2025 was a momentous year for Delaware corporate law. Not least of which was Delaware’s enactment of Senate Bill 21 (S.B. 21), making noteworthy amendments to sections of Delaware’s corporate code (the Delaware General Corporation Law) governing stockholder books and records demands and transactions involving controlling stockholders. Fairly or unfairly, commentators have characterized S.B. 21 as, in part, a response to calls from certain corporate stakeholders to leave Delaware for other jurisdictions, colloquially termed “DExit.” Relatedly, 2025 also saw the Delaware Supreme Court addressing when the decision to reincorporate to another state could constitute a breach of fiduciary duty, as well as a lawsuit challenging S.B. 21’s constitutionality.
2026 has, thus far, been a year of dust settling – including the Delaware Supreme Court’s upholding of S.B. 21’s constitutionality.
Now, more than halfway through the year, Delaware’s courts continue to tackle issues at the forefront of M&A, stockholder and corporate law:
- A case with the potential to establish the type of factual record necessary to hold Delaware fiduciaries liability for deciding to reincorporate from Delaware to jurisdictions with less stringent (real or perceived) fiduciary standards;
- An appeal calling for revisiting certification of non-opt out stockholder classes under Court of Chancery Rules 23(b)(1) and (2), where the primary relief sought is monetary, due to an alleged tension between U.S. Supreme Court and Delaware Supreme Court decisions; and
- An appeal considering whether a party to a transaction agreement may be indemnified for its own post-closing willful misconduct.
2026 Delaware Corporate Law Cases to Watch
Pena v. MacArthur Grp., Inc: Conversions/Re-domestications to Avoid Fiduciary Duties
The Delaware Supreme Court’s 2025 decision in Maffei v. Palkon addressed whether a corporate fiduciary’s decision to reincorporate to Nevada, a jurisdiction the company’s advisors viewed as reducing risk of fiduciary duty lawsuits, could constitute a breach of the duty of loyalty. Reversing the Court of Chancery below, the Delaware Supreme Court found that reincorporation decisions made prospectively, “on a clear day,” and before any threat of personal liability, are subject to business judgment rule protection.
Not long after, and relying on the Maffei decision, the Court of Chancery in Pena v. MacArthur Group, Inc., denied a motion to dismiss claims based on the related context of merging a Delaware corporation with the full set of fiduciary duties into a Delaware limited liability company waiving all fiduciary duties.
The Court of Chancery noted that the decision would not be protected by the business judgment rule, if the waiver of fiduciary duties attendant to the merger into a limited liability company resulted in a material, non-ratable benefit to those making the decision.
More specifically, if the wavier
- Addressed retroactive liability;
- Was made in the shadow of litigation; and
- Waived the duty of loyalty to the point of excusing intentional misconduct.
By contrast, the merger decision would be protected by the business judgment rule, if the waiver was
- prospective;
- made on a “clear day” – meaning there was no shadow of litigation; and
- left the duty of loyalty undisturbed.
Based on the as-pleaded facts before it in Pena, the Court of Chancery found that the plaintiff had stated a breach of fiduciary duty. According to the Court, the fiduciaries at issue (the corporation’s CEO and CFO) received a material, non-ratable benefit in deciding to merge the corporation into a limited liability company waiving all fiduciary duties because, although the decision was prospective, the fiduciaries intended to commit future misconduct, including using company funds to pay for the life insurance policy of the CEO’s wife. As alleged, the future misconduct would be shielded from scrutiny as the CEO and CFO would now no longer owe fiduciary duties in the merged limited liability company.
Now past the pleadings stage, Pena stands to inform practitioners of the type of factual record required to successfully rebut the business judgment rule for breach of fiduciary duty suits based on re-domestication decisions, where the jurisdiction to which the Delaware entity re-domesticates has less stringent (real or perceived) fiduciary standards.
“Revitalizing” Celera: Non-Opt Out Class Certification/Settlement
The Delaware Supreme Court is currently considering whether stockholder breach of fiduciary duty claims for monetary relief may be certified as a class under Court of Chancery Rules 23(b)(1) and (2), despite the lack of mandatory opt-outs for objecting stockholders.
