The Harvard Law School Forum on Corporate Governance https://corpgov.law.harvard.edu The leading online blog in the fields of corporate governance and financial regulation. Thu, 18 Jun 2026 12:51:54 +0000 en-US hourly 1 https://wordpress.org/?v=6.5.8 https://corpgov.law.harvard.edu/wp-content/uploads/2024/02/cropped-photography-4-e1706898544564-1-32x32.png Loyalty Claims Against Outside Directors – The Harvard Law School Forum on Corporate Governance https://corpgov.law.harvard.edu 32 32 Loyalty Claims Against Outside Directors https://corpgov.law.harvard.edu/2012/02/10/loyalty-claims-against-outside-directors/?utm_source=rss&utm_medium=rss&utm_campaign=loyalty-claims-against-outside-directors https://corpgov.law.harvard.edu/2012/02/10/loyalty-claims-against-outside-directors/#comments Fri, 10 Feb 2012 14:52:14 +0000 http://blogs.law.harvard.edu/corpgov/?p=25500?d=20150113151555EST Posted by Steven M. Haas, Hunton & Williams LLP, on Friday, February 10, 2012
Editor's Note:

Steven Haas is an associate at Hunton & Williams specializing in mergers and acquisitions, securities laws and corporate governance matters. This post is part of the Delaware law series, which is co-sponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.

A September 2011 Delaware Court of Chancery decision refused to dismiss claims alleging that a board of directors breached its fiduciary duty of loyalty in authorizing a sale of a corporation to a third party. The stockholder plaintiff alleged that the sale was motivated by the corporation’s former chairman and chief executive officer, who owned 37% of the corporation’s common stock and needed liquidity. The decision is significant for refusing to dismiss allegations of disloyal conduct against outside directors who were disinterested in the transaction and otherwise unaffiliated with the former CEO.

Background

New Jersey Carpenters Pension Fund v. infoGROUP, Inc. involved the 2010 sale of infoGROUP, Inc., to a private equity fund. The stockholder-plaintiff alleged that the sale was motivated by the corporation’s former chairman and chief executive officer, who owned 37% of the company and “desperately needed liquidity” to fund a new venture and to satisfy $12 million in settlement obligations stemming from a Securities and Exchange Commission action and a derivative suit brought against him. The plaintiff claimed that the board of directors breached its fiduciary duties by capitulating to the former CEO’s pressure and approving a transaction that was not in the best interests of all shareholders.

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