Delaware's "Control Group" Jurisprudence


This article describes the development of Delaware’s control group jurisprudence in recent years. Whether stockholders are members of a “control group” under Delaware law has consequences. The fiduciary duties that run with controlling stockholder status impact the viability of pleadings stage motions by potentially heightening the applicable standard of review and dictating which defenses are available to defendants. The article examines the Delaware Supreme Court decisions that have prompted stockholder plaintiffs to focus on pleading the existence of a controller or control group. That increased focus by stockholder plaintiffs has led to the Delaware courts issuing at least ten rulings addressing whether a group of stockholders constituted a “control group” since 2017. We explain that this series of recent rulings reflects only the most recent example of Delaware’s commitment to a common law process that refines its corporate law iteratively and quickly. That process, and the resulting body of case law, now guides future transactional planning and also provides predictable results in future litigation.