Yesterday’s post concerned the recent decision by U.S. District Court Judge Charles R. Eskridge in Rowe v. Doris, 2025 WL 963590 (S.D. Tex. Mar. 31, 2025).  The case involved claims arising from the merger of two Nevada corporations and my post concerned Judge Eskridge’s rejection of the plaintiff’s theory that "the mere allegation that a director was an interested party in the transaction rebuts the business judgment rule”.  

The plaintiff also argued that even if an interested director could not be held liable as such, he could be liable as a controlling stockholder.  Judge Eskridge was again unpersuaded (emphasis in original):

Plaintiff also argues that, even if that conclusion pertains to Doris in his corporate capacities, it doesn't apply to his conduct as a controlling shareholder. Dkt 22 at 20-21. Yet it's a "basic tenet that controllers have a right to vote their shares in their own interest." In re Synthes, Inc, Shareholder Litigation, 50 A3d 1022, 1041 (Del Ch 2012).  And Nevada law is plainly in accord.  Section 78.140(2)(b) is set out at length above, with one of the "circumstances in which a contract or other transaction is not void or voidable" being "[t]he fact of the common directorship, office or financial interest is known to the stockholders, and stockholders holding a majority of the voting power approve or ratify the contract or transaction in good faith. The votes of the common or interested directors or officers must be counted in any such vote of stockholders."  That's all that happened here with respect to Doris as controlling shareholder—his director and financial interest were known to the other shareholders, and he was entitled to have his vote counted towards the result.  What's more, the conclusion in Guzman applied equally to the controlling shareholder—a corporate entity that wasn't an officer or director. See 483 P3d at 538-39; see also id at 539 (noting failure to show how controlling shareholder "improperly influenced the decision to the minority shareholders' detriment" or otherwise acted "fraudulently or unlawfully").

The takeaway?  Shareholders of Nevada corporations not only have a right to vote their shares in their own interest, those votes must be counted when approving a common or interested director transaction.