{"id":245,"date":"2024-04-08T06:37:43","date_gmt":"2024-04-08T10:37:43","guid":{"rendered":"https:\/\/blogs.duanemorris.com\/delawarebusinesslaw\/?p=245"},"modified":"2024-04-08T06:37:43","modified_gmt":"2024-04-08T10:37:43","slug":"delaware-supreme-court-gives-additional-guidance-on-scope-and-mechanics-for-applying-mfw-framework-to-conflict-transactions","status":"publish","type":"post","link":"https:\/\/blogs.duanemorris.com\/delawarebusinesslaw\/2024\/04\/08\/delaware-supreme-court-gives-additional-guidance-on-scope-and-mechanics-for-applying-mfw-framework-to-conflict-transactions\/","title":{"rendered":"Delaware Supreme Court Gives Additional Guidance on Scope and Mechanics for Applying MFW Framework to Conflict Transactions"},"content":{"rendered":"

Recently, the Delaware Supreme Court issued its much-anticipated decision in In re Match Group, Inc. Derivative Litigation<\/em>, No. 368, 2022 (April 4, 2024<\/a>), in which the Court reaffirmed certain venerable teachings on the standards of review that the Delaware courts will employ to review challenged transactions involving a controlling stockholder\u2014including when and how controlling stockholders can deploy the \u201cMFW<\/em> framework\u201d (from Kahn v. M&F Worldwide Corp<\/em>, 88 A.3d 635 (Del. 2014)<\/a> (\u201cMFW<\/em>\u201d)) to shift the standard of review from \u201centire fairness\u201d to \u201cbusiness judgement.\u201d\u00a0 In general, the MFW<\/em> framework reflects the Supreme Court\u2019s ruling in that case that where a controlling stockholder conditions a going-private transaction (which would normally be reviewed under the exacting entire fairness standard), from the beginning, on (1) approval by a fully-functioning independent committee of directors and (2) a fully-informed vote of the unaffiliated minority stockholders, the Delaware courts will look to see if that transaction was within the business judgment of the fiduciaries presenting and approving it.<\/p>\n

Since the ruling in MFW<\/em> in 2014, transactional planners, stockholder plaintiffs, and corporate defendants have all probed the contours of the ruling in various ways.\u00a0 For instance, can the MFW<\/em> framework be deployed outside a squeeze-out merger context or does the entirety of the special committee need to be independent and disinterested or can just a majority of the members of the committee be satisfactory?<\/p>\n

In the Match<\/em> opinion, the Supreme Court discusses in detail (1) the historical framework of the various standards of review that the Delaware courts will use to review challenged corporate transactions and conduct, (2) the history behind, and the nature of, the Court\u2019s ruling in MFW<\/em>, and (3) additional guidance for corporate constituencies (including controlling stockholders, boards of directors, and their advisors) on the scope of and mechanics for properly deploying the MFW <\/em>framework to shift the standard of review from entire fairness to business judgment.\u00a0 Specifically, the Supreme Court held:<\/p>\n