On November 20, 2014, a New York appellate court upheld a trial court's dismissal of a challenge to a going-private transaction, holding that the entire fairness standard of review did not apply even though the buyer was the company's controlling shareholder (In re Kenneth Cole Prod., Inc. S'holder Litig., (NY App. Div. Nov. 20, 2014)). For more on the lower court's decision and the facts of the case, see Legal Update, In re Kenneth Cole: New York Court Dismisses Challenge to Going-private Transaction.

The appellate court's short opinion affirms that the business judgment rule applies under New York law to a transaction in which a controlling shareholder proposes to take the target company private, as long as the controlling shareholder does not participate in the board's decision to approve the merger and the proposal is conditioned on:

As with the lower court's decision, the appellate court does not explicitly reference the Delaware judiciary's decisions in MFW or M & F Worldwide for support of its analysis. At the same time, the court does approvingly cite Delaware law for the principle that board members do not lose the presumption of independence just because they are elected to the board by the controlling shareholder (see Aronson v. Lewis, 473 A.2d 805, 816 (Del. 1984)).