Galindo v. Stover, C.A. No. 2021-0031-SG (Del. Ch. Jan. 26, 2022)

If a majority of fully informed, uncoerced, disinterested stockholders vote to approve a merger not involving a conflicted controlling stockholder, then under the Corwin doctrine, the business judgment rule applies because the vote cleanses any breach of duty (except a claim for waste). In this decision, the Court of Chancery returns to what it means for the stockholder vote to be “informed.”

A majority of Noble Energy, Inc.’s stockholders voted to approve a merger with Chevron Corporation. The plaintiffs (former Noble Energy stockholders) alleged, among other things, that the merger process and price were unfair. Plaintiffs also alleged that the stockholder vote was not fully informed because the merger proxy did not disclose a prior buyout proposal or the timing or reasons for amendments to a plan governing change-in-control payments to Noble Energy executives.

The Court rejected the plaintiffs’ arguments because the omitted information was not material. The buyout proposal was too removed in time (roughly two years before the merger) and was for the purchase of only a portion of Noble Energy’s assets. It was unsolicited, did not lead to any negotiations, and never was considered by Noble Energy’s board. Similarly, any omission of the timing and reasons for the amendments to the change-in-control payments was immaterial because the terms of the amendments and the payments thereunder already had been disclosed to stockholders in, or in advance of, the merger proxy. The omitted information, therefore, would not have altered the total mix of information. The Court concluded that Corwin applied, and under a business judgment standard of review, it dismissed the action.