Delaware Chancery Court Holds Investment Bank Liable for Aiding and Abetting Exculpated Director Breach of Fiduciary Duties

Summary: A recent post-trial decision in In Re: Rural Metro Corporation held that a financial advisor was liable for aiding and abetting breaches of the duty of care by the board of directors in connection with the sale of the company, despite the fact that the company’s charter contained exculpatory provisions authorized by Section 102(b)(7) of the Delaware General Corporation Law. The decision is problematic for financial advisors as it potentially serves as an invitation to plaintiffs’ attorneys to try to avoid dismissal of duty-of-care claims through aiding-and-abetting claims against a company’s financial advisor. It also serves a reminder to Special Committees of the importance of process in change-of-control transactions.