Coster v. UIP II (Del. 2023)

Famous though they are, Schnell and Blasius proved difficult to apply and rarely provided the decisive argument in subsequent cases. Coster positions Schnell and Blasius in relation to other standards of review. We expect Coster to become the standard framework going forward.

Please also pay attention to the facts that gave rise to Coster. This is one of two cases in this book (the other being eBay) that demonstrate conflicts that can (and frequently do) arise in closely held corporations.

Questions:

1. Could the dispute have been avoided? Hint: Think back to the moment Schwat and Wout became the sole shareholders in UIP.
2. What action by the board triggered enhanced scrutiny in this case, and why?
3. Why did the court consider the board's actions preferable to the statutory rules for resolving deadlock under DGCL 226(1)(a)? Under what circumstances and conditions can boards circumvent the appointment of a guardian by means of a maneuver similar to the one used in this case?
4. The Supreme Court applies a version of the Unocal test to the board actions. Might a different standard of review have led to a different outcome?
5. Reflecting on the outcome of the first appeal as described in the facts of the case, can you imagine situations where a defendant's action would pass entire fairness review, but the plaintiff might still prevail under another standard of review?