Yesterday, Vice Chancellor Zurn dismissed Barry Diller from the stockholder litigation challenging the fairness of the separation of IAC and Match. See In re Match Grp., Inc. Derivative Litig., C.A. No. 2020-0505-MTZ (Del. Ch. Oct. 2, 2024). The challenged transaction is a reverse spin-off in which Match, a partially public company, was separated from its controller public company, IAC, and the unaffiliated stockholders became stockholders in an independent and widely held public company. Vice Chancellor Zurn held that Mr. Diller was not Match’s “ultimate controller” simply because he controlled IAC and IAC controlled Match.
Relying on In re Ezcorp Inc. Consulting Agreement Derivative Litigation, 2016 WL 301245, at *9 (Del. Ch. Jan. 25, 2016), the stockholder-plaintiffs argued that Mr. Diller owed fiduciary duties as a controller of Match, even though he was not a stockholder, director, or officer of Match. In other words, the plaintiffs argued that Match had two controlling stockholders before the separation: IAC, a multibillion-dollar public company that owned 98.2% of Match’s voting power, and Mr. Diller, IAC’s Chairman, Senior Executive, and largest stockholder. Vice Chancellor Zurn rejected that argument as inconsistent with Delaware law:
The Vice Chancellor’s decision is an important one, as the definition of a controlling stockholder “can greatly affect the direction of [Delaware] law, as well as the outcome of individual cases.” In re Tesla Motors S'holder Litig., 2023 WL 3854008, at *19 n.117 (Del. June 6, 2023). The decision is a reminder that the Delaware courts will exercise caution in expanding the universe of persons who could be held liable to stockholders under fiduciary principles.
