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Does Revlon Make Nevada Tense?
Monday, June 24, 2024

In Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., 506 A.2d 173, 182 (1986), the Delaware Supreme Court famously held that when the sale of a corporation becomes inevitable, the board of directors' duty changed from the preservation of the corporation to the maximization of the company's value at a sale for the stockholders' benefit. Nearly four decades have passed and Revlon remains a seminal case in Delaware jurisprudence.

Until now, however, the Nevada Supreme Court has taken absolutely no notice of Revlon. In a ruling earlier this month, the Court finally mentioned Revlon, but did not decide its application to Nevada corporate law:

Finally, we also note that Revlon appears to be in tension with Nevada corporate law, but we will not directly address that issue here, seeing that PAMTP has not pleaded a Revlon claim. See NRS 78.138(5) (“Directors and officers are not required to consider, as a dominant factor, the effect of a proposed corporate action upon any particular group or constituency having an interest in the corporation.”); Guzman v. Johnson, 137 Nev. 126, 131-32, 483 P.3d 531, 537 (2021) (holding that the “inherent fairness standard,” which obligated directors “to show [a transaction's] inherent fairness from the viewpoint of the corporation and those interested therein,” no longer applies in Nevada (internal quotation marks omitted)).

In re Parametric Sound Corp. Shareholders' Litig., 140 Nev. Adv. Op. 36 (2024). Eleven years ago, I posited that Nevada's "other constituency" statute (NRS 78.138) "constitutes an explicit repudiation by Nevada's legislature of Delaware law as established in [Revlon]". Keith Paul Bishop & Jeffrey P. Zucker, Bishop & Zucker on Nevada Corporations and Limited Liability Companies (2013). It seems that the Nevada Supreme Court may be in agreement with that thought.

For more about the Parametric Sound decision, see Nevada Supreme Court Follows Delaware In Overruling Gentile v. Rosette.

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