Reaffirming the Necessity of Bad-Faith Allegations to Pierce § 102(b)(7) Shields in Disclosure-Based SPAC Merger Challenges:
Mullen v. Bell, 24-2291 (2d Cir. 2025)

Introduction

Mullen v. Bell presented the United States Court of Appeals for the Second Circuit with a modern variation on a familiar theme: dissatisfied shareholders alleging that directors breached fiduciary duties in connection with a special-purpose acquisition company (“SPAC”) merger. Jeffrey Mullen, a former employee and shareholder of Terran Orbital Corporation (“Old Terran”), sought class-wide relief against Old Terran’s directors for alleged disclosure failures and against Tailwind Two Acquisition Corp. (“TTAC”), its directors, and Tailwind Two Sponsor LLC (“TTS”) for aiding and abetting the misconduct.

The core dispute revolved around written consent solicitation materials distributed to Old Terran shareholders in February 2022. Mullen contended the materials were misleading and failed to inform shareholders of their statutory appraisal rights. The Southern District of New York dismissed the complaint; the Second Circuit has now affirmed.

Summary of the Judgment

The Second Circuit, in a non-precedential summary order, affirmed dismissal under Rule 12(b)(6), holding that:

• Mullen failed to plead facts showing that Old Terran’s directors acted in bad faith or for personal self-interest—an indispensable element when a corporation’s charter contains an exculpatory clause authorized by 8 Del. C. § 102(b)(7).
• The alleged misstatements or omissions in the consent solicitation/Registration Statement were either (a) adequately disclosed, (b) hypothetical and expressly qualified, or (c) unknown to the board at the time of solicitation, and therefore not culpable.
• Because no primary breach of fiduciary duty was plausibly alleged, the derivative aiding-and-abetting claims necessarily failed.
• The post-merger notice of appraisal rights satisfied the statutory requirements of § 262(d)(2); Delaware common-law disclosure duties did not extend further absent bad-faith allegations.

Analysis

Precedents Cited

The panel relied on a suite of Delaware and federal authorities to ground its reasoning:

• In re Match Group, Inc. Derivative Litigation, 315 A.3d 446 (Del. 2024) – Reiterated the business judgment rule presumption of director good faith.
• Cede & Co. v. Technicolor, Inc., 634 A.2d 345 (Del. 1993) – Articulated the triad of fiduciary duties (good faith, loyalty, due care) and shareholder’s burden of proof.
• In re GGP, Inc. Stockholder Litigation, 282 A.3d 37 (Del. 2022) – Clarified that disclosure violations may sound in care or loyalty; to avoid § 102(b)(7) exculpation a plaintiff must plead bad faith or knowing misconduct.
• Arnold v. Society for Savings Bancorp, Inc., 650 A.2d 1270 (Del. 1994) – Set the baseline duty of “full and fair” disclosure when soliciting shareholder action.
• Coster v. UIP Companies, 300 A.3d 656 (Del. 2023) – Recognized per se loyalty breaches involving interference with voting contests, distinguished by the panel as inapplicable here.
• Malpiede v. Townson, 780 A.2d 1075 (Del. 2001) – Holding that aiding-and-abetting liability requires an underlying fiduciary breach.
• Federal pleading standards: Ashcroft v. Iqbal, 556 U.S. 662 (2009); Arkansas Pub. Emps. Ret. Sys. v. Bristol-Myers Squibb Co., 28 F.4th 343 (2d Cir. 2022).

Legal Reasoning

1. Business Judgment Rule & § 102(b)(7) Exculpation. The court began with Delaware’s business-judgment presumption. Because Old Terran’s charter contained a § 102(b)(7) waiver eliminating monetary liability for breaches of the duty of care, the complaint could only survive if it alleged a breach of the duties of loyalty or good faith—both requiring a showing of self-interest, bad faith, or intent to mislead.

