• Delaware Court Of Chancery Dismisses Breach Of Fiduciary Duty Claims Related To Abandoned IPO and Subsequent Settlement Proceedings

  07/07/2026

  On June 26, 2026, Chancellor Kathaleen St. J. McCormick of the Delaware Court of Chancery dismissed derivative claims against certain directors and stockholders on behalf of a biotech company (the “Company”) that had resolved litigation arising out of an abandoned IPO.  David Rostov v. Alcon Research, LLC, et al., C.A. No. 2025-0648 (Del. Ch. June 26, 2026).  The Court held the plaintiff stockholder failed to plead a breach of fiduciary duty against any defendant in connection with either the IPO process or the subsequent settlement.

  This case was the fourth in a series of lawsuits brought after the Company decided not to pursue an IPO.  One prior case (“Aurion II”) asserted direct and derivative claims for breaches of fiduciary duty against the controlling stockholder, the directors, and the former board chair, who had resigned.  The Aurion II plaintiff settled the case after the controlling stockholder purchased that derivative plaintiff’s stock.  The court approved the settlement over several objections and dismissed the derivative claims without prejudice.  Plaintiff here, another stockholder who supported the IPO and objected to the Aurion II settlement, then sued to void the settlement-related stock sale and asserted myriad breach of fiduciary duty claims for damages in connection with both the abandonment of the IPO and the Aurion II settlement.

  The Court dismissed all of the claims.  With respect to the IPO, the Court found that the complaint did not adequately plead a claim because (i) the IPO was postponed by a concededly disinterested special committee before the challenged conduct occurred, and (ii) plaintiff failed to allege facts against each director that would support an inference of bad faith sufficient to overcome the exculpatory provision in the Company’s charter.  Highlighting that, under the business judgment rule, “directors are presumed to act in good faith,” the Court also declined to credit plaintiff’s assumption that an IPO was the best path for the Company, because “a stockholder’s disagreement with a Board’s decision does not, standing alone, rebut that presumption.”  The Court also rejected plaintiff’s breach of loyalty claim against the former board chair, who allegedly resigned to “facilitate Board deadlock,” emphasizing that Delaware directors have the right to resign and, absent extreme circumstances, resignation alone will not constitute a breach.

  With respect to the claims arising from the Aurion II settlement, the Court denied the claims against the settling stockholder (who had served as the derivative plaintiff in the prior suit), pointing out that the dismissal without prejudice of derivative claims preserved all other stockholders’ rights.  The Court likewise rejected plaintiff’s effort to void the settlement-related stock transfers to the controlling stockholder, which plaintiff alleged were subject to a right of first refusal agreement in favor of the Company, concluding based on the contract itself that the agreement did not apply to either the particular parties or the preferred stock that was transferred.  Finally, the Court dismissed plaintiff’s claims based on the controlling stockholder’s post-Aurion II settlement conduct, finding them at most disagreements with business decisions, not well-pleaded claims of fiduciary misconduct.

  Categories: Corporate Governance,  Delaware Law,  Fiduciary Duties
  

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• ROSTOV V. ALCON RESEARCH