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Lori Marks-Esterman Publishes Article in the New York Law Journal on the Role the Delaware Court of Chancery Plays as Equitable Gatekeeper to Protect the Stockholder Franchise

October 20, 2022

The New York Law Journal published an article on October 14, 2022 authored by Olshan partner and Chair of Olshan’s Litigation Practice Group Lori Marks-Esterman entitled, “Equitable Review in the Delaware Court of Chancery: Revisiting ‘Schnell,’ ‘Blasius’ and the Court’s Role as Equitable Gatekeeper To Protect the Stockholder Franchise.” Read the article in its entirety here. This article discusses the critical role the Delaware Court of Chancery plays as equitable gatekeeper.  Lori begins with a background discussion of Delaware’s decisions Schnell  and Blasius, and then reviews recent Delaware decisions that have reaffirmed the demanding standards set forth in those seminal cases: Strategic Investment Opportunities v. Lee Enterprises Incorporated, et al., Marion Coster v. UIP Companies, et al., and Bray v. Katz.  Each of these cases draws from Schnell’s famous quote  --- “inequitable action does not becomes permissible simply because it is legally possible” --- and holds that corporate transactions must be “twice-tested” - for both legal and equitable fairness, particularly when the stockholder franchise is implicated. 

Lori concludes that “these recent holdings confirm that regardless of the standard of review applied, that does not end the inquiry for review of board conduct. Rather, Delaware mandates that director actions be ‘twice-tested’ for equitable fairness; and where a board acts for the primary purpose of hindering the stockholder franchise, to determine whether the board had a compelling reason for doing so.  If the board fails either level of review, its actions must be undone.” Litigation associate Jacqueline Ma assisted in the preparation of this article.

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