In a brief order issued on May 6, 2016, the Delaware Supreme Court affirmed the decision of the Delaware Court of Chancery to dismiss a claim brought against the board of directors of target company Zale Corporation and its financial advisor Merrill Lynch (In re Zale Corp. S'holders Litig., (Del. Ch. Oct. 29, 2015) (Zale II)). However, the Supreme Court ruled that the Chancery Court erred on two issues, holding that:

(Singh v. Attenborough, No. 645, 2015 (Del. May 6, 2016) (ORDER).)

The underlying facts of Zale are described in Legal Update, Delaware Court of Chancery Opines on Bad Faith, Gross Negligence and Banker Liability in "Zale" and "TIBCO", which summarizes the Chancery Court's initial opinion in Zale I (In re Zale Corp. S'holders Litig., (Del. Ch. Oct. 1, 2015)). The Chancery Court amended its decision in Zale I on reargument as a result of the Delaware Supreme Court's decision in Corwin, holding that:

In dismissing the allegations brought against the board and Merrill Lynch, the Chancery Court confronted an issue that the Supreme Court had left unresolved in Corwin. The Corwin decision was clear that a fully informed vote of a majority of the disinterested stockholders shifts the standard of review of the board's conduct to business judgment, but it was somewhat ambiguous about the type of claim that will survive once the business judgment rule reapplies. The Chancery Court addressed that issue explicitly, describing the two possible formulations for the standard that the plaintiff must satisfy when challenging the director defendants' conduct in the merger process when the directors are entitled to the presumptions of the business judgment rule:

The Zale II court ultimately found more support for the view that the appropriate standard was gross negligence. In particular, the court emphasized that nowhere in Corwin did the Supreme Court say that a plaintiff would have to state a claim alleging waste.

The Supreme Court affirmed the Chancery Court's dismissal of the claims brought against the Zale board and Merrill Lynch on the grounds that the stockholder vote invoked the business judgment rule. However, the Supreme Court held that the Chancery Court erred when it evaluated the plaintiffs' post-closing claim for damages under the gross negligence standard.

In a single paragraph on the issue, the Supreme Court explained that the standard for damages liability should change depending on whether or not the stockholders have approved the transaction:

The order does not go into further detail on this point or explain why it does not suffice that the stockholder vote restores the presumptions of the business judgment rule where a standard of reasonableness previously attached to the sale. Nevertheless, the court ruled that after stockholder approval, dismissal of the plaintiffs' damages claims is almost always appropriate. This is because whenever the presumptions of the business judgment rule have not been rebutted, the plaintiffs' only recourse is to establish that the transaction in question constituted waste. Waste is only established if "no person of ordinary sound business judgment" could consider the transaction fair. The very fact that the stockholders have approved the transaction should mean that a person of ordinary sound business judgment would consider the transaction fair.

Although claims against the board and financial advisor will frequently be dismissed if the stockholders have approved the transaction in an informed vote, an inquiry into breach of fiduciary duty is still relevant before the stockholders have voted on the transaction, or if there are found to be deficiencies in the disclosures to the stockholders. This leaves open the possibility that a financial advisor can be held liable for aiding and abetting the board's underlying breach in those circumstances.

In that regard, the Supreme Court addressed liability for aiding and abetting and remarked that it was distancing itself from any implication in Zale I that an advisor can only be held liable if it aids and abets a breach of fiduciary duty for which the directors themselves are not exculpated under Section 102(b)(7), which are breaches of the duty of good faith or loyalty. Rather, the advisor can be found liable for aiding and abetting a breach of the duty of care in the context of a change-of-control transaction, even though the directors themselves are exculpated for breaches of that duty.

The Supreme Court, hearkening back to its decision in RBC Capital Markets, LLC v. Jervis, explained that an advisor is not absolved from liability simply because its client's actions were taken in good-faith reliance on misleading and incomplete advice tainted by the advisor's own knowing disloyalty (, 129 A.3d 816, 861–866 (Del. 2015)). The court reasoned that to grant immunity to a financial advisor because it successfully duped its own client would be "unprincipled" and out of step with the protection afforded to other service professionals.

Although this portion of the order somewhat broadens the possibility for financial advisor liability, the court emphasized that on the facts of the case (which the Chancery Court had mused could support a finding of aiding and abetting), Merrill Lynch had not "come close to approaching the sort of behavior at issue in RBC Capital Markets." The court acknowledged Merrill Lynch's late disclosure of its prior business pitch to Zale's acquiror, but also noted that that disclosure was then considered by the board, determined to be immaterial, and fully disclosed in the proxy. The court therefore said that it was "skeptical" that the alleged instance of "knowing wrongdoing" rose to the level of scienter required by RBC Capital Markets.