Delaware Supreme Court Clears the Path for Conflicted Transactions
In a significant development for corporate practitioners, the Delaware Supreme Court issued a unanimous decision on February 27, 2026, that brings long-awaited clarity to one of the more complex areas of deal-making: transactions involving conflicted fiduciaries, including controlling stockholders. In Rutledge v. Clearway Energy Group LLC, the court upheld the constitutionality of Senate Bill 21 (SB 21), a set of amendments to the Delaware General Corporation Law enacted in March 2025. The ruling represents a strong endorsement of the new statutory framework and gives boards, deal lawyers, and corporate advisers increased certainty, while still underscoring the importance of careful compliance with the applicable requirements.
For decades, Delaware courts developed a complex and, at times, unpredictable body of case law governing conflicted transactions. Uncertainty often arose around when a stockholder would be deemed a controlling stockholder, when the demanding “entire fairness” standard of review would apply, and whether dual procedural protections, such as both independent committee approval and a majority-of-the-minority vote, were required under prior case law. This uncertainty frequently resulted in prolonged litigation, inconsistent outcomes, and heightened transaction risk. SB 21 and the applicable changes to Rule 144 were designed to simplify this landscape by establishing clear statutory safe harbors, defining key concepts such as “controlling stockholder” and “control group” with greater precision, and clarifying standards for director independence and disinterestedness. The statute also applies broadly, including retroactively to most pre-enactment transactions. Where its conditions are satisfied, the amended rules limit exposure to damages and certain equitable remedies, providing a more predictable path for structuring conflicted deals.
The SB 21 legislation was quickly challenged on constitutional grounds, with opponents arguing that it improperly curtailed the historic equitable jurisdiction of the Court of Chancery and violated due process by applying retroactively to extinguish existing claims. The Delaware Supreme Court rejected both arguments. It emphasized that the Court of Chancery retains full authority to hear fiduciary duty claims and to determine whether the statutory safe harbor conditions have been satisfied; the statute limits remedies in qualifying cases but does not eliminate judicial oversight. On retroactivity, the court concluded that plaintiffs had, at most, an expectation that existing law would remain unchanged rather than a vested property right. In any event, the legislature’s clear intent and legitimate policy objectives were sufficient to satisfy constitutional requirements.
From a practical perspective, the decision has meaningful implications for transaction planning. In most cases involving conflicted fiduciaries—other than certain controller take-private transactions—companies can obtain safe harbor protection by securing approval from either a fully informed, disinterested committee of directors or a fully informed majority of disinterested stockholders. In many circumstances, satisfying either path is sufficient, which simplifies structuring compared to prior doctrine. At the same time, the availability of safe harbor protection depends on strict adherence to the statute’s requirements. Boards and their advisers should therefore continue to focus on carefully establishing and documenting director independence and disinterestedness, ensuring full disclosure of all material information, and conducting a deliberative, good-faith approval process. Transactions that fall short of these standards create risks on court review.
More broadly, the decision reinforces Delaware’s longstanding strength as a responsive and adaptive corporate law jurisdiction. The court’s deference to the legislature highlights the General Assembly’s authority to refine the Delaware General Corporation Law in response to evolving market needs, particularly where increased clarity and predictability are at stake. At the same time, as with any new statutory regime, the contours of SB 21 (and Rule 144) will continue to develop through judicial interpretation, and careful attention to process will remain essential.
The Clearway decision ultimately enhances predictability in Delaware corporate law. It provides boards and dealmakers with a clearer framework for navigating conflicted transactions and, when its requirements are satisfied, a more reliable path to reducing litigation risk.
