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An Introduction to the Law of Corporations: Cases and Materials, Fall 2017

LEWIS C. PELL, Plaintiff, v. ROBERT C. KILL, KENNETH H. PAULUS, KEVIN H. ROCHE, and JAMES P. STAUNER, Defendants, and COGENTIX MEDICAL, INC., Nominal Defendant.

Headnote

In Blasius Industries v Atlas Corp, the Chancery Court announced a new application of the intermediate standard, this time in the context of board actions to thwart the stockholder voting franchise. The court justified the increased scrutiny of board action because "the shareholder franchise is the ideological underpinning upon which the legitimacy of directorial power rests." In Blasius, the court held a board must have a "compelling justification"  where the board acted "for the primary purpose of interfering with the effectiveness of a stockholder vote."

Blasius was a somewhat controversial when it first came down. Many believed that the Chancery Court was attempting to create a new standard of review beyond the business judgment presumption, entire fairness and the intermediate standard. However, subsequent application of Blasius has placed Blasius, like Revlon, squarely within the general rubrik of Unocal's intermediate standard. In the case that follows, the court applies Blasius in the context of board action to change board composition.