On October 12, 2017, the Supreme Court of Delaware affirmed a decision by the Delaware Court of Chancery to dismiss breach of fiduciary duty claims against the directors of Clear Channel Outdoor Holdings, Inc. (“CCOH”) in connection with (i) a debt offering and asset sales allegedly undertaken in order to fund special dividends for the purpose of enabling its controlling stockholder to address liquidity needs, and (ii) the alleged failure of CCOH to extricate itself from unfavorable intercompany agreements with the controlling stockholder as its financial condition deteriorated.
GAMCO Asset Management Inc. v iHeartMedia Inc., et al., C.A. No. 12312-VCS (Del. Oct. 12, 2017). As discussed in our
post regarding that decision, as to the debt offering and asset sales, the Court of Chancery applied the business judgment rule because the allegations regarding the debt offering and asset sales did not fall within the “very narrow circumstances” in which “a controlling stockholder’s immediate need for liquidity could constitute a disabling conflict of interest irrespective of pro rata treatment.” In its short order, the Supreme Court affirmed without further elaboration. As to the intercompany agreements, the Supreme Court found it unnecessary to reach the Court of Chancery’s determination that the claims were barred by a settlement agreement and res judicata because “the Court of Chancery properly found that under the pled circumstances, which included the board acting within the framework established by a forward-looking settlement agreement and the company’s binding contractual obligations . . . the complaint failed to state a claim for breach of fiduciary duty.”
