Corporations Don't Independently Owe Fiduciary Duties To Stockholders

On August 7, 2014, Vice Chancellor Glasscock issued a letter opinion in the matter Buttonwood Tree Value Partners, L.P., et al. v. R.L. Polk & Co., Inc., et al., C.A. No. 9250-VCG that is not attention-grabbing because it wrestles with some nuanced topic du jure of Delaware corporate law, but rather because it deals nearly entirely with the rather pedestrian, but not often explicated, principal that a Delaware corporation does not independently owe its stockholders fiduciary duties. Rather, fiduciary duties are owed to the stockholders (and the company) by the directors and officers who are the actual actors on behalf of the company. In Buttonwood, the plaintiffs sued both the members of the board of directors of R.L. Polk & Co., Inc. as well as the company itself claiming that the defendants, in breach of their fiduciary duties, had induced plaintiffs to sell shares of stock for an inadequate price in a corporate self-tender. In Count II of their complaint, the Plaintiffs alleged that the corporation "failed to meet its disclosure obligations under Delaware law; aided and abetted the Individual Defendants' breaches of fiduciary duties; and [was] an indispensable party to the litigation." Mem. Op. at 7. The corporation moved to dismiss Count II; a motion the court granted. The court found that the disclosure claims against the corporation were pled as claims that the company breached a fiduciary duty of disclosure to its stockholders, and that those claims failed because, under settled Delaware law, "fiduciary duties are owed by the director and officers to the corporation and its stockholders." In other words, a corporation does not owe fiduciary duties to its stockholders. Mem. Op. at 10.

The court cited to Arnold v. Soc'y for Sav. Bancorp, Inc., 678 A.2d 533 (Del. 1996); In re Dataproducts Corp. S'holders Litig., 1991 Del. Ch. LEXIS 149 (Del Ch. Aug. 22, 1991); and In re Wayport, Inc. Litig., 76 A.3d 296 (Del Ch. 2013) as authority for this holding. Even the cases cited by the Vice Chancellor treat the principal as well-settled and merely recite the rule with little historical or background analysis. See In re Wayport, 76 A.3d at 322-23 ("Wayport is not liable for breach of fiduciary duty. As a corporate entity, Wayport did not owe fiduciary duties to its stockholders."); In re Dataproducts, 1991 Del Ch. LEXIS at *18 ("The claims stated against Dataproducts are clearly for breach of fiduciary duty. However, the plaintiffs concede that a...