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Sept. 29 — Cornerstone Therapeutics Inc.'s directors can immediately appeal a ruling that denied its dismissal motion until all underlying claims were resolved at a trial regarding the fairness of a merger between Cornerstone and Chiesi Farmaceutici S.p.A., according to a Sept. 26 Delaware Chancery Court order In re Cornerstone Therapeutics Inc.
Vice Chancellor Sam Glasscock III found that all of the requirements of Delaware Supreme Court Rule 42 were met in granting the defendants' application for certification of an interlocutory appeal of his Sept. 10 decision.
Chiesi, a controlling shareholder of Cornerstone, entered into an agreement in February 2013 to purchase all of Cornerstone's outstanding stock. A full board of Cornerstone's disinterested directors approved the merger agreement (12 CARE 1133, 9/12/14).
Subsequently, plaintiff stockholders filed a complaint alleging a breach of fiduciary duty.
The approving disinterested directors moved to dismiss the complaint, arguing that because they are facially disinterested, the breach of duty had to be specifically pled and that an exculpation provision adopted in the company's bylaws should not be ignored at the motion-to-dismiss stage.
On Sept. 10, Vice Chancellor Glasscock held that under controlling precedent, the plaintiffs were not required to specifically plead a breach of duty by the disinterested directors because the standard of review of the underlying claims is entire fairness. He determined that the disinterested directors “must await a developed record, post-trial, before their liability is determined.”
On Sept. 23, the disinterested directors moved for an interlocutory appeal of the decision.
“A Rule 42 interlocutory appeal may be certified by this Court only when the appealed decision (1) ‘determines a substantial issue,' (2) ‘establishes a legal right,' and (3) meets one or more criteria further enumerated in the Rule.”
The plaintiffs first argued that the appealed decision does not involve a “substantial right.” The court, however, found that if the Sept. 10 decision was reversed, it could lead a lead to a dismissal of the disinterested directors and “thus constitutes a substantial issue in the course of litigation.”
The plaintiffs additionally argued that an interlocutory appeal is not warranted because even if the appeal was granted in the defendants' favor, it would not end the case and would interrupt the parties' progress toward trial.
Vice Chancellor Glasscock dismissed this argument as well, noting that because he did not enter a stay in the proceedings, if the Delaware Supreme Court elects to take the appeal, the parties could proceed to a trial while the higher court considers the appeal.
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The opinion is available at http://www.bloomberglaw.com/public/document/In_Re_Cornerstone_Therapeutics_Inc_Stockholders_Litigation_2014_B.
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