Cloudflare Recap Enjoined: Delaware Draws First Line on Section 144 Safe Harbor

In re Cloudflare, Inc. Stockholder Litigation (Del. Ch., V.C. Laster) preliminarily enjoined the founders' multi-step recapitalization — Class B exchanged into one-vote Class A plus nine-vote preferred, with a new non-voting Class C — designed to preserve founder control while unlocking liquidity the plaintiffs' expert valued above $4 billion. Defendants won every statutory argument: Section 144(d)(6)'s injunction exclusion reaches only Unocal/Revlon/Blasius-style deal protections, not conflicted controller transactions; the board's disinterestedness determinations survive gross-negligence review; and the heightened disinterest presumption for listed companies applies beyond the pleadings, requiring clear and convincing evidence to rebut. But the court found a reasonable probability that the committee lacked good faith, citing a controlled mindset, a pre-set narrative, backchannels to the founder, and Signal messages set to auto-delete; the gross-negligence claim failed, and defendants were offered a roughly 90-day bifurcated mini-trial on good faith alone. Counsel should expect the good-faith clause to become the default battleground in controller deals; watch defendants' election and the Dodiya line of cases.