Business Judgment Rule

News & Analysis as of

Avoiding Personal Liability: A Guide For Directors And Officers

According to the popular media, we are living in an era of corporate crime. Scandals like Enron, HealthSouth and WorldCom stretch so far back they seem like they are not even of this millennium. Among the milestones since...more

Delaware Supreme Court Leaves Open The Question Of Whether Breach Of Contract Is A Business Judgment

In this interesting order affirming a Chancery decision, the Supreme Court went out of its way to make a point. A stockholder suit alleging that the board breached a stock option plan may state a claim for breach of contract...more

Appointment Of Independent Directors On The Eve Of Bankruptcy: Why The Growing Trend?

In recent years, companies in financial distress have found “independent” directors to be useful to achieve protections for their board members. An independent director is a director – usually with no prior affiliation to the...more

The Ropes Recap: Mergers & Acquisitions Law News - January 2015

In this issue: - News from the Courts - Delaware Supreme Court Clarifies Fiduciary Duties in Sale Context and Overturns Judicial Imposition of Auction in Deal with Passive Market Check - Illinois Court...more

Minority Shareholder Oppression In Family Businesses In Pennsylvania

Decades ago, Pennsylvania courts, as well as other state courts, were reluctant to interfere with business judgments of majority shareholders managing a corporation, even where the expectations of a minority shareholder had...more

Appellate Division Review - Business Judgment Rule, Privilege, Child Support, Animal Rights

The more things change, the more they remain the same. As we enter a new year, New York’s Appellate Division faces the same and greater challenges: increasing caseloads, staff shortages, judicial vacancies, and legal disputes...more

Delaware Corporate Law And Litigation: What Happened In 2014 And What It Means For You In 2015

In This Issue: - Delaware’s Leading Role in Business and Business Litigation - Curbing Stockholder Litigation: Exclusive Forum and Fee-Shifting Provisions - Two-Tiered Poison Pill Targeted at Hedge Fund...more

Government Contracts Quarterly Update - January 2015

The Government Contracts Quarterly Update is published by BakerHostetler’s Government Contracts Practice team to inform our clients and friends of the latest developments in federal government contracting. Topics in...more

Delaware Court Determines That 17.5% Stockholder Seeking To Take Company Private Could Be Deemed A Controller And Therefore...

On November 26, 2014, the Delaware Court of Chancery denied a motion to dismiss a complaint challenging a going-private transaction where the company's CEO, Chairman and 17.5% stockholder was leading the buyout group. In his...more

Higher Educ. Mgmt. Group, Inc. v. Mathews et al., C.A. No. 9110-VCP (Del. Ch. Nov. 3, 2014) (Parsons, V.C.)

In this memorandum opinion, the Court of Chancery granted defendants’ motion to dismiss derivative claims asserted by plaintiff stockholders on the grounds that the plaintiffs failed to adequately plead demand futility under...more

New York Appellate Court Affirms Business Judgment Rule for Going-Private Transaction

New York companies seeking to go private with a controlling shareholder may now be less vulnerable to shareholder litigation. On November 20, 2014, the New York Appellate Division, First Department, affirmed a New...more

Business-Judgment Rule Applied in New York to Going-Private Transaction with Procedural Protections

The New York Appellate Division, First Department, ruled Thursday that the business-judgment rule – not the entire-fairness standard of review – can apply to a going-private transaction with the majority shareholder where the...more

Delaware Court of Chancery Applies Business Judgment Rule to Directors Who Approve Merger Supported by Large Shareholders

In its October 24, 2014, decision in In re Crimson Exploration Inc. Stockholder Litigation, C.A. No. 8541, the Delaware Court of Chancery confirmed that the business judgment rule is applicable in evaluating claims for breach...more

Nevada’s Business Judgment Rule: FDIC – 4; Management – 0

In recent weeks, the U.S. District Court has issued four separate rulings in cases brought by the Federal Deposit Insurance Corporation (FDIC) against former bank managers for breach of fiduciary duty. Here is a brief recap...more

Going Private Mergers: More Lenient Standard of Judicial Review Now Available

A recent Delaware Supreme Court decision has changed the rules for post-transaction litigation review for “going-private transactions.” The court described the conditions necessary for such a transaction to be judged by the...more

Delaware Court of Chancery Rejects Entire Fairness Review in Absence of Conflicted Transaction

On October 24, the Delaware Court of Chancery dismissed a lawsuit filed by certain minority stockholders of Crimson Exploration, Inc. in In re: Crimson Exploration Inc. Stockholder Litigation, C.A. No. 8541-VCP (Del. Ch. Oct...more

Delaware Court of Chancery Rejects Controlling Stockholder Claims and Applies Business Judgment Rule to Merger Suits

In In re KKR Financial Holdings LLC Shareholder Litigation, C.A. No. 9210 (Del. Ch. Oct. 14, 2014), the Delaware Court of Chancery dismissed a shareholder derivative suit brought by shareholders of KKR Financial Holdings LLC...more

Corporate and Financial Weekly Digest - Volume IX, Issue 42

In this issue: - Delaware Court of Chancery Rejects Controlling Stockholder Claims and Applies Business Judgment Rule to Merger Suits - FINRA Remarks at the National Society of Compliance Professionals...more

Delaware Court Confirms Applicability of Business Judgment Rule to Investment Decisions of Insolvent Corporations

In its October 1, 2014 decision in Quadrant Structured Prods. Co. v. Vertin, et al., C.A. No. 6990, the Delaware Court of Chancery applied the protections afforded under the business judgment rule to investment strategies...more

Wisconsin Supreme Court 2013-2014 Term Summary Part 3: Recap of Cases Affecting Wisconsin Businesses

This post is the third in a series of posts analyzing the 2013-14 term of the Wisconsin Supreme Court. This post provides in a nutshell what businesses need to know about the cases from last year’s term of the...more

Delaware Chancery Court Applies M&F Worldwide Six-Factor Test in Private Company Freeze-Out Merger and Grants Motion to Dismiss...

In a bench ruling in Swomley v. Schlecht, C.A. No. 9355-VCL (Del. Ch. Aug. 27, 2014), the Delaware Chancery Court relied on the six-factor test set out in Kahn v. M&F Worldwide Corp., 88 A.3d 635 (Del. 2014), to dismiss a...more

Delaware Court Denies Dismissal for Disinterested Directors When Entire Fairness Applies

The Delaware Court of Chancery recently addressed the pleading standard for claims against disinterested directors arising out of transactions involving a controlling stockholder, where the transaction has been alleged to be...more

Court of Appeal Clarifies Directors’ Fiduciary Duties and the Business Judgment Rule for Executive Compensation Matters

The Court of Appeal for Ontario recently affirmed the nature of directors’ and officers’ fiduciary duties and clarified the application of the business judgment rule in the context of a dispute regarding executive...more

The Texas Supreme Court Decision in Ritchie v. Rupe

On June 20, 2014, the Texas Supreme Court issued its opinion in Ritchie v. Rupe, 2014 Tex. LEXIS 500 (Tex. 2014). In Ritchie, a minority shareholder in a closely held corporation attempted to force the majority shareholders...more

Georgia Supreme Court: Business Judgment Rule Valid, But Bank Officers Can Still Be Liable

In the context of Federal Deposit Insurance Corporation (FDIC) litigation against the former directors and officers of a failed bank, the Georgia Supreme Court has upheld the validity of the business judgment rule in the...more

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