In transactions where a majority of directors or a controlling stockholder stands on both sides, the Delaware courts apply the entire fairness standard of review. That standard also applies in the limited liability company or limited partnership context where the parties adopt that standard by contract. While the two prongs of this nonbifurcated standard are well known – fair dealing and fair price – not that many cases have been tried and resulted in a Court of Chancery opinion that is then subject to review by the Delaware Supreme Court.
Gatz Properties v. Auriga Capital , No. 148, 2012 (Del. Supr. Nov. 7, 2012) , is the most recent post-trial entire fairness decision by the Delaware Supreme Court. The court’s affirmance that the contract at issue adopted the entire fairness standard for affiliated transactions, that fiduciary duties had been breached, that the limited liability company agreement provided no exculpation and that the lower court properly determined damages provides important guidance to practitioners for transactions subject to entire fairness review.
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