This article is available in the Jenner & Block Japan Newsletter. / この記事はJenner & Blockニュースレターに掲載されています。
The SB 21 legislation was quickly challenged on constitutional grounds, with opponents arguing that it improperly curtailed the historic equitable jurisdiction of the Court of Chancery and violated due process by applying retroactively to extinguish existing claims. The Delaware Supreme Court rejected both arguments. It emphasized that the Court of Chancery retains full authority to hear fiduciary duty claims and to determine whether the statutory safe harbor conditions have been satisfied; the statute limits remedies in qualifying cases but does not eliminate judicial oversight. On retroactivity, the court concluded that plaintiffs had, at most, an expectation that existing law would remain unchanged rather than a vested property right. In any event, the legislature’s clear intent and legitimate policy objectives were sufficient to satisfy constitutional requirements.
From a practical perspective, the decision has meaningful implications for transaction planning. In most cases involving conflicted fiduciaries—other than certain controller take-private transactions—companies can obtain safe harbor protection by securing approval from either a fully informed, disinterested committee of directors or a fully informed majority of disinterested stockholders. In many circumstances, satisfying either path is sufficient, which simplifies structuring compared to prior doctrine. At the same time, the availability of safe harbor protection depends on strict adherence to the statute’s requirements. Boards and their advisers should therefore continue to focus on carefully establishing and documenting director independence and disinterestedness, ensuring full disclosure of all material information, and conducting a deliberative, good-faith approval process. Transactions that fall short of these standards create risks on court review.
More broadly, the decision reinforces Delaware’s longstanding strength as a responsive and adaptive corporate law jurisdiction. The court’s deference to the legislature highlights the General Assembly’s authority to refine the Delaware General Corporation Law in response to evolving market needs, particularly where increased clarity and predictability are at stake. At the same time, as with any new statutory regime, the contours of SB 21 (and Rule 144) will continue to develop through judicial interpretation, and careful attention to process will remain essential.
The Clearway decision ultimately enhances predictability in Delaware corporate law. It provides boards and dealmakers with a clearer framework for navigating conflicted transactions and, when its requirements are satisfied, a more reliable path to reducing litigation risk.
This article is available in the Jenner & Block Japan Newsletter. / この記事はJenner & Blockニュースレターに掲載されています。
Related Lawyers
Related Articles
Related Capabilities
© 2026 Jenner & Block LLP. Attorney Advertising. Jenner & Block LLP is an Illinois Limited Liability Partnership including professional corporations. This publication, presentation, or event is not intended to provide legal advice but to provide information on legal matters and/or firm news of interest to our clients and colleagues. Readers or attendees should seek specific legal advice before taking any action with respect to matters mentioned in this publication or at this event. The attorney responsible for this communication is Brent E. Kidwell, Jenner & Block LLP, 353 N. Clark Street, Chicago, IL 60654-3456. Prior results do not guarantee a similar outcome. Jenner & Block London LLP, an affiliate of Jenner & Block LLP, is a limited liability partnership established under the laws of the State of Delaware, USA and is authorised and regulated by the Solicitors Regulation Authority with SRA number 615729. Information regarding the data we collect and the rights you have over your data can be found in our Privacy Notice. For further inquiries, please contact dataprotection@jenner.com.
In a significant development for corporate practitioners, the Delaware Supreme Court issued a unanimous decision on February 27, 2026, that brings long-awaited clarity to one of the more complex areas of deal-making: transactions involving conflicted fiduciaries, including controlling stockholders. In Rutledge v. Clearway Energy Group LLC, the court upheld the constitutionality of Senate Bill 21 (SB 21), a set of amendments to the Delaware General Corporation Law enacted in March 2025. The ruling represents a strong endorsement of the new statutory framework and gives boards, deal lawyers, and corporate advisers increased certainty, while still underscoring the importance of careful compliance with the applicable requirements.
