Delaware Supreme Court Sets High Bar for Counterparty Aiding and Abetting Liability in M&A Deals

Background

In 2016, TransCanada Corporation (now TC Energy) agreed to acquire Columbia Pipeline in an all-cash merger. Post-closing, Columbia Pipeline’s stockholders sued in the Delaware Court of Chancery, claiming that Columbia Pipeline’s CEO and CFO/Chairman breached their fiduciary duties by manipulating the sale process to secure lucrative change-in-control benefits.¹ Plaintiffs also asserted aiding and abetting claims against TC Energy for allegedly taking advantage of the Columbia Pipeline fiduciaries’ conflicts and permitting the fiduciaries to issue misleading proxy disclosures. Columbia Pipeline’s fiduciaries settled the case before trial, leaving TC Energy as the sole defendant.

In its June 2023 post-trial opinion, the Court of Chancery held that TC Energy aided and abetted breaches relating to the negotiating process because TC Energy had at least constructive knowledge that Columbia Pipeline’s fiduciaries were “trying to lock in their change-in-control benefits and retire,” and that Columbia Pipeline’s board was breaching its duty of care by delegating negotiation to “a conflicted management team that lacked M&A experience.”² The Court also concluded that TC Energy had actively exploited Columbia Pipeline’s conflicts when, in violation of its standstill agreement, it threatened to announce publicly that negotiations were dead if Columbia Pipeline would not accept TC Energy’s proposal — knowing that Columbia Pipeline’s fiduciaries were “wedded to a deal” and would not enforce the standstill.³ As to the disclosure claims, the Court held that TC Energy aided and abetted a disclosure violation because it had at least constructive knowledge that Columbia Pipeline’s proxy statement contained deficiencies, including failures to disclose violations of the standstill. The Court awarded damages of $199 million, calculated as the difference between the price received and the bottom range of the price contemplated by the parties’ earlier agreement in principle.

The Mindbody Decision

In December 2024, while appeal of the Columbia Pipeline decision was pending, the Delaware Supreme Court decided In re Mindbody, Inc. Stockholder Litigation, which clarified the scope of aiding and abetting liability for merger counterparties.⁴ The Mindbody case arose from Vista Equity Partners’ 2018 acquisition of Mindbody, Inc.  The Court of Chancery held post-trial that Mindbody’s CEO breached his fiduciary duties under Revlon by steering the company’s sale process toward his preferred bidder, Vista, and by issuing misleading proxy disclosures regarding the negotiation process.⁵ The Court of Chancery also held that Vista aided and abetted the disclosure breaches because (i) the parties’ merger agreement gave Vista a right to review the draft proxy statement, (ii) Vista in fact reviewed the drafts and thus “participated in the drafting” and (iii) Vista was party to the negotiations that the Court found to be inadequately disclosed.⁶ For the disclosure violations, the Court awarded joint-and-several nominal damages of $1 per share.⁷

The Delaware Supreme Court affirmed the holding that Mindbody’s CEO breached his fiduciary duties, but it reversed the aiding and abetting judgment against Vista. The Court explained that an aider and abettor must have “substantially assisted” the breach, which requires (among other things) “knowing participation.”⁸ To establish “knowing participation,” a plaintiff must prove: (1) the aider and abettor knew that the fiduciary’s conduct constituted a breach, and (2) that its own conduct (not just the fiduciary’s conduct) regarding the breach was legally improper. The Court emphasized that liability in arm’s-length deals must be reserved for active participation — such as conspiring with conflicted fiduciaries or actively exploiting their disloyalty — rather than “mere passive awareness.”⁹ Under this framework, the Supreme Court concluded that a contractual right to review the draft proxy did not impose on Vista a duty of disclosure to Mindbody’s stockholders, and that reviewing the drafts was not equivalent to “participating in the drafting” as the Court of Chancery appeared to conclude.

