Delaware Upholds SB 21: The Court Got It Right, and So Did I
A review of Rutledge v. Clearway Energy Group LLC (Del. Feb. 27, 2026) and a scorecard on my June 2025 predictions
This post is brought to you hot off the presses. I learned this afternoon that the Delaware Supreme Court had decided Rutledge v. Clearway Energy Group LLC, in which the plaintiff challenged the constitutionality of Delaware SB 21.
I first was alerted to the opinion by a LinkedIn post by the irreplaceable Lauren Pringle of The Chancery Daily. Lauren and TCD are my go to sources on Delaware law developments. And they should be yours too.
For the better part of a year, critics of Senate Bill 21 have warned that Delaware had crossed a constitutional Rubicon. By recalibrating the standard of review applicable to controlling-stockholder transactions, the General Assembly, they claimed, had invaded the sacred province of the Court of Chancery. Entire fairness review, we were told, is part of the “irreducible minimum” of equity jurisdiction protected by the Delaware Constitution. To tamper with it is to tamper with the constitutional order itself.
That argument is now dead.
The Delaware Supreme Court today issued its long-awaited Rutledge opinion and upheld the constitutionality of Senate Bill 21. In doing so, reaffirmed the corporate law is not a body of equitable principles but rather is statutory at its core and that the General Assembly retains broad authority to shape it.
The opinion, authored by Justice Traynor, is careful, well-reasoned, and—I am pleased to report—closely tracks (but fails to cite) the analysis I offered in my June 2025 post on this blog, where I predicted the court would reach exactly this result.
Is Delaware SB 21 Constitutional?
Those of us who labor in the corporate law and governance vineyard spend most of the spring preoccupied with the Delaware legislature’s effort to rollback a series of Chancery Court decisions on conflicted controller transactions. SB 21 was the result (I’ve got a free explainer on SB 21
See also:
The (State) Constitutionality of Delaware SB 21's Safe Harbors for Conflicted Controller Transactions
Delaware’s SB 21 is the most consequential corporate law reform in decades. It responds to perceived instability and uncertainty in the judicial review of conflicted transactions—particularly those involving controlling stockholders—by establishing statutory safe harbors for interested deals that follow specified cleansing procedures. As with any reform that touches both the substance and the review of fiduciary duty claims, SB 21 has inspired intense debate, which in this case has included arguments about its constitutional validity.
FYI: I’ve got three law review articles available on line that touch on aspects of the debate over SB 21 and the broader DExit debate:
Delaware Senate Bill 21: What It Does and What Questions Remain Open (May 06, 2025). Available at SSRN: https://ssrn.com/abstract=5243857
A Course Correction for Controlling Shareholder Transactions, 49 Delaware Journal of Corporate Law 525 (2025). Available at SSRN: https://ssrn.com/abstract=5022685
DExit Drivers: Is Delaware's Dominance Threatened? (July 29, 2024). UAvailable at SSRN: https://ssrn.com/abstract=4909689
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