Francis Pileggi offers up a very informative post on a panel discussion at the ABA Annual meeting, in which he mentions in passing that prominent Delaware lawyer "Kurt Heyman added that in the Rule 12(b)(6) context, the court will take judicial notice of a Section 102(b)(7) provision in the corporation's charter to the effect that the directors are protected from claims for a breach of the duty of care."
treatise:... the Delaware supreme court held in Emerald Partners that a sec. 102(b)(7) provision is an affirmative defense. [Emerald Partners v. Berlin, 726 A.2d 1215, 1223n24 (Del.1999). See also McMullin v. Beran, 765 A.2d 910, 926 (Del.2000).] Defendant directors thus have the burden of proving that they are entitled to exculpation under the statute. If aggressively applied, Emerald Partners could mean that a sec. 102(b)(7) provision rarely will entitle directors to a dismissal on grounds that plaintiff's complaint fails to state a cause of action. Consequently, plaintiffs will be entitled to discovery, which some might call a fishing expedition, and the settlement value of such claims will go up. Thus far, however, the chancery court has continued to hold a sec. 102(b)(7) based motion to dismiss is appropriate pre discovery where plaintiff solely alleged violations of the duty of care. [See, e.g., McMillan v. Intercargo Corp., 768 A.2d 492 (Del.Ch.2000); In re Lukens Inc. Shareholders Litig., 757 A.2d 720 (Del.Ch.1999). A subsequent Delaware supreme court decision in the Emerald Partners litigation confirmed this approach, while emphasizing that limited discovery is available where plaintiff has adequately alleged a violation of the duty of loyalty or of good faith. Emerald Partners v. Berlin, 787 A.2d 85 (Del.2001).]
Am I thus correct in inferring that judicial notice of a 102(b)(7) exculpation provision is how the Chancery Court is getting around Emerald Partners' identification of such a provision as an affirmative defense? And, if so, does Emerald Partners have any teeth on that score?
