On Oct. 14, 2011, the Delaware Court of Chancery issued a 105-page post-trial opinion in In re Southern Peru Copper Corporation Shareholder Derivative Litigation, which involved a challenge to Southern Peru Copper Corp.'s purchase of Minera Mexico, S.A. de C.V. from Southern Peru's controlling stockholder, Grupo Mexico, S.A.B. de C.V., for an implied value of $3.1 billion.

Chancellor Leo E. Strine Jr. applied the “entire fairness” standard, which applies to transactions with controlling stockholders and puts the burden of proof on the board of directors to show that both the transaction price and the process leading to the transaction were fair. The court:

  1. Concluded that the special committee formed to approve the transaction (advised by a global investment banking and securities firm) was independent and informed, but was nonetheless not “well functioning”
  2. Rejected the contention that the special committee process shifted the burden of proof back to the plaintiffs
  3. Found that the directors failed to establish fair process and fair price
  4. Awarded $1.3 billion in damages (the largest in the court's history)

The defendants argued that the special committee process shifted the burden of proof back to the plaintiffs, but the Chancellor rejected the argument because he found that the committee was not “well functioning.” To start, the resolution creating the special committee did not expressly authorize it to negotiate or investigate alternatives, leaving it to evaluate the transaction as proposed by Grupo Mexico. Because of this, the court found its negotiations to be “stilted and influenced by its uncertainty about whether it was actually empowered to negotiate.”