When considering differences between jurisdictions, it can be hard to appreciate when these differences will matter. To help showcase contrasts between jurisdictions, I’ve decided to launch a comparative series taking decisions from one jurisdiction and considering whether a court would come out differently when applying another state’s law.
As Delaware has the most public companies and its courts issue the most widely discussed decisions, I’m launching this series with a recent Chancery decision, Fishel v. Liberty Media.
Notably, this transaction occurred and the litigation was filed before Delaware passed SB21. If the same facts were to recur in Delaware today, the outcome might differ.
Structure – Review Panel
To make this interesting and provide independent views on how the case might come out under Nevada or Texas law, I’ve given the decision to different practicing lawyers and law professors. I’ve asked them to independently review the decision and give a brief explanation for how they think the decision would come out under their state’s law.
To make the lift easy, I also provided them with an early draft of this post and my quick factual summary of the decision. This also saves time as they don’t need to introduce any facts I’ve already summarized in this post, and they can turn to whether it might come out differently elsewhere.
Disclaimer
Quick Factual Summary
Chancellor McCormick issued this decision on April 13, 2026. The stockholder plaintiff challenged a 2024 spin-off of SiriusXM “by its controller Liberty Media Corporation (‘Liberty’).” The transactions created “an independent company with no controlling stockholder” (the “Company”).
Before the spin off, Liberty had a “tracking stock tied to its Old Sirius holdings,” and that “tracking stock traded at a discount to the net asset value of those holdings (the ‘NAV Discount’). The spin-off eliminated the tracking stock and the NAV Discount, ”a unique multi-billion dollar benefit that Liberty alone enjoyed.”
Because of the conflict, the Company’s board created “a two-person special committee to negotiate the transactions” (the “Special Committee”).
The Special Committee negotiated with Liberty over tax sharing agreements and other matters. The Special Committee ultimately negotiated the transaction and recommended it to the full board. The other board members voted in favor of the transaction based on that recommendation.
The plaintiffs challenged the transaction and alleged that “each of the director defendants lacked independence from Liberty or were interested in the transactions.”
Two different groups of director defendants moved to dismiss the complaint—the members of the special committee (“Committee Defendants”) and the directors that were not on the special committee (“Non-Committee Defendants”). Liberty itself did not move to dismiss.
Delaware law provides that plaintiffs must plead non-exculpated claims against each director for a claim to survive under Cornerstone.
With respect to the Committee Defendants, the plaintiffs argued that they had a “controlled mindset” and that they deferred to the controller without any reason. As the plaintiffs could not “plead the extreme set of process flaws” to support this theory, the Chancellor dismissed the claims against the Committee Defendants because pleadings were not enough to infer “that independent directors acted disloyally in connection with the [t]ransactions.”
When it came to the Non-Committee Defendants, the Chancellor took a different line, finding that for directors who are not independent, Cornerstone only requires “that a plaintiff also plead that the director ‘acted to advance the self-interest of an interested party.’” The Chancellor found that simply “[v]oting in favor of a transaction unquestionably advances the transaction.” As the Non-Committee Defendants voted in favor of a transaction that the Committee Defendants negotiated and recommended, the Chancellor denied the Non-Committee Defendants’ motion to dismiss.
Chancellor McCormick then denied a request for a subsequent interlocutory appeal from the Non-Committee Defendants on this issue despite acknowledging there was a split in Court of Chancery authority on whether a plaintiff needed to plead more.
This sets up an interesting situation where the directors that actually negotiated the transaction have had the claims against them dismissed, but the directors that did not negotiate the transaction but simply voted in favor of a Special Committee’s recommendation must defend a transaction they did not negotiate. The sole basis for allowing the clams against the Non-Committee Defendants was that they voted in favor of the transaction as recommended by the Special Committee.
The Business Judgment Rule in Nevada and Texas
Virtually all jurisdictions recognize some form of a business judgment rule. This rule is a judicial presumption that, absent evidence of fraud, illegality, self-dealing, or (in some jurisdictions) gross negligence, courts will not second-guess business decisions made by a board of directors. Typically, the directors must act on an informed basis, in good faith, and in the honest belief that the action taken was in the interests of the corporation. This rule effectively places the burden on a plaintiff to rebut this presumption before any liability can attach to directors.
Delaware’s business judgment rule is found in Delaware case law. Nevada and Texas have each instead codified their rule.
Under the Nevada Revised Statutes (NRS) Sec. 78.138, directors and officers of a Nevada corporation must exercise their respective powers in good faith, on an informed basis and with a view to the interests of the corporation. This statute creates a presumption that directors and officers do act in good faith, on an informed basis, and in the interests of the corporation. Directors and officers are not individually liable to the corporation, its stockholders or its creditors unless this presumption is rebutted and it is proven that the director’s or officer’s act or failure to act constituted a breach of his or her fiduciary duties and such breach involved intentional misconduct, fraud, or a knowing violation of law. Texas has also adopted a statute substantially similar in function to Nevada’s business judgment rule, although the Texas statute differs in structure and operates alongside Texas fiduciary-duty law.
