Chancellor Andre Bouchard.

The Delaware Court of Chancery on Monday dismissed an investor suit stemming from a conflicted transaction that extended power giant NRG Energy's control over a subsidiary, finding that minority shareholders had overwhelmingly approved the deal.

The ruling from Chancellor Andre G. Bouchard was the latest in a series of Chancery Court decisions that extended the state Supreme Court's 2014 ruling in Kahn v. M&F Worldwide beyond the original context of a squeeze-out merger.

Under that decision, the director-friendly business judgment rule applies if a transaction is conditioned on the approval of an independent special committee and approved by an uncoerced, informed vote of a majority of a firm's minority stockholders. But the court in recent years has shown a willingness to invoke the decision in a range of other transactions that work to the benefit of controlling shareholders.

On Monday, Bouchard continued the trend, applying the M&F Worldwide framework to a suit that accused NRG Inc.—whose financial headquarters is in West Windsor, New Jersey, and operational headquarters is in Houston—of breaches of fiduciary duty in prolonging its control of NRG Yield Inc., which serves capital for NRG's acquisition of energy-generation and infrastructure assets.

While Bouchard found that the transaction was conflicted, it also featured an independent conflict committee and other protections, and thus did not warrant heightened scrutiny under the entire fairness standard.

“The animating principle of the MFW framework is that, if followed properly, the controlled company replicates an arm's-length bargaining process in negotiating and executing a transaction,” he wrote in a 53-page opinion.

“In my opinion, the use of these types of protections should be encouraged to protect the interests of minority stockholders in transactions involving controllers, whether it be a squeeze-out merger, a merger with a third party, or one in which the minority stockholders retain their interests in the corporation.”

The plaintiff, IRA Trust FBO Bobbie Ahmed, had asked Bouchard to review the case under the entire fairness standard, alleging that while NRG and its directors had extracted renewed control over the subsidiary, no benefit was passed on to the minority shareholders, whose stake the fund said had been diminished with the creation of two new classes of stock.

The fund argued that NRG had initiated the reclassification in order to maintain its control of Yield. In court documents, it challenged the company's disclosures, saying that investors were not informed that, without the deal, NRG could have relinquished its majority stake in the subsidiary as early as 2015.

Bouchard, however, rejected the argument that minority shareholders were not adequately informed under the MFW framework, and said that the plaintiff's timeline was largely inconsequential to a stockholder vote approving the deal.

“A hypothetical timeline of when NRG might lose control would not have significantly altered the 'total mix' of information already available to stockholders and thus is immaterial,” he wrote.

Attorneys from both sides were not immediately available to comment Monday afternoon.

The fund was represented by Jeremy S. Friedman, Spencer Oster and David Tejtel of Friedman Oster & Tejtel, Jason M. Leviton and Joel Fleming of Block & Leviton and Peter B. Andrews, Craig J. Springer and David M. Sborz of Andrews & Springer.

NRG and its director defendants were represented by William M. Lafferty and D. McKinley Measley of Morris, Nichols, Arsht & Tunnell.

The case was captioned IRA Trust FBO Bobbie Ahmed v. Crane.