Of possibly greater relevance to members of the Delaware Corporate Law Community of Interest than Mr. Musk's celebrity capitalist status (ten-digit numbers being beige wallpaper in the Community) is the ruling in In re Tesla Motors, Inc. Stockholder Litigation, C.A. No. 12711-VCS (consol.), memo. op. (Del. Ch. Mar. 28, 2018), that it was reasonably conceivable that Musk, as a 22% stockholder, CEO, and chairman of Tesla, exercised control over the company's board in connection with a challenged acquisition of a company (SolarCity) in which Musk was also a 22% stockholder and chairman. The finding -- on a motion to dismiss -- that Musk was conceivably a controller meant that the transaction could be subject to the entire fairness standard of review. Importantly, that finding was also part of recent trend departing from historical reluctance to find that a less-than-50% stockholder exercised control -- well-illustrated by a table included on page 25 of In re Crimson Exploration, Inc. Stockholder Litigation, C.A. No. 8541-VCP (consol.), memo. op. (Del. Ch. Oct. 24, 2014) , collecting representative cases in which minority stockholders were alleged to be controllers, and reporting their percentage of stock ownership and whether they were found to exercise control. For many years, In re Cysive, Inc. Shareholders Litigation, C.A. No. *20341-VCS (consol.), memo. op. (Del. Ch. Aug. 15, 2003), which found that a 35% stockholder exercised control, was a uniquely distant outlier from the norm where control by minority stockholders was rarely found. The March 28, 2018 Tesla decision represented a divergence obvious even to non-math people. But a determination of stockholder control at the pleading stage is subject to revisitation in view of evidence developed through litigation, and those observing the Tesla matter might reasonably have anticipated post-trial reevaluation of Musk's control -- and of the applicable standard of review.

Today's edition reports the 131-page post-trial ruling in In re Tesla Motors, Inc. Stockholder Litigation, C.A. No. 12711-VCS (consol.), memo. op. (Del. Ch. Apr. 27, 2022). Those anticipating revisitation and explication of the law governing stockholder control and the applicable standard of review will be disappointed. The decision finds, assuming Musk is a controlling stockholder and the challenged transaction is subject to review for entire fairness, that evidence presented at trial demonstrated the transaction was entirely fair:

The process employed by the Tesla Board to negotiate and ultimately recommend the Acquisition was far from perfect. Elon was more involved in the process than a conflicted fiduciary should be. And conflicts among other Tesla Board members were not completely neutralized. With that said, the Tesla Board meaningfully vetted the Acquisition, and Elon did not stand in its way. Equally if not more important, the preponderance of the evidence reveals that Tesla paid a fair price -- SolarCity was, at a minimum, worth what Tesla paid for it, and the Acquisition otherwise was highly beneficial to Tesla.

TCD is aware that the Practizing Law Institute's* Mergers & Acquisitions 2022: Advanced Trends and Developments program featured discussion of "Delaware Litigation Developments" involving stockholder control, in which difficulty in advising corporate boards on the existence of a controlling stockholder -- and whether the structural protections for controlling stockholder transactions prescribed under Alan Kahn, et al. v. M&F Worldwide Corp., et al., No. 334, 2013, opinion (Del. Mar. 14, 2014), should be implemented -- was roundly lamented. What's a poor captain of industry to do? In TCD's experience, captains of industry, and consequently their counsel, prefer bullet-point answers to all questions -- including highly contextual and nuance-y mixed questions of fact and law. M&F Worldwide -- providing a short checklist of actions to take (or feign) in order to avoid any contextual or nuance-y scrutiny of a transaction inherently fraught with self-interest -- is thus a high-level thinker's dream. Vice Chancellor Slights' 131-page Tesla Opinion is not. What it instead provides is a collection of factually detailed scenarios that contributed to a conclusion that a transaction was entirely fair, from which contextual / nuance-y thinkers might derive roughly categorical understandings of conduct that supports a finding of entire fairness.

To be clear, although characterized in the quote above as "equally if not more important" to the entire fairness analysis, the Court's finding that the price paid for SolarCity was fair -- and rejection of plaintiffs' position that SolarCity was worthless -- seems to have weighed more strongly in favor of entire fairness than a finding that deal process was fair. Although characterized in the quote above as "far from perfect," the Court suggests that deal process in fact straddled the line between imperfect and unacceptable in a manner separate from its entire fairness analysis:

Elon likely could have avoided the need for judicial review of his conduct as a Tesla fiduciary had he simply followed the ground rules of good corporate governance in conflict transactions. He declined to do so. For that reason, I decline to award him prevailing party costs.

