Gail Weinstein is a Senior Counsel, Philip Richter is a Partner, and Steven Epstein is the Managing Partner at Fried, Frank, Harris, Shriver & Jacobson LLP. This post is based on a Fried Frank memorandum by Ms. Weinstein, Mr. Richter, Mr. Epstein, Steven J. Steinman, Roy Tannenbaum, and Randi Lally, and is part of the Delaware law series; links to other posts in the series are available here.
In Sjunde AP-Fonden v. Activision Blizzard (Oct. 2, 2025) (“Activision II”), the Delaware Court of Chancery, at the pleading stage, declined to dismiss claims that the directors of Activision Blizzard, Inc. breached their fiduciary duties in connection with the $69 billion sale of the company to Microsoft Corporation.
This is the court’s second major decision issued in this litigation—which, notably, is still at the pleading stage although it has been pending for three years. In the first decision, “Activision I” (2024), Chancellor Kathaleen St. J. McCormick held that Activision’s board may have violated certain provisions of the DGCL relating to approval of merger agreements. That decision led the board to have its stockholders ratify the merger agreement; and, famously, led the Delaware legislature to enact amendments to the DGCL to clarify certain of the technical requirements for approval of merger agreements.
In Activision II, the court has addressed the plaintiff’s claims that the directors breached their fiduciary duties in the sale process. The Chancellor found it reasonably conceivable (the standard at the pleading stage) that the board permitted Activision’s CEO to tilt the process to favor a quick deal with Microsoft, which was in his personal interest but not value-maximizing for the stockholders. Notably, although the court assumed that all of the directors were independent and disinterested, the court found it reasonably conceivable that all of them breached their fiduciary duties and acted in bad faith by simply supporting the conflicted-CEO’s decisions. The court also held that the fiduciary breaches could not be cleansed under Corwin nor exculpated under Cornerstone—leaving the directors potentially personally liable.
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