On June 17, 2025, the Delaware Supreme Court (Court), sitting en banc, reversed a Court of Chancery ruling that had held a bidder liable for aiding and abetting fiduciary breaches of the target's management. The Court's ruling confirmed again that bidders should not be subject to such liability unless stringent standards have been met. In In re Columbia Pipeline Group, Inc. Merger Litigation,1 the Court held that TC Energy Corp. (TransCanada), the acquirer of Columbia Pipeline Group, was not liable for aiding and abetting fiduciary breaches by Columbia's officers. The Court reiterated the standard it had recently set in In re Mindbody, Inc., Stockholder Litigation,2 issued subsequent to the Chancery Court's ruling here, requiring that the bidder act with knowledge that the primary party's conduct constituted a breach of fiduciary duty and that the bidder's own conduct was legally improper and that it substantially assisted in the commission of the breach. The Court conducted an independent review of the record, holding that the Mindbody standard was not met.
Facts of the case
In brief, the plaintiffs, Columbia's stockholders, sued Columbia's CEO and board chairman, Robert Skaggs Jr., and CFO, Stephen Smith, for breaches of the duty of loyalty and disclosure and TransCanada for aiding and abetting those breaches in connection with an all-cash merger with TransCanada in early 2016.
The plaintiffs alleged that Skaggs and Smith breached their duty of loyalty because both were motivated by self-interest related to their change-in-control agreements with Columbia and their desire to retire in 2016 in order to receive those benefits. They also alleged that Skaggs and Smith and Columbia's board of directors breached their duty of disclosure by issuing proxy statements that contained material misrepresentations by not setting out the full extent of the officials' involvement in the negotiations.
Prior to trial, Skaggs and Smith had settled for $79 million. At that point, TransCanada, the acquirer, became the sole remaining defendant with respect to the aiding and abetting claim. At trial, plaintiffs needed to prove both the underlying breaches of fiduciary duties by the primary parties — Skaggs and Smith — and TransCanada's aiding and abetting of those breaches. Vice Chancellor J. Travis Laster conducted a five-day trial, after which he concluded that Skaggs' and Smith's conflicts of interest led them to "take steps that fell outside the range of reasonableness."3 Additionally, the vice chancellor held that Skaggs and Smith breached their duty of disclosure by issuing a misleading proxy statement that omitted the "full panoply" of their interactions with TransCanada during the transaction process.
Regarding TransCanada, the vice chancellor concluded that TransCanada had "constructive knowledge" of and culpably participated in Skaggs' and Smith's fiduciary duty breaches during the sale process. He determined that TransCanada had reason to know that Skaggs and Smith had a conflict of interest and it exploited that interest.4 As to breach of the duty of disclosure, the vice chancellor ruled that TransCanada had the right to review the proxy statement and an obligation to inform Columbia of any material omission, and yet it did not correct the proxy statement's omissions in the description of the sales process. The Court of Chancery assessed damages at $1 per share for the sale-process claim and $0.50 per share for the disclosure claim.5
The Supreme Court's decision
Writing for a unanimous Delaware Supreme Court, Justice Gary F. Traynor focused on whether TransCanada had engaged in "knowing participation" in Skaggs' and Smith's breaches. He first confirmed the standard on the "knowing" element, as outlined in Mindbody: A plaintiff must prove two types of knowledge — that the buyer knew of the seller's breach and that the buyer knew that its own conduct regarding the breach was improper. Thus, according to the Supreme Court, the Chancery Court's finding of "constructive knowledge" of the seller's breach is not enough; there must be "actual knowledge."
In this regard, Justice Traynor concluded that TransCanada did not have actual knowledge of Skaggs' and Smith's conflicts of interest (i.e., it did not actually know of their plans to retire soon and thus reap the rewards of their change-in-control benefits). Further, the Court determined that Skaggs and Smith sent ambiguous signals at best — while they were eager to get a deal done, they often pushed back at TransCanada's premium offerings. Thus, the Court held that a finding that such "subtle and unintentional signals should arouse suspicion — much less constitute clear and direct knowledge" of a breach — would not be justified.6 And, absent actual knowledge of Skaggs' and Smith's breaches, the Court concluded that TransCanada could not know that its own conduct was impermissible.
Regarding the second prong of "knowing participation" — actual and substantial participation — the Court again reiterated the standard outlined in Mindbody. As the Court emphasized in Mindbody, the participation element hinges on whether the defendant "substantially assisted in the commission of the breach." On this element, the Court concluded that the record did not show that TransCanada knew it was substantially assisting the Columbia negotiators' breach of their fiduciary duties.