Panel Views from Nevada & Texas
To see how others thought this situation might play out in Nevada or Texas, we have views from Gian Brown at Holland & Hart and Erika Pike Turner at Garman Turner Gordon, both in Las Vegas. We also have Professor Carliss Chatman from Southern Methodist University, Dedman School of Law in Dallas. I’ve set out their views below.
Gian Brown’s quick take:
If Fishel v. Liberty Media had been decided under Nevada law rather than Delaware’s Cornerstone framework, the Non-Committee Defendants’ motion to dismiss likely would have been granted, rather than denied as it was by Chancellor McCormick. The Chancellor held that a vote advancing a conflicted transaction was sufficient to state a non-exculpated claim against non-independent directors (despite the Special Committee’s determination, following arm’s-length negotiation, that the transaction should be recommended to the full board).
Nevada’s statutory framework, by contrast, does not employ the Cornerstone doctrine. NRS 78.140 provides that a contract between a corporation and an officer or director (or entity in which an officer or director has a financial interest) is not void or voidable solely for that reason if one of four safe harbors is satisfied:
(a) the fact of the common directorship, office or financial interest is known to the board or a board committee, and the directors or committee members, other than any common or interested directors or members of the committee, approve or ratify the contract or transaction in good faith;
(b) these facts are known to the stockholders, and stockholders holding a majority of the voting power approve or ratify the contract or transaction in good faith;
(c) these facts are not known to the director or officer at the time the transaction is brought before the board of directors of the corporation for action; or
(d) the contract or transaction is fair to the corporation at the time it is authorized or approved.
Here, a Nevada court is likely to find that the Non-Committee Defendants would be presumed to act in good faith; NRS 78.140(4) expressly provides that interested directors may be counted toward the quorum and vote necessary to authorize, approve, or ratify the transaction, and their participation does not, standing alone, void the transaction. The plaintiff would need to plead facts that the directors engaged in intentional misconduct, fraud, or a knowing violation of law — a significantly higher threshold than the Delaware standard applied in Fishel. In other words, a Nevada court draws a critical distinction: whereas Delaware’s framework focuses on whether a director acted to advance an interested party’s self-interest, Nevada’s statute focuses on whether the director’s own conduct was affirmatively wrongful. Absent additional facts, reliance on the Special Committee’s recommendation, where that reliance satisfies one of NRS 78.140’s safe harbors, would not rise to that level. The practical effect of applying Nevada law to the Fishel facts would be to eliminate the anomaly that Chancellor McCormick’s decision created—where the directors who actually negotiated the transaction (the Committee Defendants) had claims dismissed, while the directors who merely voted in reliance on the Special Committee’s recommendation (the Non-Committee Defendants) were required to defend those claims.
Erika Pike Turner’s quick view on the situation reached a similar conclusion:
Summary:
Analysis under Nevada law:
Under Nevada law, a corporation’s board of directors has “full control over the affairs of the corporation.” Shoen v. SAC Holding Corp., 122 Nev. 621, 632, 137 P.3d 1171, 1178 (Nev. 2006); see NRS 78.120(1) (“[T]he board of directors has full control over the affairs of the corporation”). Part of managing the corporation’s affairs includes “decid[ing] whether to take legal action on the corporation’s behalf.” Id.
As the Nevada Supreme Court explained in Chur v. Eighth Jud. Dist. Ct. in & for Cnty. of Clark, 136 Nev. 68, 71–72, 458 P.3d 336, 339–40 (2020), and as is clear from the plain language of NRS 78.138, NRS 78.138, i.e., the business judgment rule, provides for the sole circumstance under which a director or officer may be held individually liable for damages stemming from the director’s or officer’s conduct in an official capacity. See NRS 78.138(3) (“[a] director or officer is not individually liable for damages as a result of an act or failure to act in his or her capacity as a director or officer except under circumstances described in subsection 7.” (emphasis added.)).
First, “directors and officers, in deciding upon matters of business, are presumed to act in good faith, on an informed basis and with a view to the interests of the corporation.” NRS 78.138(3). Second, the “director’s or officer’s act or failure to act” must not only constitute “a breach of his or her fiduciary duties,” but that breach must further involve “intentional misconduct, fraud or a knowing violation of law.” NRS 78.138(7)(b)(1)-(2). Further, to meet the “intentional” misconduct requirement, it is not enough to intentionally vote or take other action. That is not enough. The shareholder must establish that the director or officer “had knowledge that the alleged conduct was wrongful.” See Chur, at 75, 458 P.3d at 342.
Here, the allegations against the director, if proven, may indeed meet the elements for a standard claim for breach of his/her fiduciary duties under Nevada law. Still, as the complaint is against a defendant director entitled to business judgment rule protections, the complaint cannot move forward without more. See Guzman v. Johnson, 137 Nev. 126, 134, 483 P.3d 531, 538 (2021) (properly dismissing claims against directors who took action sufficient to affect the subject transaction harming minority shareholders for failure to satisfy NRS 78.138(7)).
