Mindbody Decision Limits Aiding and Abetting Liability for Deals Done at Arm’s Length

In In re Mindbody, Inc., the Delaware Supreme Court (“Supreme Court”) affirmed in part and reversed in part a posttrial decision by the Delaware Court of Chancery (“Court of Chancery”),^[2] which had garnered significant attention. The Supreme Court affirmed the Court of Chancery’s rulings that a CEO breached his fiduciary duties of loyalty (by tilting the sale process in a specific buyer’s favor out of his own self-interest) and disclosure (by failing to disclose material aspects of his participation in, and his motivations for, the sale). The Supreme Court reversed, however, the Court of Chancery’s ruling that the private equity acquirer had aided and abetted the CEO’s disclosure breach, disagreeing with the Court of Chancery that the acquirer’s contractual right to review U.S. Securities and Exchange Commission (“SEC”) filings provided a sufficient basis to conclude that the acquirer had substantially participated in the breach. In doing so, the Supreme Court provided guidance for the first time as to the applicability of the Restatement (Second) of Torts (“Restatement”) factors in examining the “substantial assistance” portion of an aiding and abetting analysis.

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