On the disclosure claim, the Court again followed the holding in Mindbody. In that case, the buyer took no affirmative action to assist the seller's breach, even though the buyer, as is typical, had an affirmative contractual obligation to notify the seller of factual deficiencies in a proxy statement. Despite not notifying the seller of factual deficiencies, the Court in Mindbody held that the buyer was not liable for aiding and abetting. Here, the Court determined that TransCanada was similarly situated.
Like the Mindbody buyer, TransCanada did not propose any of the statements in the proxy statement that the Court of Chancery held were misleading. Nor did TransCanada suggest omitting certain material. In an unsuccessful attempt to distinguish Mindbody, plaintiffs argued that TransCanada had an independent obligation to provide all information required so that the proxy statement would not be misleading. The Court disagreed, concluding that both the obligation here and the one in Mindbody required the buyer only to review the proxy statement and to notify the seller if it discovered any information needed to ensure the statement was not misleading.
Key takeaways
As we previously wrote in our alerts on the Mindbody decision,7 these cases are a reminder that a board must oversee a careful and diligent process that demonstrates the full board's good faith. The proxy needs to accurately describe any relevant contacts, including events that may seem less important in isolation but whose omission may render other statements misleading. To the extent that management has conflicts, those conflicts should be openly identified and appropriately dealt with.
Regarding a buyer's potential aiding and abetting liability, while the Court reversed the Court of Chancery's liability holding and reiterated the high bar set by Mindbody, a bidder, if successful, will own the target, who will in turn likely have indemnity obligations to its former officers and directors. Thus, the bidder still has a plain interest in ensuring that the target board's process is reasonable, diligent and accurately described.
Footnotes
1 No. 281, 2024, 2025 WL 1693491 (Del. June 17, 2025) ("Columbia Pipeline III").
2 332 A.3d 349 (Del. 2024).
3 In re Columbia Pipeline Grp., Inc. Merger Litig., 299 A.3d 393, 461 (Del. Ch. 2023) ("Columbia Pipeline I").
4 See id. at 480.
5 Following the court's damages award, TransCanada,
under the Delaware Uniform Contribution Among Tortfeasors Act
(DUCATA), sought a credit against the damages award based on the
settlement that Skaggs and Smith had reached. The court assessed
damages of $398,436,581 for the aiding and abetting the breaches of
the duty of loyalty (Sale-Process Claim) and $199,218,290.50 for
aiding and abetting the breach of the duty of disclosure
(Disclosure Claim). See In re Columbia Pipeline Grp.,
Inc. Merger Litig., 316 A.3d 359, 366 (Del. Ch. May 15, 2024)
("Columbia Pipeline II"). The awards were
noncumulative, meaning that TransCanada was only liable for the
larger amount. See id.
Under DUCATA, a joint tortfeasor is entitled to a credit against
its liability equal to the greater of the settlement amount or the
proportionate share of damages for which the other tortfeasors were
responsible. In his posttrial findings, the vice chancellor
conducted an analysis to determine how culpable each party was for
each wrongdoing and assessed a percentage to determine liability.
He concluded that TransCanada and the officers were equally
responsible for the Sale-Process Claim and thus held that
TransCanada could receive a credit, under DUCATA, of 50% of the
Sale-Process Claim damages, or $199,218,290.50. This number was
greater than the $79 million settlement reached by the joint
tortfeasors — Skaggs and Smith. Therefore, TransCanada
received the larger credit of $199,218,290.50. Subtracting its
credit, TransCanada was then liable for $199,218,290.50. See
id. at 366.
Additionally, regarding the Disclosure Claim damages, the Chancery
Court concluded that TransCanada was 42% culpable and the officers
were 58% culpable. Thus, it held that TransCanada could receive a
credit, under DUCATA, for the officers' share of responsibility
— 58% of the $199,218,290.50 award, or $115,546,608. Again,
this number was greater than the $79 million that the officers
settled for. Therefore, TransCanada received this larger credit.
Subtracting the credit of $115,546,608 from the total award, the
Court calculated that TransCanada was liable for $83,671,682 for
the Disclosure Claim. See id. at 367. Finally, because the
two claims were noncumulative, TransCanada was only liable for the
larger amount, which, after applying the credits, was the
Sale-Process Claim of $199,218,290.50. See id.
6 Columbia Pipeline III, 2025 WL 1693491, at *26.
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