SB 21 at a Constitutional Crossroad: Delaware’s New Safe Harbors, Books-and-Records Limits, and the Supreme Court’s Certified Review in Rutledge

By: Alex D. Goldfinger

Delaware’s 2025 corporate-law overhaul, Senate Substitute No. 1 for Senate Bill 21 (“SB 21”), arrives at the Delaware Supreme Court with certified questions that go to the structure of Delaware corporate adjudication.1 The enactment was publicly framed as a bid for clarity and predictability in conflicted-transaction review and books-and-records practice.2

Before SB 21, the governing rule for controller transactions was dictated by MFW and its progeny: absent the dual “cleansers,” entire fairness presumptively governed with both protections in place from the outset, as well as the business-judgment rule.3 On the pre-suit information front, DGCL § 220 practice sometimes extended to officer and director ESI when necessary and essential.4

Generally, SB 21 reorients DGCL § 144 by codifying safe harbors across three categories—interested-director or officer transactions, controlling-stockholder transactions, and going-private transactions —and by attaching outcome-determinative consequences when the statutory conditions are met.5 For controller transactions outside the going-private context, either good-faith approval by a properly constituted committee of disinterested directors or an informed, uncoerced vote of disinterested stockholders is sufficient, with an entire fairness backstop.6 For going-private transactions, the statute requires both protections and fairness to reach the same harbor, hewing to the MFW architecture by design.7 For interested-director or officer transactions, the same structure applies: disinterested-director approval, disinterested-stockholder approval, or fairness.8 The statute also narrows and structures DGCL § 220 inspections. It centers the inspection right on formal board-level materials and empowers the Court of Chancery to order additional records only on a heightened showing, while permitting reasonable confidentiality and use restrictions and treating produced materials as incorporated by reference in later pleadings.9

The Rutledge dispute arrives at the Delaware Supreme Court out of a derivative challenge to a conflicted controller–affiliate asset purchase at Clearway Energy, Inc.10 The transaction, closed in April 2024, was approved by a board committee that the board deemed independent under NYSE rules, and was not submitted to a disinterested stockholder vote.11 Appellant’s opening brief summarizes the dispute well: the committee approved a $107 million price, yet the deal closed at $117 million; the record (as recounted in the complaint) does not explain the $10 million increase; the $117 million was $21 million above the controller’s initial ask and “tens of millions” over the advisor’s valuation; and no minority vote was obtained.12

Vice Chancellor Will certified two constitutional questions to the Supreme Court: (1) whether § 144, as amended by SB 21, unconstitutionally deprives the Court of Chancery of its equitable power to award “equitable relief” or “damages” once statutory safe harbors are satisfied, and (2) whether SB 21’s retroactivity clause unconstitutionally extinguishes accrued or vested claims.13 The Supreme Court accepted certification on June 11, 2025, set the case for argument, and the State intervened to defend the statute.14

At the center of the merits is what SB 21 did to DGCL § 144. For controller transactions, § 144(b) recognizes three paths: approval by a properly empowered, disinterested committee acting in good faith and without gross negligence; approval by an informed, uncoerced majority of disinterested stockholders; or substantive fairness.15 For going private mergers, § 144(c) demands both the committee and the disinterested stockholder vote, or fairness.16 The legislative synopsis also states that nothing in the revisions forecloses aiding and abetting claims against non-director actors.17

Appellant’s theory is twofold. First, invoking DuPont’s recognition of an irreducible core of equity jurisdiction protected by the Delaware Constitution, Appellant argues SB 21’s remedial consequences strip the Court of Chancery of the power to grant equitable relief or damages when a transaction is “cleansed,” thereby trenching on constitutionally guaranteed equity.18 Second, Appellant contends the retroactivity clause violates Article I, § 9’s remedial guarantee and settled Delaware doctrine that a cause of action, once accrued, cannot be abrogated retroactively.19 Appellant situates the case against pre-SB 21 doctrine—namely, that conflicted controller transactions face entire fairness unless conditioned ab initio on both an independent committee and a disinterested stockholder vote under MFW—and stresses that Clearway’s transaction had neither dual protections nor a minority vote.20

The State contends that SB 21 does not retract Court’s subject matter jurisdiction at all; rather, it legislatively specifies when fiduciary duty claims in conflict transaction settings fail on the merits (or yield no remedy) once particular procedural protections are satisfied or the transaction is substantively fair. The State emphasizes the strong presumption of constitutionality and the judiciary’s duty to construe statutes, where possible, to avoid invalidation.21 On retroactivity, the State points to clear legislative intent and argues that applying § 144’s standards to pre-enactment conduct is a reasonable adjustment that does not extinguish “vested” derivative rights and, in any event, leaves other routes to accountability untouched.22

Amici divides sharply. A group of corporate law academics supporting Appellant argues that SB 21 collapses equity’s historic backstop in self-dealing contexts by precommitting outcomes to formal “cleansing,” thereby dulling the disciplining function of entire fairness review.23 On the other side, the Society for Corporate Governance and a separate group of corporate law professors support Appellees and the State, describing SB 21 as a measured, constitutionally proper clarification that supplies predictability without displacing core fiduciary norms, and warning that Appellant’s position would unduly curtail the General Assembly’s role in shaping corporate law.24

