339 A.3d 705
Del.2025Background:
- Tripadvisor, Inc. and Liberty TripAdvisor sought to redomesticate from Delaware to Nevada; management and proxy materials emphasized Nevada’s greater D&O protection and lower litigation risk.
- Gregory Maffei (controller) held supervoting shares; the Conversions would have failed without Maffei/Liberty TripAdvisor voting in favor, though votes passed when they were included.
- Plaintiffs (stockholders) sued in Delaware Chancery Court alleging the Conversions confer a non‑ratable benefit (reduced future litigation exposure) to the controller and directors, triggering entire‑fairness review.
- The Court of Chancery denied defendants’ Rule 12(b)(6) motion to dismiss, finding plaintiffs pleaded facts supporting a reasonable inference that the Conversions conferred a non‑ratable benefit and might not be entirely fair.
- The Delaware Supreme Court accepted interlocutory review, denied plaintiffs’ mootness argument (a later proposed transaction to eliminate the controller was not consummated), and reversed, holding the business judgment rule applies because plaintiffs failed to allege a material non‑ratable benefit.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standard of review for the Conversions | Palkon: Conversions confer a non‑ratable benefit (reduced D&O liability) to controller/directors → entire fairness applies | Maffei: Future/ speculative litigation protection is not a material non‑ratable benefit; business judgment applies | Business judgment rule applies; entire fairness not triggered absent material, non‑ratable benefit tied to existing/threatened claims |
| Materiality/temporality of litigation risk | Palkon: Any reduction in litigation exposure is a benefit and can be material even if future | Maffei: Temporal distinction matters—only measures that eliminate existing liability are material; speculative future benefits insufficient | Temporality is key; speculative future litigation protection is too contingent to be a material non‑ratable benefit |
| Directors’ disinterest / procedural protections | Palkon: Proxy/board materials admit purpose was to insulate fiduciaries, supporting inference of conflicted directors | Defs: Directors acted for valid business reasons and were disinterested; no cleansing facts needed | Allegations insufficient to show directors received a material unique benefit; business judgment deferential review applies |
| Mootness of appeal after announced controller‑eliminating transaction | Palkon: Planned merger eliminating controller moots appeal; plaintiffs intend voluntary dismissal | Defs: Proposed transaction was unconsummated and conditional; appeal remains live and may present recurring legal question | Appeal not moot because the proposed transaction was not completed and controller status and director claims remain live |
Key Cases Cited
- Weinberger v. UOP, Inc., 457 A.2d 701 (Del. 1983) (articulates entire‑fairness standard: fair dealing and fair price)
- In re Match Grp., Inc. Derivative Litig., 315 A.3d 446 (Del. 2024) (entire‑fairness applies when a controller receives a non‑ratable benefit)
- Williams v. Geier, 671 A.2d 1368 (Del. 1996) (a benefit shared ratably with all stockholders does not trigger entire‑fairness)
- Rales v. Blasband, 634 A.2d 927 (Del. 1993) (standards for director interest and demand futility principles)
- Polk v. Good, 507 A.2d 531 (Del. 1986) (describes business judgment presumption)
- Cinerama, Inc. v. Technicolor, Inc., 663 A.2d 1156 (Del. 1995) (noting that choice of standard of review often decides the case)
- Rollins Int’l, Inc. v. Int’l Hydronics Corp., 303 A.2d 660 (Del. 1973) (ripeness/declaratory judgment principles; courts avoid advisory opinions)
- Emp’rs Ins. Co. of Wausau v. First State Orthopaedics, P.A., 312 A.3d 597 (Del. 2024) (standing requires injury that is concrete or imminent, not speculative)