The Delaware Supreme Court’s Columbia Pipeline Decision

Applying the standard articulated in Mindbody, the Delaware Supreme Court reversed the Court of Chancery’s aiding and abetting judgment against TC Energy.¹⁰ The Delaware Supreme Court explained that the Court of Chancery’s imposition of aiding and abetting liability based on “constructive knowledge” did not comport with Mindbody’s holding that “the acquiror must have actual knowledge of both the target’s breach and the wrongfulness of its own conduct.”¹¹

The Delaware Supreme Court concluded plaintiffs had not met this standard because the record evidence would not have supported a finding of TC Energy’s actual knowledge that Columbia Pipeline’s fiduciaries were not seeking to obtain the best deal available. With respect to the standstill, the Court explained this could support liability only if TC Energy “must have known not only that it was breaching the [s]tandstill, but that Columbia [Pipeline]’s negotiators were, by allowing it, breaching their fiduciary duties,” which the record did not support.¹² The Court also noted that “active” participation in the breach “must include something more than taking advantage of the other side’s weakness and negotiating aggressively for the lowest possible price.”¹³ An overarching theme of the opinion was that aiding and abetting liability should be especially difficult to plead against a counterparty because “a buyer has limited visibility into the seller’s internal governance dynamics” as well as a “fiduciary duty to its own stockholders to extract the best reasonably available price.”¹⁴

Takeaways

The Mindbody and Columbia Pipeline decisions provide important clarity and comfort for merger parties that they will not be held liable as aiders and abettors for vigorously negotiating the best deal possible, nor are they obligated to police their counterparty’s corporate governance or stockholder communications. The decisions have reinforced that counterparty aiding-and-abetting claims are among the most difficult in the law to prevail on, which we expect will reduce the tendency to sue buyers as “add-on” defendants in sell-side stockholder merger challenges.

But caution is still warranted. While the bar is set high, aiding and abetting remains a viable theory in M&A litigation. Mindbody and Columbia Pipeline expressly preserve the possibility of liability where the buyer “attempts to create or exploit conflicts of interest in the board” or “where the bidder and the board conspire in or agree to the fiduciary breach.”¹⁵ Thus, parties should be mindful to avoid scenarios that could be interpreted as incentivizing breaches or actively subverting the counterparty’s process. Under Mindbody and Columbia Pipeline, a buyer may also face aiding and abetting claims if it edits a draft communication to stockholders in a knowingly false manner.

Despite the rulings in Mindbody and Columbia Pipeline that curtail the ability to bring an aiding and abetting claim against the acquirer, we note that acquirers may still indirectly bear some or all of the liability associated with the underlying breach of fiduciary duty claims as a result of the acquirer’s post-closing ownership of the target company and the target company’s broad indemnification for directors and officers, including for claims of breach of fiduciary duties. Thus, acquirers should still mindful of potential process claims, and obtaining a “tail policy” for the target’s directors and officers insurance is an important risk management tool for claims asserted post-closing.

¹ In re Columbia Pipeline Grp., 299 A.3d 393 (Del. Ch. 2023).

² Id. at 477.

³ Id. at 407.

⁴ In re Mindbody, Inc. S’holder Litig., 332 A.3d 349 (Del. 2024).

⁵ In re Mindbody, Inc., 2023 Del. Ch. LEXIS 65 (Del. Ch. Mar. 15, 2023).

⁶ The Court held that plaintiffs had waived their claims that Vista aided and abetted the breaches relating to the negotiation process itself. See id. at 110.

⁷ The Court also awarded $1 per share in damages against the CEO for the breaches relating to the negotiations, based on a finding that Vista would have been willing to pay this additional amount. See id. at 118.

⁸ In re Mindbody, 332 A.3d at 389, 406.

⁹ Id. at 399.

¹⁰ In re Columbia Pipeline Grp., Inc. Merger Litig., 2025 Del. LEXIS 226 (Del. July 17, 2025).

¹¹ Id. at *3.

¹² Id. at *80.

¹³ Id. at *77.

¹⁴ Id. at *66.

¹⁵ In re Mindbody, 332 A.3d at 402.