Beyond Approval: The Role of the Delaware Court of Chancery in Settlements of Fiduciary Litigation

Gilda Sophie Prestipino (Stanford Law School)

Abstract

The Delaware Court of Chancery wields significant influence in resolving fiduciary disputes, yet its pivotal role in the settlement process remains underexplored. While existing scholarship predominantly views the Court as a passive arbiter merely endorsing party-crafted agreements, this article uncovers a more dynamic reality. By conducting a comprehensive analysis of every settlement in fiduciary duty lawsuits filed since 2013, along with over 100 bench ruling transcripts, this study reveals the Court’s active engagement in shaping settlement outcomes and addressing
systemic and case-specific issues.

The analysis highlights the Court’s use of nuanced oversight to balance competing policy goals, including safeguarding shareholder interests, promoting fairness, and fostering judicial economy. Transcripts of settlement hearings, rarely cited in academic literature, offer unparalleled insights
into the Court’s reasoning and interventions. These include recalibrating attorneys’ fees, refining release clauses, and ensuring settlements meaningfully benefit shareholders. This proactive role
ensures that the settlement process remains equitable and aligned with “Delaware’s credibility as an honest broker in the legal realm.”

By reframing the narrative around fiduciary litigation, this article highlights the Court’s critical function as an effective gatekeeper. Its interventions extend beyond mere settlement approval, reflecting a commitment to maintaining the integrity of representative litigation while adapting to evolving challenges in corporate governance. Through this comprehensive examination, the
article contributes new insights into how Delaware’s legal framework continues to shape corporate accountability and uphold equitable principles.

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