Lyondell Chemical Co. v. Ryan: Yes, You Can (Purchase or Sell a Delaware Company with a Preemptive Bid to a Disinterested Board)
By Barry A. Brooks, Kevin C. Logue and Asa R. Danes
On March 25, 2009, the Delaware Supreme Court (the Court) issued its highly anticipated decision in Lyondell Chemical Co. v. Ryan, clarifying the fiduciary duties and limitations on potential damages liability of a target corporations directors when approving a disinterested merger, with respect to which there is no conflict of interest. The Court rejected the notion that there are legally prescribed steps that directors must follow in making reasoned decisions as to how best to satisfy the single Revlon duty of obtaining the best price for stockholders in a sale of the company. Moreover, the Court held that in the context of a post-transaction damages lawsuit against directors of a target corporation whose charter contained an exculpatory provision relating to directors fiduciary duties, as permitted by section 102(b)(7) of the Delaware General Corporation Law (DGCL), the correct inquiry is not whether disinterested, independent directors did everything that they (arguably) should have done to obtain the best sale price, but rather whether those directors utterly failed to attempt to obtain the best sale price.