1 85 Del. Laws ch. 6 (2025) (enacting S.S. 1 for S.B. 21 and revising DGCL §§ 144, 220); November 2025 Argument List, Del. Sup. Ct., List #2 (Sept. 23, 2025) (setting oral argument in Rutledge v. Clearway Energy Grp. LLC, No. 248, 2025, for Nov. 5, 2025, 10:00 a.m., in Dover); Order Accepting Certified Questions, Rutledge v. Clearway Energy Grp. LLC, No. 248, 2025 (Del. June 11, 2025) (accepting Rule 41 certification of constitutional questions); Order Certifying Questions, Rutledge v. Clearway Energy Grp. LLC, C.A. No. 2025-0499-LWW, at 2–4 (Del. Ch. June 6, 2025) (certifying equity-jurisdiction and retroactivity questions under Del. Supr. Ct. R. 41).
2 Press Release, Office of the Governor, Governor Matt Meyer Signs SB 21 Strengthening Delaware Corporate Law (Mar. 26, 2025), https://news.delaware.gov/2025/03/26/governor-meyer-signs-sb21-strengthening-delaware-corporate-law/ (stating the law promotes “clarity and predictability” and balances stockholder and board interests).
3 Kahn v. M&F Worldwide Corp. (MFW), 88 A.3d 635, 644–45 (Del. 2014) (holding that business-judgment review applies to controller squeeze-outs conditioned ab initio on both independent committee approval and a fully informed, uncoerced majority-of-the-minority vote); In re Match Grp., Inc. Deriv. Litig., 315 A.3d 446, 462–66 (Del. 2024) (reaffirming MFW and explaining burden/standard dynamics in controller conflicts).
4 KT4 Partners LLC v. Palantir Techs. Inc., 203 A.3d 738, 751–52 (Del. 2019) (permitting inspection of ESI such as emails when necessary and essential to the stockholder’s purpose).
5 8 DEL. C. § 144(a)–(c) (2025) (as amended by SB 21) (establishing safe-harbor consequences for conflicted transactions and specifying director/officer and controller pathways); 85 Del. Laws ch. 6, § 1 (2025) (adding definitions and detailing committee and stockholder-approval mechanics).
6 8 DEL. C. § 144(b)(1)–(3) (2025) (controller transactions: committee approval or disinterested-stockholder approval, or fairness).
7 Id. at § 144(c) (2025) (going-private transactions require both committee approval and disinterested-stockholder approval, or fairness).
8 Id. at § 144(a)(1)–(3) (2025) (director/officer transactions: disinterested-director approval, disinterested-stockholder approval, or fairness).
9 Id. at § 220(a)(1), (e)–(g) (2025) (defining baseline materials, authorizing additional records if core materials do not exist, and requiring a clear-and-convincing showing of compelling need for specified additional categories); 8 DEL. C. § 220(b)(3) (2025) (authorizing reasonable use and confidentiality restrictions and providing for incorporation by reference of produced materials into subsequent complaints).
10 See generally Rutledge v. Clearway Energy Grp. LLC, C.A. No. 2025-0499-LWW (Del. Ch. June 6, 2025).
11 Order Certifying Questions, Dkt. No. 19, Rutledge v. Clearway Energy Grp. LLC, C.A. No. 2025 0499 LWW (Del. Ch. June 6, 2025).
12 Opening Brief for Appellant at Statement of Facts, Rutledge v. Clearway Energy Grp. LLC, No. 248, 2025 (Del. July 31, 2025).
13 Order Certifying Questions, Rutledge v. Clearway Energy Grp. LLC, C.A. No. 2025 0499 LWW (Del. Ch. June 6, 2025).
14 Order Accepting Certified Questions, Rutledge v. Clearway Energy Grp. LLC, No. 248, 2025 (Del. June 11, 2025); Answering Brief of Intervenor the State of Delaware, No. 248, 2025 (Del. filed Sept. 5, 2025).
15 8 DEL. C. § 144(b) (2025).
16 Id. at § 144(c) (2025).
17 S.S. 1 for S.B. 21, 153d Gen. Assemb. (Del. 2025) (Synopsis).
18 See DuPont v. DuPont, 85 A.2d 724 (Del. 1951) (recognizing core equity jurisdiction).
19 See Cheswold Volunteer Fire Co. v. Lambertson Constr. Co., 489 A.2d 413, 418 (Del. 1984); Albert v. Alex. Brown Mgmt. Servs., Inc., 2005 WL 1594085, at *18 (Del. Ch. June 29, 2005).
20 See Kahn v. M&F Worldwide Corp., 88 A.3d 635 (Del. 2014); In re Match Group, Inc. Deriv. Litig., 315 A.3d 446 (Del. 2024).
21 Answering Brief of Intervenor the State of Delaware at Scope of Review & Argument § I, Rutledge v. Clearway Energy Grp. LLC, No. 248, 2025 (Del. filed Sept. 5, 2025).
22 Id. at Argument §§ I–II.
23 Brief of Corporate Law Academics as Amici Curiae in Support of Appellant (Aug. 13, 2025), Rutledge v. Clearway Energy Grp. LLC, No. 248, 2025 (Del. Aug. 7, 2025)
24 Brief of Society for Corporate Governance as Amicus Curiae in Support of Appellees (Sept. 15, 2025) Rutledge v. Clearway Energy Grp. LLC, No. 248, 2025 (Del. Aug. 7, 2025); Brief of Corporate Law Professors as Amici Curiae in Supp. of Appellees (Sept. 2025), Rutledge v. Clearway Energy Grp. LLC, No. 248, 2025 (Del. Aug. 7, 2025)