On September 26, 2014, the Delaware Court of Chancery granted an application for interlocutory appeal in In re Cornerstone Therapeutics Inc. Stockholder Litigation, Consol. C.A. No. 8922-VCG (Del. Ch. Sept. 26, 2014). In so doing, the Court acknowledged its prior conflicting decisions on the issue of whether independent directors must await a final determination on the merits of the Court's review of the entire fairness of a transaction subject to that standard before they can be exonerated, or whether they can invoke the corporation's Section 102(b)(7) provision at the pleading stage to obtain dismissal of the claims against them.

As discussed in a recent Legal Update, the Court of Chancery on September 9, 2014, weighed this issue and acknowledged an apparently duelling line of cases on this point ( (Del. Ch. Sept. 9, 2014); see Legal Update, In re Cornerstone Therapeutics: Dismissal under 102(b)(7) Unavailable to Independent Directors when Entire Fairness Applies). In its September 9 decision, the Court discussed, with some apparent sympathy, the director defendants' argument based on Southern Peru, a decision that apparently stands for the proposition that an entire-fairness claim against a controlling stockholder does not relieve the plaintiffs of their obligation to plead a specific claim against each of the disinterested and independent directors. In that decision, the Court stated that "[u]nless there are facts suggesting that the directors consciously approved an unfair transaction... the more stringent, strict liability standard applicable to interested parties is critically different" than the standard applicable to the directors on the special committee (In re S. Peru Copper Corp. S'holder Deriv. Litig., 52 A.3d 761, 787 n.72 (Del. Ch. 2011)).

In response, the plaintiffs had contended that when the applicable standard of review for the transaction is entire fairness, the Court must hold off on dismissing the claims against the disinterested and independent directors, in spite of the certificate of incorporation's exculpation provision. In support of that contention, the plaintiffs cited to In re Orchard Enterprises, Inc. Stockholder Litigation, which apparently stands for exactly that rule (88 A.3d 1, 37 (Del. Ch. 2014)).

The Cornerstone Therapeutics court eventually ruled that in spite of the incongruous lines of cases, a strict reading of the Delaware Supreme Court's decision in Emerald Partners II compelled a holding that the independent directors could not win on a motion to dismiss, in spite of the certificate of incorporation's Section 102(b)(7) provision that exonerates directors for breaches of the duty of care (Emerald Partners v. Berlin, 787 A.2d 85 (Del. 2001)).

In its September 26 letter opinion, the Court of Chancery certified the director defendants' application for appeal to the Supreme Court on this issue. The Court held that its September 9 decision satisfied all three elements of Delaware Supreme Court Rule 42(b) for certification of interlocutory appeal on a substantial issue, because:

(Supr. Ct. R. 42(b).)