The Delaware Supreme Court today affirmed the constitutionality of recent amendments to the Delaware General Corporation Law (DGCL) addressing transactions involving controlling stockholders. In Rutledge v. Clearway Energy Group LLC, No. 248, 2025 (Del. Feb. 27, 2026), the court rejected constitutional challenges to Senate Bill 21 (SB 21), upholding both the statute’s fiduciary‑duty safe harbor framework and its retroactive application.
The decision resolves uncertainty surrounding the validity of the 2025 amendments and confirms the General Assembly’s authority to define the standards governing review of controlling‑stockholder transactions.
Background
SB 21, enacted in March 2025, amended DGCL Section 144 to provide statutory approval mechanisms for transactions involving controlling stockholders or control groups. Among other things, the amendments:
- established safe harbors to protect certain controlling‑stockholder transactions from equitable relief or damages for breach of fiduciary duty;
- defined “controlling stockholder” and “control group”; and
- provided that the amendments apply to acts or transactions occurring before enactment, except for actions already pending or completed as of February 17, 2025.
Following enactment, a stockholder of Clearway Energy, Inc., brought a derivative action challenging a transaction between the company and its controlling stockholder and asserted that SB 21 was unconstitutional because it improperly limited the jurisdiction of the Delaware Court of Chancery.
The Court’s Decision
The Court of Chancery certified two questions to the Delaware Supreme Court regarding (1) whether the safe harbor provisions impermissibly curtailed the Court of Chancery’s equity jurisdiction and (2) whether the statute’s retroactive application violated due process. The Delaware Supreme Court answered both certified questions in the negative.
1. First, the court held that the safe harbor provisions do not constitute an unconstitutional limitation on equity jurisdiction.
The court held that SB 21 does not violate Article IV, Section 10 of the Delaware Constitution. Although amended, Section 144 limits the availability of equitable relief and damages when statutory conditions are satisfied, and the court emphasized that the statute does not divest the Court of Chancery of jurisdiction over fiduciary duty claims.
Instead, SB 21 establishes a legislative framework governing how those claims are evaluated and what remedies are available. The Court of Chancery retains authority to hear breach of fiduciary duty actions and to determine whether the statutory prerequisites for the safe harbor have been met in a given case.
The court also pointed to Delaware’s long-standing practice of legislative refinement of corporate law, including provisions affecting standards of review and remedies, as consistent with constitutional limits.
2. Second, the court held that the safe harbor provision’s retroactive application does not violate due process.
The court likewise rejected the argument that SB 21’s retroactive application violates Article I, Section 9 of the Delaware Constitution. The court found that the General Assembly clearly expressed its intent for the amendments to apply retroactively, subject to a defined carve‑out for already pending actions.
The court further concluded that applying amended Section 144 to pre‑enactment conduct does not impermissibly extinguish vested rights. Stockholders retain the ability to assert breach of fiduciary duty claims; the statute affects the applicable standards and remedies rather than eliminating causes of action. The court also found that the amendments bear a reasonable relationship to a permissible legislative objective.
Takeaways and Conclusion
The Delaware Supreme Court’s decision in Rutledge v. Clearway confirms the constitutionality of the 2025 amendments to DGCL Section 144 and resolves the principal constitutional challenges to the statute. Thus, corporations engaged in transactions involving a controlling shareholder may rely on Section 144 as authoritative when assessing the level of liability protection provided by various steps such as the formation of independent director committees and affirmative votes of disinterested shareholders.
WilmerHale’s securities litigation team has extensive experience litigating Delaware fiduciary duty claims and advising clients on how statutory developments such as amended DGCL Section 144 affect transaction structuring, disclosure, and litigation strategy.
