In Eric Douglas Guilbeau, et. al. v. Footprint International Holdco, Inc., et al., Vice Chancellor Laster ruled on May 12, 2026 that the plaintiff’s claims that a board lacked a disinterested and independent majority, requiring entire fairness – both fair dealing and fair price – could not be dismissed. The board approved Class F financing was a cram down that rendered initial preferred shares virtually worthless.
“Delaware has 3 tiers of review for evaluating director decision-making: the business judgment rule, enhanced scrutiny, & entire fairness. In each manifestation, the standard of review is more forgiving of directors and more onerous for stockholder plaintiffs than the standard of conduct.”
When a board lacks a disinterested and independent majority, entire fairness applies, which requires both fair dealing and fair price, regardless of motive or intent.
“In Weinberger, the Delaware Supreme Court famously held that there is ‘no dilution’ of the duty of loyalty when a director ‘holds dual or multiple’ fiduciary roles.”
Here, on a 10 person board, there were 4 funds that benefited from and participated in the class F financing, each of whom had a designated seat on the board. Each of those designees had fiduciary duties to both the fund and the company. And the fifth board member in question was an officer of the company, who the court noted cannot by nature exercise independent judgment for the company. Therefore, there were 5 conflicted board members, which means that the board lacked the majority to escape entire fairness review.
The company board here likely erred in giving ultimate decision making power to a board that was not a majority disinterested board in a transaction that benefited one class of shares at the expense of another. This could have been remedied by adding another 1 or 2 independent board members before the board approved the decision.
Jerome Fogel is co-founder of Fogel & Potamianos LLP, a firm recognized by Chambers & Partners’ California Spotlight Guide for excellence in corporate law. A partner in the Corporate Practice Group and Chair of the Sports & Entertainment Group, he is known as an innovator and dealmaker in the legal community. He serves as a general counsel to privately held companies, including representation in mergers and acquisitions.
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