What's a poor captain of industry to do? While lacking the simplicity of a bullet-point list, one answer, which was presumably the answer during the history of the world preceding issuance of M&F Worldwide a mere few years ago, is good governance. For captains of industry who can't resist the compulsion to create a circus environment around their every endeavor, the answer may be an eleven-day trial.

* "Practising Law Institute" is also at times misspelled "Practicing Law Institute."

• The Court finds nominal defendant's acquisition of a profitable but struggling company entirely fair where, although involvement of a conflicted fiduciary created some process flaws, the board acted properly and the price was "'entirely' fair in the truest sense."
• ENTERED: Judgment favoring defendant
• Stockholders of nominal defendant brought derivative claims for breach of fiduciary duty, unjust enrichment, and waste against the company's Chairman, CEO, and alleged controlling stockholder, challenging nominal defendant's acquisition of a profitable but cash-strapped company in a transaction allegedly designed to benefit defendant, who owned 22% of each company and also chaired the acquired company's board. For years prior to the transaction, nominal defendant had publicly maintained a long-term strategy to complete a synergistic acquisition of a business in the acquired company's industry. Although formally recused from transaction decisions, defendant involved himself in multiple aspects of the process, which was otherwise led by an independent director. The board, which did not form a special committee, had rebuffed defendant when he previously proposed the acquisition and only decided to proceed when it perceived the timing to be in nominal defendant's favor. The all-stock acquisition, recommended by nominal defendant's financial advisor and approved by 85% of voting shares, closed at an exchange ratio representing a discount to the acquired company's unaffected market price. Plaintiffs sued, relying on expert testimony to assert that the acquired company was insolvent and worthless and that the acquisition constituted a bailout. The Court rules in defendant's favor in this post-trial Opinion, despite criticizing defendant and the board for having failed to "adopt more objectively evident procedural protections" that might have avoided the need for litigation, as a consequence for which the Court finds defendant not entitled to court costs. The Court assumes for purposes of the ruling that defendant was a controller, that the board was not independent and disinterested, that stockholder approval was not fully informed, and that defendant therefore had the burden to prove entire fairness, but concludes that he did so based on findings that: although the acquisition process was flawed, primarily due to defendant's involvement, it included sufficient "redeeming features" to "emulate[] arms-length bargaining for the benefit of [nominal defendant's] stockholders"; plaintiffs' contention that the acquired company was worthless at the time of the acquisition is "incredible on its face"; defendant proved that the price was fair; and, with entire fairness proven by defendant, plaintiffs cannot prove either unjust enrichment or waste.

• The Court enters final judgment favoring defendant, a conflicted fiduciary, finding the challenged acquisition of a struggling company by nominal defendant entirely fair.
• ENTERED: Judgment favoring defendant

• Nature of Action: Stockholder Class Action
• Plaintiff's Counsel: BIELLI & KLAUDER; WEISSLAW
• Individual Defendant(s): Jon P. Vrabely; Patrick L. Larmon; James F. Hibberd; Gina G. Hoaglan; J. Keith Matheney; Donald L. Glass; Delbert H. Tanner
• Entity Defendant(s): Huttig Building Products, Inc.

• Nature of Action: Stockholder Class Action
• Plaintiff's Counsel: DELEEUW LAW; ABRAHAM FRUCHTER & TWERSKY
• Individual Defendant(s): Walter P. Wilkerson; Fred D. Clark, Jr.; William L. Brunson, Jr.; Jack E. Brunson; Donald S. Pittman; Mickey L. Murdock; Fleming G. Brooks; Frank B. O'Neil; Brian R. McLeod; L. Brunson White; Charles B. Arnold; Elizabeth B. Crawford; Andrew J. Abernathey
• Entity Defendant(s): National Security Group, Inc.

