Delaware Court Clarifies Judicial Standard of Review for Evaluating Director Actions Affecting a Stockholder Vote
August 22, 2007, Stephen C. Norman, Kevin R. Shannon, Berton W. Ashman, Jr.
On August 14, 2007, the Delaware Court of Chancery issued a decision in Mercier v. Inter-Tel (Delaware), Inc., et al., declining to enjoin the consummation of a merger that had been approved by a majority of Inter-Tel’s stockholders. The decision is significant in that it sets out to reformulate the well-known standard requiring a "compelling justification" for directors to interfere with an exercise of the stockholder franchise, and holds that a board can take action to reschedule a vote so as to provide additional information to stockholders when the vote is imminent and the directors think the stockholders are going to make the wrong decision.