For decades, Delaware courts developed a complex and, at times, unpredictable body of case law governing conflicted transactions. Uncertainty often arose around when a stockholder would be deemed a controlling stockholder, when the demanding “entire fairness” standard of review would apply, and whether dual procedural protections, such as both independent committee approval and a majority-of-the-minority vote, were required under prior case law. This uncertainty frequently resulted in prolonged litigation, inconsistent outcomes, and heightened transaction risk. SB 21 and the applicable changes to Rule 144 were designed to simplify this landscape by establishing clear statutory safe harbors, defining key concepts such as “controlling stockholder” and “control group” with greater precision, and clarifying standards for director independence and disinterestedness. The statute also applies broadly, including retroactively to most pre-enactment transactions. Where its conditions are satisfied, the amended rules limit exposure to damages and certain equitable remedies, providing a more predictable path for structuring conflicted deals.
The SB 21 legislation was quickly challenged on constitutional grounds, with opponents arguing that it improperly curtailed the historic equitable jurisdiction of the Court of Chancery and violated due process by applying retroactively to extinguish existing claims. The Delaware Supreme Court rejected both arguments. It emphasized that the Court of Chancery retains full authority to hear fiduciary duty claims and to determine whether the statutory safe harbor conditions have been satisfied; the statute limits remedies in qualifying cases but does not eliminate judicial oversight. On retroactivity, the court concluded that plaintiffs had, at most, an expectation that existing law would remain unchanged rather than a vested property right. In any event, the legislature’s clear intent and legitimate policy objectives were sufficient to satisfy constitutional requirements.
From a practical perspective, the decision has meaningful implications for transaction planning. In most cases involving conflicted fiduciaries—other than certain controller take-private transactions—companies can obtain safe harbor protection by securing approval from either a fully informed, disinterested committee of directors or a fully informed majority of disinterested stockholders. In many circumstances, satisfying either path is sufficient, which simplifies structuring compared to prior doctrine. At the same time, the availability of safe harbor protection depends on strict adherence to the statute’s requirements. Boards and their advisers should therefore continue to focus on carefully establishing and documenting director independence and disinterestedness, ensuring full disclosure of all material information, and conducting a deliberative, good-faith approval process. Transactions that fall short of these standards create risks on court review.
More broadly, the decision reinforces Delaware’s longstanding strength as a responsive and adaptive corporate law jurisdiction. The court’s deference to the legislature highlights the General Assembly’s authority to refine the Delaware General Corporation Law in response to evolving market needs, particularly where increased clarity and predictability are at stake. At the same time, as with any new statutory regime, the contours of SB 21 (and Rule 144) will continue to develop through judicial interpretation, and careful attention to process will remain essential.
The Clearway decision ultimately enhances predictability in Delaware corporate law. It provides boards and dealmakers with a clearer framework for navigating conflicted transactions and, when its requirements are satisfied, a more reliable path to reducing litigation risk.
This article is available in the Jenner & Block Japan Newsletter. / この記事はJenner & Blockニュースレターに掲載されています。
The SB 21 legislation was quickly challenged on constitutional grounds, with opponents arguing that it improperly curtailed the historic equitable jurisdiction of the Court of Chancery and violated due process by applying retroactively to extinguish existing claims. The Delaware Supreme Court rejected both arguments. It emphasized that the Court of Chancery retains full authority to hear fiduciary duty claims and to determine whether the statutory safe harbor conditions have been satisfied; the statute limits remedies in qualifying cases but does not eliminate judicial oversight. On retroactivity, the court concluded that plaintiffs had, at most, an expectation that existing law would remain unchanged rather than a vested property right. In any event, the legislature’s clear intent and legitimate policy objectives were sufficient to satisfy constitutional requirements.
From a practical perspective, the decision has meaningful implications for transaction planning. In most cases involving conflicted fiduciaries—other than certain controller take-private transactions—companies can obtain safe harbor protection by securing approval from either a fully informed, disinterested committee of directors or a fully informed majority of disinterested stockholders. In many circumstances, satisfying either path is sufficient, which simplifies structuring compared to prior doctrine. At the same time, the availability of safe harbor protection depends on strict adherence to the statute’s requirements. Boards and their advisers should therefore continue to focus on carefully establishing and documenting director independence and disinterestedness, ensuring full disclosure of all material information, and conducting a deliberative, good-faith approval process. Transactions that fall short of these standards create risks on court review.
