In Dodiya v. Franklin, C.A. No. 2025-0932-LWW (Del. Ch. Aug. 26, 2026) (Dodiya), the Delaware Court of Chancery had occasion to interpret recent amendments to the Delaware General Corporation Law (DGCL) that added safe harbor provisions (the Safe Harbor Provisions) for parties involved in certain conflicted corporate transactions. The Safe Harbor Provisions apply under certain conditions where a corporation is on one side of a conflicted transaction and directors, officers, or managers (of the corporation itself or another interested corporation) are on the other side. In Dodiya, the Court of Chancery ultimately dismissed the complaint against several disinterested directors, holding that though the Safe Harbor Provisions did not shield their conduct, which amounted to gross negligence, such conduct was nevertheless exculpated by common law and the certificate of incorporation’s exculpation provision. But claims against a self-interested director survived since the alleged conduct amounted to a breach of the duty of loyalty that was shielded by neither the Safe Harbor Provisions nor any exculpation provisions.
Defendant Martin Franklin is the founder and CEO of private investment firm Mariposa Capital, LLC (Mariposa). Starting in early 2022, Martin Franklin began disclosing ownership of stock in publicly traded sweetener producer Whole Earth Brands (Whole Earth), both personally and through Sababa Holdings FREE, LLC (Sababa). By August 2022, Martin Franklin, through an affiliate, had his son Michael Franklin (Franklin), a partner at Mariposa, appointed to the board of Whole Earth. After Whole Earth’s CEO resigned in December 2022, Franklin was appointed interim CEO.
Ten days after becoming interim CEO of Whole Earth, Franklin sent Mariposa a 54-page goodwill impairment test report concerning Whole Earth prepared by a global financial and risk advisory firm (the Whole Earth Report). The Whole Earth Report contained materially confidential and proprietary information, including financial projections and results, as well as a valuation of Whole Earth’s stock at $9.73 per share—about 2.5 times the publicly traded stock price. Franklin sent the Whole Earth Report to Mariposa in secret and did not subject Mariposa to any confidentiality obligations. Shortly thereafter, Franklin sent additional confidential information to Mariposa, and he directed the Whole Earth CFO to do the same.
Starting in March 2023 and by June 2023, Sababa acquired a 19.8 percent stake in Whole Earth by purchasing stock on the open market. Franklin soon expressed to an intermediary that he wanted to take Whole Earth private at $4.00 per share. Sababa then offered to acquire all of Whole Earth’s stock at $4.00 per share. The Whole Earth board of directors (the Board) knew Franklin was conflicted and asked him to recuse himself from merger discussions and to refrain from sharing information with Mariposa, but Franklin refused. The Board also became aware of Franklin’s disclosures to Mariposa. It nevertheless invited Franklin into subsequent merger discussions and even allowed him to attend a Board meeting on the special committee’s report regarding the Sababa merger. The Board and the Whole Earth stockholders ultimately approved the Sababa merger.
The defendant members of the Board alleged that they were protected by the Safe Harbor Provisions. Under Section 144(a) of the DGCL, interested transactions are protected so long as they are approved by a majority of disinterested directors in “good faith and without gross negligence.” The Court thus concluded that the Safe Harbor Provisions could not apply if the plaintiff showed that either the Sababa merger was approved in bad faith or the Board acted grossly negligently in approving the merger. The Court concluded that the Board’s lack of oversight, along with its willingness to allow a deeply conflicted fiduciary to access sensitive information without a mechanism to prevent leaks, was recklessly indifferent and amounted to gross negligence. The Court also concluded that the Safe Harbor Provisions were not available because the stockholders were materially misled about Franklin’s involvement in the Sababa merger.
In dismissing the complaint against the disinterested directors, the Court explained that although the Safe Harbor Provisions did not protect grossly negligent acts, such behavior was nevertheless exculpated. The complaint against Franklin, among others, however, was not dismissed. Because Franklin acted in his own self-interest, his conduct was neither exculpable nor covered by the Safe Harbor Provisions.
The Dodiya case confirms that the Safe Harbor Provisions and the exculpation provisions of the DGCL serve different functions. While the Safe Harbor Provisions may not protect a director’s grossly negligent behavior, an exculpation provision in a corporation’s certificate of incorporation may do so. Similarly, self-interested conduct is rarely, if ever, exculpated or provided safe harbor in Delaware, and the Dodiya case demonstrates why.
Reprinted with permission from the October 7, 2026 edition of the Delaware Business Court Insider © 2026 ALM Global Properties, LLC, trading as Centellic. All rights reserved. Further duplication without permission is prohibited, contact 877-256-2472 or [email protected].