“Actual-Knowledge” Becomes the Touchstone: Delaware Clarifies Aider-and-Abettor Liability for Acquirers
Commentary on In re Columbia Pipeline Group, Inc. Merger Litigation, 332 A.3d 349 (Del. Supr. 2025)

1. Introduction

The Delaware Supreme Court’s en-banc reversal in In re Columbia Pipeline Group, Inc. Merger Litigation (June 17 2025) decisively re-aligns the contours of aiding-and-abetting liability for third-party buyers in corporate control transactions. The Court rejects the Court of Chancery’s $200-million judgment against Canadian acquirer TC Energy Corp. (formerly TransCanada) and holds that, after its own 2024 decision in In re Mindbody, Inc. Stockholder Litigation, an acquirer can be cast as an aider and abettor only if it had actual knowledge both (i) of the target-side fiduciary breach and (ii) of the wrongfulness of the acquirer’s own conduct. Constructive knowledge, “reckless indifference,” or aggressive arm’s-length bargaining, standing alone, are no longer enough. The decision also limits buyer exposure for alleged disclosure violations where the buyer passively reviews – but does not actively manipulate – the seller’s proxy statement.

2. Case Overview

Background Facts

• Parties. Columbia Pipeline Group, Inc. (“Columbia”), a Delaware-incorporated midstream company, and TransCanada (now TC Energy Corp.), a Canadian energy conglomerate.
• Transaction. July 1 2016 all-cash merger at $25.50 per share following a volatile 2015-2016 sale process run largely by Columbia’s CEO Robert Skaggs and CFO Stephen Smith, both beneficiaries of lucrative change-in-control agreements.
• Suit. Post-closing class action alleged:
  • Target officers Skaggs & Smith breached their duties of loyalty by running a management-tilted process.
  • Target board breached duty of care via insufficient oversight.
  • TransCanada aided and abetted those breaches and further “knowingly participated” in disclosure violations in Columbia’s proxy.
• Procedural Path. Court of Chancery found aiding-and-abetting liability, entered ≈ $200 million judgment. Supreme Court reversed.

Key Issues on Appeal

1. What level of scienter satisfies the “knowing participation” element for an acquirer accused of aiding and abetting sell-side fiduciary breaches?
2. Did TransCanada possess that knowledge and culpably participate?
3. Did TransCanada aid and abet disclosure breaches by passively failing to correct Columbia’s proxy?

3. Summary of the Judgment

The Supreme Court unanimously reversed the Court of Chancery. Anchoring its analysis to Mindbody (decided after the trial-level ruling), the Court held:

• Actual Knowledge Required. For a buyer to “knowingly participate,” the plaintiff must prove the buyer’s actual knowledge of both (a) the fiduciary breach and (b) the impropriety of the buyer’s own conduct. Constructive knowledge or reckless indifference is insufficient.
• No Actual Knowledge Found. The record did not show TransCanada actually knew Columbia’s officers or board were breaching duties; at most it perceived eagerness to sell and negotiating miscues – not clear breaches.
• No “Substantial Assistance.” Hard-nosed bargaining, exploiting superior skill, or misunderstanding an NDA standstill does not equate to culpable participation absent evidence of collusion or inducement.
• Disclosure Claim Rejected. TransCanada’s passive failure to correct Columbia’s proxy, despite a contractual review right, did not amount to aiding-and-abetting because it supplied no active assistance and lacked scienter.
• Damages & Contribution moot. With liability reversed, the Court did not reach damages allocation questions.

4. Analysis

4.1 Precedents Cited & Their Influence

• Malpiede v. Townson (2001). Established four-element test for aiding-and-abetting claims. Columbia court applied Malpiede but, Supreme Court says, mis-applied the scienter prong.
• RBC Capital Markets v. Jervis (2015). Earlier language spoke of “actual or constructive” knowledge. Court now confines that language to advisors; for buyers, Mindbody and Columbia tighten to actual knowledge.
• In re Mindbody (Del. Supr. 2024). Cornerstone precedent: two-step scienter (knowledge of breach + knowledge of own wrongdoing) and four-factor “substantial assistance” test from Dole. Columbia imports and applies same framework.
• Restatement (Second) of Torts § 876 & Restatement (Third) § 28. Provide academic scaffolding for “substantial assistance” doctrine; Court explicitly aligns with Restatement (Third) comment that actual knowledge is required.
• Morgan v. Cash (Del. Ch. 2010). Reiterated that privileged, arm’s-length bargaining is not actionable aiding-and-abetting absent collusion. Court relied heavily on Morgan’s “buy-off or exploit” benchmark.

