In this post, Professor Stephen Bainbridge posits that the Delaware Supreme Court incorrectly decided Fliegler v. Lawrence, 361 A.2d 218 (Del. 1976) by requiring that stockholder approval of conflicted transaction requires a majority vote of the disinterested stockholders to shift the burden from the defendants to the plaintiffs:

The court’s reading of § 144 is inconsistent with a plain-meaning approach to statutory construction. Section 144(a)(1) requires approval by “a majority of the disinterested directors,” but § 144(a)(2) requires only approval by a “vote of the shareholders.”  The statute’s drafters thus inserted a requirement of disinterest in (a)(1) but not in (a)(2). Presumably, they did not forget the word disinterested in the presumably brief interval between writing (a)(1) and (a)(2).  Accordingly, on the face of the statute, shareholder approval ought to be effective even if the shareholders are not disinterested.

Surprisingly, I find support for Professor Bainbridge's logic in the California General Corporation Law.   Like Section 144(a)(1) of the DGCL, California Corporations Code Section 310(a)(2) requires approval of the board by a vote "sufficient without counting the vote of the interested directors".  Unlike Section 144(a)(2), however, Section 310(a)(1) requires approval of the shareholders with the shares "owned by the interested director or directors not being entitled to vote thereon".    Thus, the California statute illustrates Professor Bainbridge's point - the Delaware legislature could have, but did not, include "disinterested" in Section 144(a)(2).   I agree - haec omissio non praetermitterenda est.

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