In Re Books-A-Million, Inc. Stockholders Litigation, C.A. No. 11343-VCL (Del. Ch. Oct. 10, 2016)

The Court of Chancery addressed a claim for breach of fiduciary duty in connection with a going-private transaction that utilized the deal protections set forth by the Delaware Supreme Court in Kahn v. M&F Worldwide, Corp. The Court reiterated that the proper use of the Kahn protections makes it nearly impossible for minority shareholders to successfully claim breach of fiduciary duty against controlling shareholders or board members in a going-private transaction.  The plaintiff’s only options are to successfully allege that the Kahn protections were not satisfied or that the transaction at issue constituted waste under Delaware law.

BOTTOM LINE: The business judgment rule will apply, and all but foreclose successful claims of breach of fiduciary duty, when  (i) a transaction is conditioned on the approval of both an independent Special Committee of the Board and an informed majority of the minority stockholder vote; (ii) the Special Committee is empowered freely to select its own advisors and to say no definitively; (iii) the Special Committee meets its duty of care in negotiating fair price; and (iv) there is no coercion of the minority shareholders.