No Advance Notice Required: Delaware Chancery Upholds Board’s Right to Remove CEO

The decision provides significant guidance on the circumstances under which a board may act to remove a CEO, including by forming executive committees and acting without providing the CEO advance notice of the contemplated action.

The dispute arose in a closely held, family-owned company which controls the Market Basket grocery store chain. The company has been the subject of shareholder and control fights since the early 1990s. After the last round of family conflict (stemming from a Demoulas cousin’s shifting loyalty) resulted in a leveraged buyout in 2014, Arthur T. Demoulas and his three sisters emerged as the sole stockholders. Arthur served as CEO and, according to the court, often operated in a manner that thwarted and resisted board oversight. As he told the board in 2012, “[t]here’s only one boss in the company.” Over time, certain members of the board grew concerned about Arthur’s refusal to share information, his resistance to governance reforms, and rumors that Arthur and his allies were preparing for an employee walkout and customer boycott (similar to what had previously occurred in 2014) in the event Arthur was removed from his position of authority. 

In May 2025, the board suspended Arthur and key members of his team pending an outside law firm’s investigation. Arthur retaliated with a public relations campaign and social media attacks against his sisters and other board members. When mediation failed and an investigation confirmed the board’s concerns, the board terminated Arthur as CEO.

The Court’s Holdings

No-Trickery/No-Deception Doctrine Clarified 

Authur claimed that his termination was the result of unfair trickery and deception because the board concealed a list of governance issues until the start of an executive session, replaced a director as board chair without advance warning, and formed a committee that excluded directors aligned with Arthur. In rejecting this argument, the court provided an extended discussion of the “no-trickery” line of cases under Delaware law from Lippman¹ through Bäcker v. Palisades Growth Capital². The court clarified the narrow circumstances in which board action (such as the termination of a CEO) may be rendered void for deception. The court expressly overruled prior cases that appeared to recognize an obligation to give directors/CEOs advance notice of actions that could adversely affect their positions. The court explained that actionable trickery and deception only occurs when there is an affirmative misrepresentation that induced a director to attend a meeting (i.e., intentionally concealing that an emergency meeting would be used to address issues with the CEO’s performance or falsely stating that a general meeting would not address issues with the CEO). The court held that addressing a CEO’s performance at a general meeting that did not have a set agenda did not constitute an affirmative misrepresentation, even if the board intended to surprise the CEO. 

No-Exclusion Principle Has Limits 

The court also addressed the related principle that board majorities should not conduct business outside the boardroom such that meetings become rubber stamps. Although the court affirmed the importance of collective deliberation, it held that directors may confer with each other, and with officers, stockholders, and advisors outside of meetings to gather information, so long as they report material information to the full board and provide meaningful opportunities for deliberation. The court upheld the board’s formation of an executive committee that excluded a director aligned with Arthur, rejecting the argument that doing so was inequitable. Here, the directors rationally believed that the excluded director would share sensitive information with Arthur. The court held that this rational, good faith belief was sufficient to satisfy the business judgment rule — even if the directors’ belief ultimately proved incorrect.

Acting Quickly in a Crisis May Be a Protected Business Judgment 

The court also held that the board’s decision to act swiftly — suspending the CEO and key members of his team without first conducting an investigation — was a protected business judgment. The directors had heard from multiple sources that Arthur’s allies were preparing for an employee walkout and customer boycott, and they rationally concluded that immediate action was necessary to protect the company. In rejecting the argument that the directors should have investigated before acting, the court emphasized that the amount of information a board determines is “prudent to have before a decision is made is itself a business judgment of the very type that courts are institutionally poorly equipped to make.”

[1] Lippman v. Kehoe Stenograph Co., 95 A. 895 (Del. Ch. 1915)

[2] Bäcker v. Palisades Growth Cap. II, L.P., 246 A.3d 81 (Del. 2021)