On May 22, 2017, the Supreme Court of Delaware affirmed the dismissal of a breach of fiduciary duty action against the directors of Books-A-Million, Inc. and other defendants following a “squeeze-out” merger by the company’s controlling stockholders.
In re Books-A-Million, Inc. Stockholders Litigation v. Anderson, Consol. C.A. No. 11343-VCL. Without further elaboration, the Supreme Court’s brief order provides that the decision of the Delaware Court of Chancery “should be affirmed on the basis of and for the reasons assigned” in its opinion (citing
In re Books-A-Million, Inc., C.A. No. 11343 (Del. Ch. Oct. 10, 2016)). As discussed in our
post on the Chancery Court’s decision, the lower court found—based on the complaint and the proxy filed by the company in connection with the merger—that the transaction followed the framework established by the Delaware Supreme Court in
Kahn v. M&F Worldwide Corp., 88 A.3d 635 (Del. 2014). Under that framework, a controlling stockholder transaction that is approved by both an independent special committee of the board—with access to its own advisors and the ability to definitively reject the deal—and an informed, uncoerced vote of the majority of minority (
i.e., non-controlling) stockholders will be reviewed under the deferential “business judgment rule,” as opposed to the entire fairness standard typically applied to controlling stockholder transactions.
