Securities Regulation Daily Wrap Up, EXECUTIVE COMPENSATION—Del. Ch.: Amended DGCL provision factored into split decision on founder’s, directors’ pay packages, (Jun 17, 2026)

By Mark S. Nelson, J.D.

The court interpreted what it means to rebut a presumption of director independence with “substantial,” not just particularized, facts under amended DGCL Section 144(d)(2).

The Delaware Chancery Court delivered a split decision regarding a company pay package that awarded its founder/nonexecutive chair a one-time equity grant and provided for the company’s directors to award themselves compensation. The court concluded that recently amended DGCL Section 144 saved the founder/nonexecutive chair from liability in combination with the plaintiff’s failure to allege particularized facts that may have excused demand. But directors who approved the board’s pay package could be liable, at least at the pleading stage of the case, because the complaint sufficiently alleged that the approving directors’ actions fell short of entire fairness (the plaintiff’s unjust enrichment claim also can proceed against all directors who retained their compensation) (Ayers v. Foley, No. 2025-0650-LWW (Del. Ch. June 15, 2026)).

Board composition. Plaintiff Patrick Ayers sued, among others, William P. Foley, founder and nonexecutive chair of Fidelity National Financial, Inc. (the nominal defendant) for breach of fiduciary duty and unjust enrichment related to an executive and board compensation package awarded in advance of a corporate redomestication. Fidelity National Financial is an insurance, mortgage, and real estate services company. The suit was filed after Ayers received company documents in reply to a books-and-records demand.

Before the redomestication, the company had an 11-member board. The board, per amended DGCL 144, determined that nine of those directors met the statutory minimum for independence (i.e., the directors were independent per the listing rules of the applicable stock exchange—here, the NSYE). Foley was the primary focus of the complaint, while one other director (Raymond R. Quirk) was never named as a defendant.

The director defendants moved to dismiss the complaint for failure to plead demand futility and for failure to state a claim. The court’s analysis involved what appeared to be the first time state judges were called on to interpret amended DGCL 144. Specifically, the court had to define what it means to rebut a presumption of director independence with “substantial” and not just particularized facts under amended DGCL Section 144(d)(2).

“Substantial” and particularized facts. Over a year ago, the Delaware General Assembly enacted into law a package of DGCL amendments intended to loosen some standards for some deal approvals in order to slow the redomestication of companies from Delaware to other jurisdictions, primarily Texas, Nevada, and a small group of offshore jurisdictions. Among those amendments was a change to DGCL Section 144 regarding director independence that required a plaintiff to make a “heightened” showing of director conflicts. New DGCL Section 144(d)(2) has three salient features:

• If a company has a class of stock listed on a national securities exchange, a director of that company is presumed to be a disinterested director for acts to which the director was not a party if the company’s board determines that the director met the exchange’s listing standard.

• Then the “presumption shall be heightened.”

• And the presumption “may only be rebutted by substantial and particularized facts” showing the director had a material interest in the transaction or has a material relationship with someone who had a material interest in the transaction (emphasis added).

The “particularity” requirement, said the court, was well known and means something like “to state in detail” or to “specify.” With respect to “substantial,” however, the court looked to other sources and concluded: “to overcome Section 144(d)(2)’s heightened presumption, a plaintiff must plead specific, non-conclusory facts of sufficient qualitative significance to support a reasonable inference of a material interest or relationship that would impair the director’s objective judgment.”

In other words, explained the court, the General Assembly focused on materiality and, thus, “substantial” should be understood in its “qualitative sense,” meaning “[c]onsiderable in extent, amount, or value; large in volume or number” or “important, essential, and material; of real worth and importance.” As result, the above interpretation emphasizes “specific, non-conclusory facts of sufficient qualitative significance” (emphasis added).

Alleged director conflicts over equity grant. With the major interpretive issue resolved for purposes of the Chancery Court’s opinion, the court turned to whether three directors had material relationships with Foley regarding the equity grant to Foley. “[M]aterial relationship” is defined by statute to mean “familial, financial, professional, employment, or other relationship[s] that... would reasonably be expected to impair the objectivity of the director’s judgment when participating in the negotiation, authorization, or approval of the act or transaction at issue,” explained the court.

Here, the court concluded that the three directors’ service on the boards of Foley-affiliated companies standing alone was not enough to deprive them of independence. Likewise, co-ownership with Foley of multiple professional sports teams, despite the alleged prestige and uniqueness of such investments, was not enough because the three directors had only minority interests in an entity that invested in the sports teams. Also, one of the three directors had private equity ties to Foley, but these too were insufficient to show a material relationship with Foley.

The court then briefly addressed the question of whether any of the challenged directors might face substantial liability. The court noted that the plaintiff waived this theory but nevertheless opined that the complaint would not be able to overcome the statutory pleading requirements and, if it did, could not overcome the fact that the company had exculpated its directors from liability. The complaint also failed to allege that the board acted in bad faith or unlawfully.

As a result, the complaint was dismissed for failure to allege demand futility regarding the board’s equity grant to Foley.

Board compensation. The court also considered the directors’ action to pay themselves under the entire fairness standard, which requires both fair dealing and fair price. At the pleading stage, that meant that the unfair dealing component of the entire fairness standard was essentially established. The emphasis thereafter was on whether the price (i.e., the amount of compensation) was fair.

The complaint posited that the company paid its directors at a level above that of its peers. The director defendants countered that there is nothing wrong with that and that the company achieved better performance than its peers. However, the court said these issues were unsuited to being resolved at the motion to dismiss stage. As a result, the case would continue against those members of the company’s compensation committee who approved the directors’ compensation package.

In the case of the non-approving directors, however, the complaint did not allege that they were aware that the compensation they received was wrongful. As a result, the complaint was dismissed as to them.

The case is No. 2025-0650-LWW.

Judge: Will, L.

Attorneys: Stephen E. Jenkins (Ashby & Geddes, P.A.) for Patrick Ayers. Michael A. Barlow (Quinn Emanuel Urquhart & Sullivan, LLP) for William P. Foley.

Companies: Fidelity National Financial, Inc.

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