As the court described, a board's determination of its own compensation is reviewed as a self-dealing transaction under the entire fairness standard (see Legal Update, Delaware Court of Chancery Applies Entire Fairness to Breach Claim Relating to Non-employee Director Equity Awards for a discussion of the court's decision in Calma v. Templeton, which discussed this issue in detail). However, the business judgment rule will apply if the transaction is ratified by a fully informed, disinterested majority of the stockholders, at which point the decision will be reviewed under the standard for waste. Under the DGCL, the stockholders may ratify a board action by either:

Section 228 permits the use of written consents by a majority stockholder without a meeting, prior notice or a vote. However, notice of the written consent must be promptly given to the non-assenting stockholders (for a form of notice, see Standard Document, Section 228 Notice to Stockholders). The defendants argued that Zuckerberg's affidavits and deposition testimony met the ratification requirement necessary to lower the review standard from entire fairness to business judgment, and that as a controlling stockholder, he did not need to adhere to the formalities of Section 228.

The court disagreed, finding that the requirements of Section 228 must be strictly adhered to for the ratification to be effective, even if the controlling stockholder's intent to ratify the board action is well known. The court reasoned that strict compliance with the formalities of Section 228 is necessary to prevent "the potential for mischief" and to provide transparency to those stockholders whose rights are affected by the actions of the majority.

The court exhaustively reviewed the legislative history of written stockholder action and Delaware case law in support of its conclusion that Section 228 must be strictly adhered to. While acknowledging that no case explicitly prohibits or precludes a stockholder's informal assent to a board action, the court also noted that in those cases where stockholder ratification lowered the standard of review from entire fairness to business judgment, the ratification occurred at a formal meeting of stockholders. Primarily, the court emphasized the decision in Gantler v. Stephens, which the Delaware Supreme Court recently confirmed in KKR to have been narrowly focused on the issue of ratification (965 A.2d 695 (Del. 2009); (Del. Oct. 2, 2015); see also Legal Update, Delaware Supreme Court Affirms "KKR," Lowers Standard of Review from Enhanced Scrutiny to Business Judgment when Merger Approved by Fully Informed Stockholder Vote). The court here found that Gantler's use of the phrase "fully informed shareholder vote" was deliberate and intended to require a formal process for ratification, thus precluding informal methods of stockholder ratification.

The court also found support for its conclusion in the policies underlying the provisions of the DGCL that mandate procedural formalities. As the court explained, formality:

The court also noted the potential for a slippery slope by excusing strict adherence to the formalities of Section 228, which would in effect excuse a controlling stockholder from ever providing written consents for any major decision. Although the defendants maintained that there was no threat of imprecision or ambiguity by relying on affidavit when a single controlling stockholder holds 61% of the voting power, the court asked rhetorically what other methods of communication would then be acceptable: meeting minutes, press releases, conversations with directors, or even "liking" a Facebook post of a proposed corporate action.

Having denied the motion for summary judgment on the fiduciary duty claim, the court denied the motion on the related unjust enrichment claim as well. However, the court granted the defendants' motion to dismiss the plaintiff's waste claim. As the court explained, the standard for a waste claim is a showing that the director defendants authorized an exchange so one-sided that no business person of ordinary, sound judgment could conclude that the corporation had received adequate consideration. This test is extreme and rarely satisfied, and the plaintiff's allegations that the non-employee directors were overpaid did not satisfy that standard.