Washington Law Review


In Cede & Co. v. Technicolor, Inc., the Delaware Supreme Court held that shareholders are not required to prove injury from corporate directors' failure to exercise due care in approving a merger transaction. Tort principles, the court stated, have no role in a business judgment rule analysis. Therefore, once shareholders prove a violation of the directors' duty of care, the burden is shifted to the directors to prove the entire fairness of the transaction despite the absence of a breach of the duty of loyalty. This Note argues that the entire fairness review of a disinterested board transaction is unworkable. Rather, courts should use tort principles to analyze a breach of the duty of care, and those principles require plaintiffs to prove causation and resulting injury. Because proving causation to an absolute certainty in the corporate control setting can be forbidding, this Note proposes a "substantial lost chance" causation standard as a more viable alternative.

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