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In re Cornerstone Therapeutics Inc. Stockholder Litigation

Court of Chancery of Delaware

September 26, 2014

In re Cornerstone Therapeutics Inc. Stockholder Litigation,

Submitted: September 26, 2014.

Seth D. Rigrodsky, Esquire Brian D. Long, Esquire Gina M. Serra, Esquire Jeremy J. Riley, Esquire Rigrodsky & Long, P.A.

Donald J. Wolfe, Jr., Esquire Kevin R. Shannon, Esquire Christopher N. Kelly, Esquire Potter Anderson & Corroon LLP.

Kurt M. Heyman, Esquire Patricia L. Enerio, Esquire Dawn Kurtz Crompton, Esquire Proctor Heyman LLP.

Dear Counsel:

In a recent Memorandum Opinion[1] I denied Motions to Dismiss brought by Defendants Christopher Codeanne, Michael Enright, James A. Harper, Michael Heffernan, Laura Shawver, Craig Collard, and Robert Stephan (collectively, the "Director Defendants"), finding that, since entire fairness applied to the transaction at issue in this litigation ab initio, under the holding of Emerald Partners II[2] the Director Defendants must await a determination of entire fairness at trial before this Court may consider whether they are exculpated from liability by a Section 102(b)(7) provision.[3] On September 23, 2014, the Director Defendants moved for an interlocutory appeal of that decision under Delaware Supreme Court Rule 42. I heard Plaintiffs' oral response to the application on September 26, 2014.

A Rule 42 interlocutory appeal may be certified by this Court only when the appealed decision (1) "determines a substantial issue, " (2) "establishes a legal right, " and (3) meets one or more criteria further enumerated in the Rule, including that the decision falls under any of the criteria for certification of questions of law set forth in Rule 41.[4] Here, all three requirements of Rule 42 are met. In opposing the application for interlocutory appeal, Plaintiffs argue that my decision in the Memorandum Opinion to decline to consider the Director Defendants' exculpation from liability at the motion-to-dismiss stage does not raise a substantial issue, as it merely concerns the timing of when the exculpation provision will be considered. However, my determination, if reversed, could lead to the dismissal of the Director Defendants from this litigation, and thus constitutes a substantial issue in the course of this litigation. Further, my ruling in the Memorandum Opinion establishes a legal right in that it necessitates the Director Defendants be held as parties to the litigation, unable to assert their Section 102(b)(7) defense, at least until a determination of entire fairness at trial. Finally, my ruling satisfies the criteria enumerated in Rule 42(b)(i) by meeting the "[c]onflicting decisions" qualification for certification of questions of law set forth in Rule 41(b)(ii);[5] the Director Defendants accurately point out that decisions of this Court are conflicting on the determinative question of law: when dealing with a transaction subject to entire fairness review ab initio, whether breach of duty on the part of facially disinterested directors "who negotiated with the controller or otherwise facilitated the transaction needs to be specifically pled; and whether an exculpation provision adopted pursuant to Section 102(b)(7) must be ignored at the motion-to-dismiss stage, to await consideration after the transaction has been reviewed for entire fairness at trial."[6] The legal test aside, Plaintiffs argue that interlocutory appeal is nonetheless not warranted here because resolution of the appeal, even in the Director Defendants' favor, would not terminate this litigation, but would have the effect of interrupting the parties' progress toward trial. I do not find this argument persuasive, however; I have not entered a stay in the proceedings and thus the parties may proceed to trial concurrent with the Supreme Court's consideration of this appeal, should the Court elect to entertain it.

For the foregoing reasons, the Director Defendants' Application for Certification of Interlocutory Appeal is granted. An appropriate Order accompanies this Opinion.


SAM GLASSCOCK III, Vice Chancellor.


This 26th day of September, 2014, the Defendants having made application pursuant to Rule 42 of the Supreme Court for an order certifying an appeal from the interlocutory order of this Court, dated September 10, 2014; and the Court having found that such order determines substantial issues and establishes legal rights and that the following criteria of Supreme Court Rule 42(b) apply: 42(b)(i);

IT IS SO ORDERED that the Court's order of September 10, 2014, is hereby certified to the Supreme Court of the State of Delaware for disposition in accordance with Rule 42 of that Court.

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