Firefighters' Pension System of City of Kansas City, Mo. Trust v. Presidio, Inc.

Court of Chancery of the State of Delaware · 2021 · Corporations

Updated August 22, 2026

CorporationsMergers and acquisitionsFiduciary dutiesAiding and abettingDisclosureRevlonenhanced scrutinyCorwin

Facts

Presidio agreed to be acquired by BCP for $16.00 per share under a merger agreement with a go-shop that gave an "Excluded Party" extra negotiating time and a lower termination fee. During the go-shop, CD&R bid $16.50 per share and indicated it could go to at least $17.00, qualifying as an Excluded Party. Before the company gave BCP the limited notice required by the merger agreement, LionTree tipped BCP about CD&R's bid, and BCP promptly raised its offer to $16.60 while demanding a flat $40 million termination fee that eliminated the key benefit of Excluded Party status. The board, unaware of the tip, accepted BCP's amended offer; after the amended agreement was announced, CD&R walked away.

Issue

Whether the complaint plausibly alleged that the sale process and merger disclosures were tainted by fiduciary breaches and aiding-and-abetting misconduct, such that dismissal was improper. More specifically, the court addressed whether enhanced scrutiny or the business judgment rule applied, whether Corwin cleansing was available, and whether the complaint stated damages claims against the CEO, directors, Apollo, LionTree, and BCP.

Rule

A cash sale of a corporation is subject to enhanced scrutiny, and where a controlling stockholder sells for the same consideration as other stockholders, entire fairness does not apply absent a conflicted-controller transaction, but enhanced scrutiny remains the baseline absent Corwin cleansing. Corwin cleansing applies only if the transaction is approved by a fully informed, uncoerced vote of disinterested stockholders, and one material disclosure violation defeats cleansing. In a damages case, an exculpated director is liable only if the complaint pleads a non-exculpated claim by supporting an inference of self-interest, lack of independence, or bad faith; aiding and abetting requires a fiduciary relationship, breach, knowing participation, and damages, and knowing participation may be shown by tipping, misleading the board, or withholding material information that creates an informational vacuum.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

North Shore Data Systems, a Delaware corporation based in Chicago, is controlled by Lake Harbor Partners, which owns 44% of the voting power and will receive the same per-share cash as all other stockholders in a proposed merger with Redwood Equity. After the merger closes, a former stockholder sues, arguing that because the company was sold for cash, the sale process should be reviewed under the business judgment rule unless the controller was conflicted.

Which standard of review should a Delaware court most likely apply as the baseline to evaluate the sale process, assuming no cleansing vote applies?

Explanation. The majority opinion treated a cash sale as subject to enhanced scrutiny as the baseline. Entire fairness does not apply merely because a controller is present if the controller receives the same consideration and no conflicted-controller transaction is pled. But that does not mean business judgment review automatically governs; absent cleansing, enhanced scrutiny remains the operative standard.