342 A.3d 324
Del.2025Background
- Columbia Pipeline (spun off from NiSource in 2015) was led in practice by CEO Robert Skaggs and CFO Stephen Smith, who obtained change‑in‑control agreements that would vest on a sale and who planned to retire after a sale.
- Columbia ran a dual track (equity raise + test strategic buyers); Lazard identified TransCanada as a likely bidder; TransCanada (led by François Poirier) approached Smith, and the parties executed NDAs containing “don’t‑ask‑don’t‑waive” standstills.
- Management continued communications with TransCanada (and other bidders), provided nonpublic information, and—according to the Chancery Court—allowed repeated standstill breaches and otherwise signaled eagerness to sell, while the board pursued an equity offering when bids were below its $28/share target.
- TransCanada reengaged after the equity raise, secured exclusivity in early March 2016, negotiated, and ultimately signed a merger agreement at $25.50 per share (announced March 16, 2016); the merger closed July 1, 2016. Executives received substantial change‑in‑control payouts and then retired.
- Stockholders sued officers and directors for fiduciary breaches and TransCanada for aiding and abetting; the Court of Chancery (after trial) found TransCanada liable for aiding and abetting both sale‑process and disclosure breaches (relying on constructive knowledge) and awarded ~ $199 million against TransCanada.
- On appeal, the Delaware Supreme Court reversed, applying its later decision in In re Mindbody (requiring actual knowledge by an acquiror that (a) the target breached and (b) the acquiror’s own conduct was wrongful) and finding the record insufficient to show actual knowledge or substantial assistance.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether TransCanada aided and abetted sell‑side fiduciary breaches (sale process) | TransCanada constructively knew management/board were conflicted and exploited that knowledge to secure a below‑market deal; thus it knowingly participated | TransCanada argued plaintiffs cannot show actual knowledge or culpable participation; arm's‑length bargaining and ambiguous signals cannot establish aiding and abetting | Reversed: plaintiff failed to show TransCanada had actual knowledge of the underlying breaches or that TransCanada knowingly and substantially assisted them; constructive knowledge insufficient per Mindbody |
| Whether TransCanada aided and abetted fiduciary breaches of disclosure (proxy) | TransCanada reviewed and commented on the draft proxy, had a contractual duty to notify Columbia of material omissions, and nevertheless failed to correct misleading omissions | TransCanada argued its review was not an affirmative, deceptive act and that failing to press Columbia to change its proxy does not equate to knowing participation; Mindbody forecloses liability for mere inaction | Reversed: some omissions were known to TransCanada but plaintiffs failed to prove TransCanada had actual knowledge that its omission wrongfully assisted a fiduciary disclosure breach or that it gave substantial assistance |
| Whether nominal damages (~$0.50/share) for disclosure claim were proper | Plaintiffs sought equitable relief/compensatory damages and, absent reliance, sought nominal damages as equitable remedy | TransCanada challenged liability and damages allocation; on appeal court need not reach damages once liability reversed | Not reached: because aiding‑and‑abetting liability reversed, damages rulings were vacated |
| Whether allocation of fault under DUCATA to TransCanada should stand | Plaintiffs argued allocation appropriate given Chancery’s percent allocations and settlements with officers | TransCanada argued allocation premised on reversed liability findings and so should be vacated | Not reached: allocation dependent on liability; reversal of liability moots DUCATA allocation review |
Key Cases Cited
- In re Mindbody, Inc. Stockholder Litigation, 332 A.3d 349 (Del. 2024) (acquiror aiding‑and‑abetting liability requires actual knowledge of both the target’s breach and the wrongfulness of the acquiror’s conduct)
- RBC Capital Mkts., LLC v. Jervis, 129 A.3d 816 (Del. 2015) (aider‑and‑abettor must have actual or constructive knowledge that their conduct was legally improper; scienter is difficult to prove)
- Malpiede v. Townson, 780 A.2d 1075 (Del. 2001) (elements of aiding and abetting a fiduciary breach; secondary liability framework)
- Dohmen v. Goodman, 234 A.3d 1161 (Del. 2020) (directors’ duty to disclose material facts in proxy solicitations)
- In re Oracle Corp., 867 A.2d 904 (Del. Ch. 2004) (discusses culpable state of mind in corporate wrongdoing and scienter concepts)
- Wood v. Baum, 953 A.2d 136 (Del. 2008) (actual knowledge vs. constructive knowledge in pleading scienter)