2. Evaluation of Alleged Misstatements/Omissions. Each challenged disclosure was examined against contemporaneous public filings:

• Redemption Cap Misrepresentation: The Registration Statement explicitly said the 85% figure was a threshold for satisfying the net-debt condition, not a hard cap, and disclosed the condition’s waivability.
• Cash Position Estimates: The projection was framed as hypothetical and contingent on the threshold. Waiver of the condition mooted the estimate—no intentional deception was plausibly inferred.
• Unreported Amendments: Amendments occurred after the solicitation date; Arnold limits disclosure duties to information within the board’s control at the time of solicitation.
• PIPE Investor Payments & Debt Exchange: The $30 million quarterly fee and resulting dilution were expressly disclosed; the later debt-for-equity swap arose post-solicitation.

3. Appraisal-Rights Notice. Del. Code § 262(d)(2) requires notice within ten days after the effective date when a merger is approved by written consent. Old Terran complied. Although Mullen invoked a broader common-law duty, he pled no facts indicating knowing concealment or bad faith, again failing to bypass § 102(b)(7).

4. Derivative Aiding-and-Abetting Liability. Because no primary breach was pled, Malpiede barred secondary liability claims against TTAC, its directors, and TTS.

Impact

While issued as a summary order without precedential effect, Mullen v. Bell contributes to the growing body of federal courts applying Delaware law to SPAC-related disputes. Its practical implications include:

• Heightened Pleading Hurdle. Plaintiffs challenging SPAC mergers on disclosure grounds must plead particularized facts showing knowing or intentional misstatements to survive § 102(b)(7) shields—mere inaccuracy or hindsight “misses” will not suffice.
• Timing Matters. Information arising post-solicitation is outside the board’s duty of disclosure; plaintiffs must anchor claims to contemporaneous knowledge.
• Appraisal-Rights Framework Upheld. The panel confirmed that § 262(d)(2)’s post-merger notice regime is adequate in written-consent mergers absent bad faith—foreclosing arguments that earlier notice is per se required.
• Federal Trendline. The decision aligns with cases such as In re Multiplan Corp. Stockholder Litig. (Del. Ch. 2022) and Delman v. GigAcquisitions3 LLC (Del. Ch. 2023), indicating courts’ skepticism toward rote SPAC-disclosure suits lacking concrete evidence of director scienter.

Complex Concepts Simplified

• SPAC (Special-Purpose Acquisition Company): A publicly traded “blank-check” company formed solely to merge with a private target, thereby taking it public without a traditional IPO.
• Business Judgment Rule: A presumption that directors act in good faith, on an informed basis, and in the corporation’s best interest. Plaintiffs must rebut this presumption with evidence of bad faith, disloyalty, or gross negligence.
• § 102(b)(7) Exculpatory Clause: A Delaware charter provision that eliminates director monetary liability for breaches of the duty of care, but not for disloyalty or bad faith.
• Duty of Disclosure: A facet of fiduciary duties requiring directors to provide shareholders with all material information when seeking their action (e.g., votes or consents).
• Appraisal Rights (§ 262): Statutory right for dissenting shareholders to petition the Delaware Court of Chancery for a judicial determination of “fair value” of their shares after certain mergers.
• Aiding and Abetting Breach: Secondary liability requiring (i) a primary breach, (ii) knowledge of the breach, and (iii) substantial assistance. If the primary claim fails, so does the derivative claim.

Conclusion

Mullen v. Bell underscores the formidable barrier that § 102(b)(7) exculpatory provisions pose to disclosure-based fiduciary-duty claims, especially in the SPAC context where post-signing amendments and evolving deal economics are commonplace. Absent well-pled facts showing that directors knew their statements were false or acted with disloyal intent, courts will not infer bad faith. The Second Circuit’s disposition thereby reinforces the doctrinal distinction between negligent disclosure (exculpated) and disloyal or intentional deception (actionable), a demarcation likely to shape future litigation strategies for both plaintiffs and defendants in Delaware-governed corporate disputes.

For practitioners, the decision recommends meticulous drafting of proxy or consent materials with explicit conditional language and waiver disclosures, while reminding plaintiffs that conclusory allegations of “materially misleading” statements will be insufficient without specific evidence of scienter. Although a summary order, Mullen serves as a practical roadmap for courts confronting the next wave of SPAC-merger challenges and fortifies the protective capacity of § 102(b)(7) in the disclosure arena.