McMillan v. Intercargo Corporation

Delaware Court of Chancery · 2000 · Corporations

768 A.2d 492 (2000)

Updated August 22, 2026

CorporationsRevlonduty of loyaltyduty of care102(b)(7)exculpatory charter provisionjudgment on the pleadingscompleted merger

Facts

Intercargo's eight-member board decided to pursue strategic alternatives and engaged Fox-Pitt, Kelton to look for a buyer, evaluating 27 prospects, entering confidentiality agreements with 11, and providing confidential information to all 11. XL ultimately agreed to acquire Intercargo for $12 per share in a completed merger approved by stockholders. The complaint conceded that five directors were disinterested and independent, while alleging only that CEO Galanski would be hired by XL, Sklar was a partner at Intercargo's outside law firm, and Sanborn was an Orion designee who recused himself from one strategic-alternatives discussion. Intercargo's charter contained a Section 102(b)(7) provision exculpating directors from monetary liability for duty-of-care violations.

Issue

After the merger had closed and rescission was unavailable, did the amended complaint plead non-exculpated claims for damages by alleging facts supporting a reasonable inference that the directors acted disloyally, in bad faith, or intentionally in breaching their Revlon duties or disclosure duties? More specifically, did the allegations about the sale process, the deal protections, and the three allegedly conflicted directors suffice to state a loyalty-based claim despite the exculpatory charter provision?

Rule

When a completed merger leaves plaintiffs with only a damages remedy and the corporation's charter exculpates directors under 8 Del. C. § 102(b)(7) for duty-of-care violations, a complaint survives only if it pleads well-supported facts supporting a reasonable inference of non-exculpated conduct such as bad faith, self-interest, or other disloyal intentional misconduct. In a Revlon context, directors must seek the highest value reasonably attainable, but a plaintiff seeking damages must still plead loyalty-level culpability, not merely an unreasonable or imperfect process. The mere presence of allegedly interested directors is insufficient where a disinterested majority approved the transaction and the complaint does not plead domination, control, deception, or improper influence over the board.

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

Harbor Peak Logistics, a Delaware corporation based in Seattle, agreed to be acquired by a third-party buyer after a sale process. After the stockholder vote and closing, stockholders sued only for money damages, alleging the board should have run a broader market check; Harbor Peak's charter contains a Section 102(b)(7) provision exculpating directors from monetary liability for duty-of-care breaches.

Which is the strongest argument for dismissing the complaint at the pleading stage?

Explanation. After a completed merger, rescission is generally impracticable, so plaintiffs are left with a damages claim. If the charter contains a Section 102(b)(7) provision, damages claims based only on due care are barred. The complaint therefore survives only if it pleads facts supporting a reasonable inference of non-exculpated conduct such as bad faith, self-interest, or other intentional disloyal misconduct. A claim that the board merely should have run a better process sounds in due care, not loyalty.