No. The leaders did not act in bad faith. While they maybe didn't handle the sale perfectly and were very rushed, they didn't completely ignore their job. The rules for selling a company don't require leaders to follow a specific script, like holding an auction. Their only real duty is to try to get the best price. To be guilty of 'bad faith,' the leaders would have had to know what their job was and intentionally not do it. Here, they met, hired experts, tried to negotiate, and got a really high price. That's not a 'conscious disregard' of their duties; it's just a flawed process.

No, the Lyondell bosses didn't break the rules. They only have to really try their best to get a good price once they decide to sell the company, not just because someone says they might want to buy it. The bosses did meet a few times, tried to get Blavatnik to pay more, and asked the experts what they thought. In the end, they agreed to sell because it was a really good price. Even if they didn't do everything perfectly, like looking for other buyers, they didn't just ignore their job. The judges said that not being perfect at your job isn't the same as ignoring it completely, which is what you have to do to get in big trouble. The lower court was wrong to focus on little mistakes instead of seeing if the bosses tried at all to do a good job.

—"there is a vast difference between an inadequate or flawed effort to carry out fiduciary duties and a conscious disregard for those duties."

But, if the directors failed to do all that they should have under the circumstances, they breached their duty of care. Only if they knowingly and completely failed to undertake their responsibilities would they breach their duty of loyalty. The trial court approached the record from the wrong perspective. Instead of questioning whether disinterested, independent directors did …

Only if they knowingly and completely failed to undertake their responsibilities would they breach their duty of loyalty

As our Supreme Court explained in Lyondell Chem. Co. v. Ryan, "Directors' decisions must be reasonable, not perfect. In the transactional context,[an] extreme set of facts [is] required to sustain a disloyalty claim premised on the notion that disinterested directors were intentionally disregarding their duties

The duty to seek the best available price applies only when a company embarks on a transaction—on its own initiative or in response to an unsolicited offer—that will result in a change of control

We assume, as we must on summary judgment, that the Lyondell directors... did not even consider conducting a market check before agreeing to the merger. Even so, this record clearly establishes that the Lyondell directors did not breach their duty of loyalty by failing to act in good faith

No court can tell directors exactly how to accomplish th [e] goal [of receiving the best price for their shareholders], because they will be facing a unique combination of circumstances, many of which will be outside their control

—finding stronger challenges to a sale process were insufficient to support claim that directors breached their fiduciary duties by acting in bad faith

The Delaware Supreme Court has held that Revlon's one duty does not arise simply because a company is "in play."

When carrying out their fiduciary duties, Comvest's actions needed only "be reasonable, not perfect," a standard that is easily met here.

No. The directors' actions, while arguably constituting a breach of the duty of care, did not rise to the level of a conscious disregard for their duties required to find a breach of the duty of loyalty through bad faith. Revlon duties do not create a specific checklist of required actions for a board; the only duty is to get the best price for the stockholders. The trial court erred by imposing Revlon duties before the board decided to sell the company and by treating Revlon as a set of specific requirements rather than a guiding principle. Bad faith requires a showing that directors knowingly and completely failed to undertake their responsibilities, which is a higher bar than an inadequate or flawed effort. Here, the directors met, engaged advisors, considered the company's value, and their CEO attempted to negotiate better terms, which demonstrates they did not utterly fail to attempt to obtain the best sale price.

No, the Lyondell directors did not breach their duty of loyalty by failing to act in good faith. The directors' duty under Revlon to seek the best available price applies only when the company embarks on a transaction that will result in a change of control, not simply because the company is 'in play.' Here, the time for action under Revlon did not begin until the directors began negotiating the sale. During that one week period, the directors met several times, attempted to negotiate better terms, evaluated Lyondell's value with the assistance of financial and legal advisors, and ultimately approved the merger because the price was very favorable. Even assuming the directors did absolutely nothing to prepare for the offer and did not consider a market check, there is no evidence they consciously disregarded their duties, as would be required for a breach of the duty of loyalty. At most, this would amount to a breach of the duty of care, which is exculpated. The Court of Chancery erred by focusing on whether there was an imperfect attempt to carry out Revlon duties rather than whether the directors utterly failed to attempt to obtain the best sale price.

Ryan v. Lyondell Chemical Co.

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