According to the appellant in IsZo Capital LP v. Brandenburg, et al (a large stockholder of the company), there is a conflict between the U.S. Supreme Court’s decision in Wal-Mart Stores, Inc. v. Dukes and the Delaware Supreme Court’s decision In re Celera Corp. regarding class certification of claims for monetary relief under Rules 23(b)(1) and (2) of the Federal Civil Rules of Procedure and the Court of Chancery Rules, respectively. Appellant’s reading of the U.S Supreme Court’s ruling in Wal-Mart is that due process requires claims seeking monetary relief to be certified under Rule 23(b)(3) because it has a mandatory opt out, unlike Rules 23(b)(1) and (2). The Delaware Supreme Court held in Celera that Wal-Mart did not require breach of fiduciary duty class actions seeking monetary—not equitable—relief to be certified under Rule 23(b)(3). The Delaware Supreme Court reasoned that, even for classes certified under Rules 23(b)(1) and (2), the Court of Chancery retains discretion to allow stockholders to opt out of settlements.
After the Court of Chancery rejected the large stockholder’s objection seeking to opt out of the settlement, the stockholder appealed, claiming that in the thirteen years since the Celera decision, the Court of Chancery has not exercised its discretion to permit a stockholder to opt out of monetary claim settlements.
Accordingly, and based on this track record, the stockholder argued that the Delaware Supreme Court should revisit and “revitalize” Celera, by making an exception requiring a mandatory opt-out, where
- There is no class-wide equitable relief; and
- A large stockholder is willing to independently pursue monetary relief.
In response, appellees argued that appellant misconstrued a tension between Wal-Mart and Celera. According to appellees, Wal-Mart is distinguishable from Celera and the stockholder fiduciary duty claims at issue because, unlike the employee backpay claims in Wal-Mart, stockholder fiduciary duty claims do not involve individualized injuries. Instead, appellees argued that in a breach of fiduciary claim, the breach will be common to all stockholder class members and the recovery will not be individualized.
Both sides have also advanced public policy arguments, each contending that the opposing side’s position would chill class action settlements of stockholder claims. No matter how the Delaware Supreme Court resolves the issue, IsZo will at least clarify any perceived tension between Wal-Mart and Celera, and it may reshape the settlement landscape for stockholder breach of fiduciary duty claims going forward.
Gendreau et al. v. Movora, LLC et al.: Indemnifying Future Willful Misconduct
The Delaware Supreme Court is presently considering whether and to what extent an indemnification provision in a transaction agreement may indemnify a party for its own, post-closing willful misconduct.
In Gendreau v. Movora, LLC, the seller under a transaction agreement agreed to indemnify the buyer for certain then-pending patent litigation involving the business sold as part of the transaction. Read broadly, the indemnification provision could require the seller to indemnify the buyer for the buyer’s post-closing willful misconduct in relation to the patent litigation.
After closing, the patent litigation settled, and the buyer sought indemnification from the seller for the full settlement amount. The seller responded that portions of the settlement were not indemnifiable because the buyer’s post-closing conduct allegedly increased the damages in the patent litigation. According to the seller, allowing the buyer to obtain indemnification for amounts attributable to its own post-closing actions would violate public policy by encouraging willful misconduct. Relying on James v. Getty Oil, a more than 40-year-old Delaware Superior Court decision, the seller argued that Delaware does not permit indemnification of willful misconduct.
Post-trial, the Delaware Superior Court disagreed with the seller’s position. The Delaware Superior Court found that the counter-vailing public policy consideration was the parties’ freedom of contract to choose the scope and subject matter of indemnification. The Delaware Superior Court further found that Delaware courts have permitted indemnification for a variety of purportedly willful acts, including “punitive damages for wanton conduct;” “losses occasioned by fraud;” “restitution or disgorgement;” and “a monetary settlement of a claim alleging indemnitee committed intentional ERISA violations.” In doing so, the Delaware Superior Court noted that the James decision had not gained “traction” and was, effectively, superseded by subsequent Delaware decisions.
The seller appealed the Delaware Superior Court’s post-trial decision regarding, among other things, the Court-below’s rejection of the continued staying power of James’s public policy pronouncement against indemnifying willful misconduct. The Delaware Supreme Court’s resolution of this issue will be of interest both to transactional attorneys and litigators in the M&A space, as the extent and scope of indemnification provisions are a common theme in transaction agreements and any related litigation.
Originally published in Wolters Kluwer's Securities Regulation Daily
