In re Match Group, Inc. Derivative Litigation

Court of Chancery of the State of Delaware · 2024 · Corporations

Corporationsfiduciary dutiescontrolling stockholdersdirector liabilityexculpationcontrolleractual controlhard control

Facts

Plaintiffs alleged Diller controlled Old IAC through 42.9% of its voting power, his role as chairman and senior executive, and his influence over Old IAC's strategy and board. Old IAC undisputedly controlled Old Match through 98.2% of Old Match's voting power, but Diller held no Old Match voting power directly. Plaintiffs alleged that IAC and Diller used IAC's voting power to fill Old Match's board with IAC executives, directors, and alleged loyalists. Levin, Schiffman, Stein, Winiarski, and Spoon each served as a director or officer of both Old IAC and Old Match and each voted to approve the Separation.

Issue

Whether plaintiffs adequately pled that Diller, by controlling Old IAC, also owed fiduciary duties as the ultimate controller of Old Match. Whether claims against Levin, Schiffman, Stein, Winiarski, and Spoon were dismissed because they were exculpated or because those defendants abstained from the challenged transaction.

Rule

A controller owes fiduciary duties if he owns more than 50% of a corporation's voting power or actually exercises control over the corporation's business and affairs; mere potential to control is insufficient. Control does not automatically pass transitively through a chain of entities as a matter of law, so a plaintiff must plead actual control over the subsidiary if the defendant lacks voting power there. Where a charter contains an exculpatory provision, claims survive if the plaintiff pleads that directors were interested, lacked independence in advancing another interested party's self-interest, or acted in bad faith; a director's status as a dual fiduciary to both sides of a conflicted transaction can establish interestedness. A dual fiduciary may avoid liability only by totally abstaining from participation, and at minimum abstention requires not voting to approve the transaction.

🔒

See the holding & full analysis

Create a free KwikCourt account to unlock the rest of this brief — and practice the case.

The court's holding and reasoning
Doctrine tests, pitfalls & exam hypotheticals
10 practice questions + 4 AI-graded essays on this case

Free sample · practice this case

Test yourself

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

In Seattle, Nolan Price owns 44% of the voting stock of Cascade Holdings and is its longtime chair. Cascade owns 97% of the voting power of HarborTech, but Nolan owns no HarborTech shares directly. A derivative complaint alleges only that because Nolan controls Cascade, he necessarily controls HarborTech as Cascade's downstream subsidiary.

Is Nolan most likely adequately pled to owe fiduciary duties as HarborTech's controller?

Explanation. The majority rejected a categorical transitive theory of control. Even if a person is adequately pled to control a parent, that does not automatically make the person controller of the subsidiary. Where the person has no voting power in the subsidiary, the plaintiff must plead hard control there or actual control over that subsidiary's business and affairs. (Derived from In re Match Group, Inc. Derivative Litigation (n.d.).)