• Nature of Action: Breach of Contract
• Plaintiff's Counsel: YOUNG CONAWAY STARGATT & TAYLOR; OGLETREE DEAKINS NASH SMOAK & STEWART
• Individual Defendant(s): Curt Burgener
• Entity Defendant(s): G& Z Transport, LLC

• Nature of Action: Stockholder Class Action
• Plaintiff's Counsel: GORDON FOURNARIS & MAMMARELLA
• Individual Defendant(s): David G. Hirz; Leland P. Smith, Sr.; Richard N. Phegler
• Entity Defendant(s): Ares Corporate Opportunities Fund III, LP; Ares Corporate Opportunities Fund IV, LP; Citigroup Global Markets, Inc.; Jefferies, LLC

• Plaintiff(s): Don Reith
• Plaintiff's Counsel: BIELLI & KLAUDER - Ryan M. Ernst (#4788); WEISSLAW - Michael A. Rogovin
• Individual Defendant(s): Jon P. Vrabely; Patrick L. Larmon; James F. Hibberd; Gina G. Hoaglan; J. Keith Matheney; Donald L. Glass; Delbert H. Tanner
• Entity Defendant(s): Huttig Building Products, Inc.
• Nature of Claim(s): Plaintiff, a stockholder of defendant Huttig Building Products, brought breach of fiduciary duty claims against defendant directors in connection with the proposed sale of the company to Woodgrain, Inc.
  Count 1 & 2: Breach of Fiduciary Duties
• Field of Law: Corporation Law
• Basis for Jurisdiction: 10 Del. C. § 341 - jurisdiction over matters and causes in equity
• Preliminary Motions: Motion for expedited proceedings, Motion for preliminary injunction

• Plaintiff(s): Edward Cohen
• Plaintiff's Counsel: DELEEUW LAW - P. Bradford deLeeuw (#3569); ABRAHAM FRUCHTER & TWERSKY - Jeffrey S. Abraham; Michael J. Klein
• Individual Defendant(s): Walter P. Wilkerson; Fred D. Clark, Jr.; William L. Brunson, Jr.; Jack E. Brunson; Donald S. Pittman; Mickey L. Murdock; Fleming G. Brooks; Frank B. O'Neil; Brian R. McLeod; L. Brunson White; Charles B. Arnold; Elizabeth B. Crawford; Andrew J. Abernathey
• Entity Defendant(s): National Security Group, Inc.
• Nature of Claim(s): Plaintiff, a stockholder of defendant National Security Group, brought breach of fiduciary duty claims against director defendants in connection with a proposed merger of the company with VR Insurance SPV and its wholly-owned subsidiary.
  Count 1: Breach of Fiduciary Duty
• Field of Law: Corporation Law
• Basis for Jurisdiction: 10 Del. C. § 341 - jurisdiction over matters and causes in equity
• Preliminary Motions: Motion for expedited proceedings, Motion for preliminary injunction

• Plaintiff(s): Transpro, Inc.
• Plaintiff's Counsel: YOUNG CONAWAY STARGATT & TAYLOR - Lauren E.M. Russell (#5366); OGLETREE DEAKINS NASH SMOAK & STEWART - David L. Zwisler; Steven R. Reid
• Individual Defendant(s): Curt Burgener
• Entity Defendant(s): G& Z Transport, LLC
• Nature of Claim(s): Plaintiff brought suit against its former employee for breach of the restrictive covenants of his employment agreements with plaintiff and his current employer, a direct competitor of plaintiff.
  Count 1: Breach of Contract
  Count 2 & 3: Tortious Interference
  Count 4: Unjust Enrichment
  Count 5: Conversion
  Count 6: Civil Conspiracy
  
• Field of Law: Commercial Law
• Basis for Jurisdiction: 10 Del. C. § 341 - jurisdiction over matters and causes in equity

• Plaintiff(s): Glenn J. Krevlin
• Plaintiff's Counsel: GORDON FOURNARIS & MAMMARELLA - Neil R. Lapinski (#3645); Phillip A. Giordano (#5756); Christopher P. Clemson (#6539); Madeline Silverman (#6920)
• Individual Defendant(s): David G. Hirz; Leland P. Smith, Sr.; Richard N. Phegler
• Entity Defendant(s): Ares Corporate Opportunities Fund III, LP; Ares Corporate Opportunities Fund IV, LP; Citigroup Global Markets, Inc.; Jefferies, LLC
• Nature of Claim(s): Plaintiff, a former stockholder of non-party Smart and Final Stores, Inc., brought putative class claims against the company's officers, directors and controlling stockholders for knowingly causing disclosure of materially false information among other things, in connection with the sale of the company.
  Count 1 & 2: Breach of Fiduciary Duty
  Count 3: Aiding and Abetting
  
• Field of Law: Corporation Law
• Basis for Jurisdiction: 10 Del. C. § 341 - jurisdiction over matters and causes in equity