite minority stock ownership, were plausibly alleged to be controlling stockholders—individually or as a control group—based on board veto rights and contractual/economic leverage.
2. Whether the complaint sufficiently alleged that the March 2000 transactions involved self-interested conduct subject to entire fairness review and stated claims for breach of fiduciary duty against the corporate and director defendants.

## Decision

- The Court of Chancery denied the motion to dismiss.
- The court held the complaint supported a reasonable inference that Cox and Comcast acted together as a controlling group (or exercised control sufficient to trigger comparable fiduciary obligations).
- Because the transactions were plausibly alleged to confer nonratable benefits on the alleged controllers, the court treated entire fairness as the operative pleading-stage standard and found the claims adequately pled.
- Claims against the director designees also survived because the complaint plausibly alleged they acted to advance their sponsoring stockholders’ interests at the corporation’s expense.

## Legal Principles

- A stockholder may be deemed controlling without majority voting power if it actually dominates corporate decision-making through a combination of equity position, governance rights, and contractual/economic leverage.
- Two or more minority stockholders may constitute a controlling group when connected in a legally significant way and alleged to act together to exercise control.
- When a controlling stockholder or control group receives unique benefits in a transaction with the corporation, the transaction is generally reviewed for entire fairness (fair dealing and fair price), absent cleansing protections sufficient to change the standard or shift burdens.
- Directors owe duties of care and loyalty to the corporation; a loyalty claim is stated when directors are plausibly alleged to have caused the corporation to enter transactions that favor the interests of their sponsoring stockholders over the corporation’s interests.

## Conclusion

The court allowed the derivative fiduciary-duty action to proceed, holding that minority stockholders can be treated as a controlling group when board veto power and business leverage plausibly enable domination of corporate decisions, and that allegations of nonratable benefits to such controllers support entire fairness review at the pleading stage.


Williamson v. Cox Commc’ns, Inc., No. 1663-N, 2006 WL 1586375 (Del. Ch. June 5, 2006)