The Importance of Alleging Control: Between Corwin and MFW
The Harvard Law School Forum on Corporate Governance and Financial Regulation 2018-04-19
The Delaware Court of Chancery recently held that individual members of Rouse Properties Inc.’s board of directors, who negotiated and approved a merger with the company’s largest stockholder in 2016, were protected under Corwin  by the business judgment rule from claims by plaintiff stockholders that the board, allegedly controlled by the stockholder, had breached their fiduciary duties.
In Re Rouse Properties, Inc. Fiduciary Litigation  arose out of the 2016 merger between Rouse Properties Inc. (“Rouse”), a Delaware corporation and real estate investment trust, and Brookfield Asset Management, Inc. (“Brookfield”), a Canadian global asset management corporation. In January 2016, Brookfield, owning 33.5% of the outstanding shares of Rouse, made an offer to acquire all of Rouse’s remaining outstanding shares for $17 per share. In response, Rouse formed a special committee of independent directors to negotiate with Brookfield and consider strategic alternatives. The parties ultimately agreed on a price of $18.25 per share and signed a merger agreement, which was subsequently approved by 82.44% of Rouse’s non-Brookfield-affiliated shares.