In the subject Liberty Media case, the director’s vote, even if harmful to the minority shareholder, cannot move forward without also demonstrating intentional misconduct, fraud or knowing violation of law. The complaint is properly dismissed for the failure to state a claim rebutting Nevada’s business judgment rule.
Professor Chatman focused on Texas law:
Texas law would likely analyze the challenged transaction through a series of statutory safe harbors that are substantially more protective of directors than Delaware’s fiduciary-duty framework.
Under the Texas Business Organizations Code, there is a strong presumption that directors and officers act in good faith, on an informed basis, in the best interests of the corporation, and in compliance with law (Tex. Bus. Orgs. Code § 21.419). Although Texas fiduciary-duty claims remain available, a plaintiff seeking to overcome that presumption must plead particularized facts showing fraud, intentional misconduct, an ultra vires act, or a knowing violation of law (Tex. Bus. Orgs. Code § 21.419).
Texas also provides statutory protections for transactions involving controlling shareholders and other interested parties when they are reviewed and approved by an independent committee of disinterested directors, approved by disinterested shareholders, or otherwise satisfy statutory fairness requirements (Tex. Bus. Orgs. Code §§ 21.416, 21.4161, 21.418). The statute further authorizes corporations to establish independent special committees and permits corporations to petition for advance judicial determinations regarding committee independence through the Texas Business Court under special circumstances (Tex. Bus. Orgs. Code § 21.4161). Texas has implemented a procedural innovation that allows corporations to reduce uncertainty before a challenged transaction closes.
Unlike Delaware’s emphasis on post hoc judicial review under doctrines such as entire fairness and MFW, Texas relies more heavily on ex ante procedural protections and statutory presumptions (Tex. Bus. Orgs. Code §§ 21.416–21.419). As a result, once an independent special committee approves a controller transaction, directors who are not themselves interested in the transaction would generally face a significantly lower risk of liability absent particularized allegations of intentional wrongdoing or knowing legal violations (Tex. Bus. Orgs. Code §§ 21.418, 21.419).
The result in Fishel arguably creates a structural disincentive for directors to participate in the ultimate approval of transactions negotiated by independent committees. Texas appears to move in the opposite direction, encouraging reliance on properly constituted committees by providing statutory presumptions and procedural protections for directors who follow those processes.
Conclusion – What Happens in Delaware Stays in Delaware?
This comparative exercise helps to illustrate differences between the jurisdictions. Nevada and Texas both have statutory frameworks making it unlikely that a case like this would continue against directors here past a motion to dismiss. Delaware might also reach the same result for transactions occurring today after its legislative reforms last year.
This also provides an example of how Delaware’s Court of Chancery sometimes splits on these types of issues. Chancellor McCormick’s order denying the Non-Committee Defendants’ motion for an interlocutory appeal recognized that “the Non-Committee Defendants are correct to say that there is divergence among trial court decisions on what a plaintiff must plead to satisfy the action element of Cornerstone.”
For now, form may have triumphed over substance with Delaware’s equitable discretion balancing in favor of possible liability for the Non-Committee Defendants. Another view may be that the final approving vote was real substance, even though it simply approved the deal negotiated by the Committee Defendants. The denial order appears to acknowledge that if the process had been set up slightly differently, the Non-Committee Defendants might have escaped liability under Delaware law. In essence, if the Non-Committee Defendants had simply voted to authorize the Special Committee to handle the entirety of the matter and never voted in favor of the transaction, a different result might have occurred before Chancellor McCormick. Her order noted “Delaware law encourages conflicted directors to abstain from board processes—including the ultimate board vote—to avoid liability.” Here, a board process and participating in the ultimate board vote appears to have created liability for the Non-Committee Defendants.
Of course, there are costs to conflict-mitigation measures as well. When directors isolate themselves from a process for fear of personal liability, a corporation loses whatever benefit their judgment and involvement might have generated. Had the Non-Committee Defendants isolated themselves from the transaction entirely here and refrained from casting any votes to approve the Committee Defendants’ recommendation, it might have allowed them to avoid liability.
The Delaware Supreme Court also recently rejected the Non-Committee Defendants’ request for an interlocutory appeal. It also noted the underlying divergence within the Court of Chancery, but in an exercise of “discretion” and “giving great weight to the trial court’s view,” it concluded that “the interlocutory appeal should be refused.” Dismissing the Non-Committee Defendants would not have ended the case because Liberty itself did not move to dismiss and the case will continue.
Still, keeping the Non-Committee Defendants in the action maintains their exposure to possible personal liability. It may be a factor they consider when deciding whether or on what terms to settle this action.
For now, how fact patterns similar to this will go may depend on which jurist directors draw in Delaware and how they apply SB21. In Nevada or Texas, statutory protections may lead to a different result.