More broadly, the decision reinforces Delaware’s longstanding strength as a responsive and adaptive corporate law jurisdiction. The court’s deference to the legislature highlights the General Assembly’s authority to refine the Delaware General Corporation Law in response to evolving market needs, particularly where increased clarity and predictability are at stake. At the same time, as with any new statutory regime, the contours of SB 21 (and Rule 144) will continue to develop through judicial interpretation, and careful attention to process will remain essential.
The Clearway decision ultimately enhances predictability in Delaware corporate law. It provides boards and dealmakers with a clearer framework for navigating conflicted transactions and, when its requirements are satisfied, a more reliable path to reducing litigation risk.
This article is available in the Jenner & Block Japan Newsletter. / この記事はJenner & Blockニュースレターに掲載されています。
Related Lawyers
Related Articles
Related Capabilities
© 2026 Jenner & Block LLP. Attorney Advertising. Jenner & Block LLP is an Illinois Limited Liability Partnership including professional corporations. This publication, presentation, or event is not intended to provide legal advice but to provide information on legal matters and/or firm news of interest to our clients and colleagues. Readers or attendees should seek specific legal advice before taking any action with respect to matters mentioned in this publication or at this event. The attorney responsible for this communication is Brent E. Kidwell, Jenner & Block LLP, 353 N. Clark Street, Chicago, IL 60654-3456. Prior results do not guarantee a similar outcome. Jenner & Block London LLP, an affiliate of Jenner & Block LLP, is a limited liability partnership established under the laws of the State of Delaware, USA and is authorised and regulated by the Solicitors Regulation Authority with SRA number 615729. Information regarding the data we collect and the rights you have over your data can be found in our Privacy Notice. For further inquiries, please contact dataprotection@jenner.com.
News and Insights
Event
Partner Terri Mascherin to Speak at Illinois State Bar Association Seminar on Negotiation Ethics
On November 11, Partner Terri Mascherin will join a faculty panel for the Illinois State Bar Association (ISBA) continuing legal education (CLE) seminar “Negotiation Ethics: Winning Without Selling Your Soul.”
November 11, 2026
Publications
Before You Sign: Key Contract Provisions for Tribes Considering Data Center Developments, ICT
Grace Signorelli-Cassady of Jenner & Block’s Native American Law Practice authored an opinion piece for ICT examining key contract provisions tribes should consider when approached about data center developments.
November 5, 2026
Publications
Jon Skladany and Kayvan Sadeghi Quoted on Fintech Investigation Readiness in Law360
Jenner & Block Partners Jon Skladany and Kayvan Sadeghi were quoted in a Law360 article examining how crypto and fintech companies are preparing for heightened congressional oversight following the 2026 midterm elections.
November 5, 2026
Publications
Partner Emily Loeb Discusses What the 2026 Midterms Mean for Congressional Oversight in the Financial Times
Partner Emily Loeb, co-chair of Jenner & Block’s Congressional Investigations Practice, was quoted in the Financial Times in an article examining how companies are preparing for congressional oversight as the new Congress takes shape following the 2026 midterm elections.
November 4, 2026
Recognition
Three Jenner & Block Partners Named 2026 Law360 MVPs
Law360 named Jenner & Block Partners Adam Unikowsky, Lindsay Harrison, and Rebekah Goodheart to its 2026 MVPs list.
November 3, 2026
Publications
Congressional Oversight after Trump v. United States, Lawfare
Special Counsel David Manners-Weber authored an article for Lawfare examining how the Supreme Court’s 2024 decision in Trump v. United States may weaken Congress’s ability to investigate the executive branch.
November 2, 2026
Publications
In Politico, Partner Emily Loeb Discusses How Companies Are Preparing for Congressional Oversight
Partner Emily Loeb was spoke with Politico for a story examining how companies are preparing for heightened congressional oversight, particularly those that could become the focus of investigations centered on affordability and accountability.
October 29, 2026