4.2 The Court’s Legal Reasoning

(a) Re-defining “Knowledge”

The Supreme Court rejects the Chancery’s reliance on “constructive knowledge” and re-states that:

Actual knowledge – “clear and direct knowledge” – is indispensable; it cannot be imputed from what a ‘savvy negotiator should have realized.’

Because TransCanada never saw board minutes, internal emails, or retirement-timing motives proving disloyalty, it could not “actually” know a breach occurred. Perceived desperation or incompetence by Skaggs & Smith was, at best, circumstantial.

(b) No Culpable Participation

Applying the Mindbody/Dole factors:

1. Severity & Clarity. The sell-side breaches were not “clear” from TransCanada’s vantage point; some acts (e.g., ignoring standstill) appeared authorized by Columbia’s own counsel.
2. Amount & Kind of Assistance. TransCanada bargained hard but did not manipulate internal governance, pay side-deals, or draft misleading proxy language.
3. Relationship. Purely arm’s-length, adversarial positioning – protective for defendants.
4. State of Mind. No evidence TransCanada knew its own conduct was wrongful; bluffing in negotiations is not illegal.

(c) Disclosure Aiding-and-Abetting

Although Columbia’s proxy omitted several material facts, the buyer’s liability demands more: active help or conscious inducement. Section 5.01 of the merger agreement imposed a contractual duty to correct, but breach of contract ≠ aiding-and-abetting unless paired with scienter and substantial assistance. Here, “silence” did not create an informational vacuum because Columbia “knew everything TransCanada knew.”

4.3 Impact of the Decision

• Higher Pleading & Proof Bar. Stockholder plaintiffs must now plead particularized facts showing the buyer’s actual knowledge – emails, testimony, or documents demonstrating awareness of wrongdoing.
• Negotiating Latitude. Acquirers regain comfort that tough tactics – including walk-away threats, leveraging market conditions, or exploiting process weaknesses – will not automatically translate into secondary liability.
• Board Crafting of NDAs & Standstills. Targets must police and document standstill compliance; passive non-enforcement will not be “bootstrapped” against the buyer.
• Proxy Review Duties. Contractual “review and comment” clauses do not transform buyers into co-fiduciaries. Active deceit or participation is required.
• Advisers vs. Buyers. RBC remains good law for banker liability where constructive knowledge may suffice; but acquirers are in a separate, more protected category.
• Litigation Strategy. Plaintiffs may refocus on fiduciaries (officers/directors) and financial advisers rather than buyers, or seek books-and-records to uncover “smoking-gun” buyer emails.

5. Complex Concepts Simplified

• Aiding and Abetting. Think of it as a “plus-one” rule: someone (the fiduciary) commits the wrong, and another person (the aider) knowingly helps. Help must be both knowing and substantial.
• Actual vs. Constructive Knowledge. Actual = you really know. Constructive = you should have known if you were paying attention. After Columbia, only the former counts for buyers.
• Culpable Participation. Not mere awareness; it’s active encouragement or assistance – e.g., funding a self-deal, writing misleading disclosures, or structuring payoff packages.
• Standstill “Don’t-Ask-Don’t-Waive.” NDA clause barring the counter-party from privately or publicly asking the board to waive the standstill. Violations can taint a process but, without knowledge and collusion, don’t tar the buyer.
• Nominal vs. Compensatory Damages. Nominal ($0.50/share) symbolically vindicates a right without showing financial loss. It evaporated here once liability was vacated.

6. Conclusion

In re Columbia Pipeline cements a doctrinal shift begun in Mindbody: the Delaware Supreme Court is intent on confining aider-and-abettor exposure for third-party buyers to scenarios involving clear proof of collusion, inducement, or active deception. Constructive knowledge and ordinary hard bargaining are no longer fertile ground for mega-damage verdicts. Deal lawyers should still draft and observe robust process safeguards, but acquirers can negotiate aggressively without the overhang of expansive secondary liability. For plaintiffs, future success will hinge on documentary “smoking guns” evidencing the buyer’s contemporaneous awareness of fiduciary wrongdoing and its own illicit role – a high bar that promises to recalibrate post-closing merger litigation in Delaware.