On June 15, 2026, Vice Chancellor Will of the Delaware Court of Chancery issued a split ruling in a shareholder lawsuit against Fidelity National Financial (FNF), providing the first judicial test of the state's recently rewritten corporate governance statute. The decision offers board members and compensation committees a clear delineation of when heightened judicial scrutiny applies.
Shareholder Patrick Ayers challenged two compensation decisions: a $50 million stock grant to non-executive chairman William P. Foley, intended to retain him through 2027, and director compensation for 2022 through 2024. The court dismissed the challenge to Foley's grant but allowed the claim regarding director pay to proceed.
The grant to Foley survived because it was approved by a special committee of independent directors who had no personal financial interest in the transaction. The committee engaged an outside compensation consultant, obtained legal advice, and negotiated Foley down from his initial $60 million request to $50 million. Under Delaware's revised 8 Del. C. § 144, which governs transactions involving conflicted directors, Ayers needed to demonstrate that a majority of the board could not fairly evaluate whether to pursue the claim. He failed to meet that burden.
The revised statute, enacted by the Delaware legislature in 2025, provides directors of exchange-listed companies with a stronger presumption of independence. To overcome it, a plaintiff must present “substantial and particularized facts” showing a genuine conflict. Vice Chancellor Will interpreted “substantial” to require materially significant facts, not merely a large quantity of allegations. This is the first Delaware court opinion to unpack that language.
Ayers argued that three directors lacked independence due to overlapping board seats at other Foley-controlled entities and co-investments in sports franchises, including the Vegas Golden Knights. The court rejected this, holding that shared board service and minority stakes in a hockey team do not, standing alone, establish a disabling conflict.
However, the court allowed the claim against director compensation to move forward. When directors set their own pay, they sit on both sides of the transaction, stripping them of the business judgment rule’s protections and subjecting the decision to an entire fairness review. Ayers alleged that director compensation exceeded peer medians by 21% in 2022, 38% in 2023, and 67% in 2024, while FNF lagged peers in market capitalization, revenue, and net income. The court found these allegations sufficient to proceed against Compensation Committee members who approved the awards. Directors who merely received the pay without voting on it were dismissed from that claim, but an unjust enrichment claim remains against all who retained the funds.
The ruling clarifies the boundaries of the revised Section 144: it shields independent directors on conflicted transactions from which they do not personally benefit, but offers no protection when directors set their own compensation. This distinction is now embedded in Delaware case law and should inform how compensation committees structure their processes.
For financial advisors and their clients who serve on corporate boards, the decision underscores the importance of robust procedural safeguards—special committees, independent advisors, and documented negotiations—when approving related-party transactions. It also highlights the vulnerability of director compensation decisions to heightened scrutiny, particularly when pay levels diverge significantly from peer benchmarks amid underperformance.
The case is Ayers v. Foley, C.A. No. 2025-0127, in the Delaware Court of Chancery.
