Challenges Raised to 2025 DGCL Amendments
In August 2025, Delaware amended its General Corporation Law (the “DGCL”) in a number of very significant ways. Shareholders engaged in litigation with corporations have challenged the substance of these amendments in the Court of Chancery, primarily asserting that certain of the amendments violate the Delaware Constitution. Legislation can amend the DGCL, but only within the boundaries of the State’s Foundational Constitution.
Among other things, the amendments (1) expanded safe harbors that allow controlling shareholders, directors, and officers to engage in certain conflicted transactions under a deferential standard of review if certain cleansing steps are taken (i.e., approval by a committee of independent directors or informed consent of a majority of stockholders), and (2) expanded the scope of the safe harbors to preclude equitable remedies and damages altogether if their terms are satisfied. Further, the amendments expressly apply retroactively, meaning that they apply to conduct occurring before the amendments’ adoption if brought in litigation after such date.
Three plaintiffs are currently challenging the application of the amended DGCL to their cases. These cases are:
- Plumbers & Fitters Local 295 Pension Fund v. Dropbox, Inc., et al., 2025-0354-KSJM (Del. Ch. 2025) (“Dropbox”);
- Roofers Local 149 Pension Fund v. Magnus Holdings Co. Ltd., et al., 2025-0466-PAF (Del. Ch. 2025) (“Acushnet”); and
- Thomas Drew Rutledge v. Clearway Energy Group LLC, et al., 2025-0499-LWW (Del. Ch. 2025) (“Clearway”).
These cases challenge the constitutionality of the amendments under the Delaware Constitution in circumscribing the Court of Chancery’s equitable authority when the safe harbor is met (such as independent transactions where they face conflicts of interest), restricting the Court of Chancery’s ability to hear certain of such cases granted to it under its flexible powers as a court of equity.
Further, the cases challenge the retroactive application of the amendments. As noted, the amendments are applicable to conduct that occurred prior to their passage – thus, the amendments’ terms could be outcome-determinative even though the parties did not anticipate such application. The challenges allege this violates the due process clause of the Delaware Constitution by applying a standard other than that applicable at the time of conduct, contrary to the expectations of the parties and the then-settled law governing a given circumstance used in planning and evaluating transactions and actions.
The Governor of the State of Delaware intervened in the case on the State’s behalf and will file a brief arguing in favor of the changes’ constitutionality. The parties’ initial brief in the Clearway case was due in late July, and the answering briefs are due in early September (2025). This case could give an indication as to how others might fare and the potential future of the controversial adopted amendments.
The amendments were specifically adopted to overrule or revise specific Court of Chancery holdings in the areas addressed and represent a significant change in the terms of the DGCL. We will provide a follow-up update as these cases progress and on the future of the amendments.
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