Background
Via Renewables stockholder Michael Stutzman challenged the company’s October 2024 acquisition by founder and controller William K. Maxwell III. Maxwell first proposed taking Via private in September 2023 for $10.50 per share, without MFW’s dual protections. After withdrawing that proposal, he made a November 2023 offer of $9 per share that said he anticipated a special committee and intended to condition a merger on a majority-of-the-minority vote.
The special committee sought clarification, but Maxwell did not promptly confirm the protections, and his initial merger-agreement draft omitted the majority-of-the-minority condition. The parties nonetheless negotiated price and other deal terms before Maxwell sent a revised agreement including that condition on December 15. The complaint also alleged that CFO Miguel Barajas prepared lower projections shortly before the committee approved Maxwell’s $11-per-share deal, directed the committee’s financial advisor to use them without committee authorization, and participated in a proxy that omitted the timing of Maxwell’s commitment and the revised projections.
The Court’s Holding
Chancellor Kathaleen St. J. McCormick denied the motions to dismiss. The court held it was reasonably conceivable that Maxwell did not establish MFW’s special-committee and majority-of-the-minority protections before substantive economic negotiations began. MFW therefore did not warrant business-judgment review at the pleading stage, leaving the controller fiduciary-duty claim subject to further proceedings.
The court also denied dismissal of the claims against the special-committee directors because their arguments relied exclusively on MFW; they did not separately invoke a Cornerstone-based exculpation defense. Finally, the court held that the allegations supported a reasonable inference that Barajas acted with at least reckless indifference by lowering projections favorable to Maxwell’s bid and directing their use in the fairness opinion without special-committee authorization.
Key Takeaways
- MFW protections must be in place before substantive economic negotiations, not added after price and deal terms are being negotiated.
- A controller’s equivocal language and delayed agreement to a majority-of-the-minority condition can defeat MFW review at the pleading stage.
- Corporate officers may face non-exculpated duty-of-care liability for allegedly reckless conduct in preparing and deploying merger projections.
Why It Matters
The order reinforces that MFW is a process safe harbor requiring timely, unequivocal self-disabling by the controller. A controller cannot obtain business-judgment review merely by accepting dual protections after negotiations have moved beyond the transaction’s germination stage.
It also highlights the litigation risk posed by management projections. Where an officer revises projections near a deal vote and directs their use in a fairness analysis without apparent committee approval, the officer may face a viable duty-of-care claim.