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Duty of Care

Original Creator: Brian JM Quinn Current Version: Brian JM Quinn Show/Hide
  1. 1 Show/Hide More Aronson v. Lewis
    Original Creator: Brian JM Quinn Current Version: Brian JM Quinn
    In an earlier case (Shlensky v Wrigley) you were introduced the business judgment presumption. Remember that in Shlensky, the court ruled that absent some act of fraud or gross negligence that it would not second guess business decisions of a board of directors. This general deference to the board’s statutory role is known as the business judgment presumption and it plays out most commonly in cases where stockholders bring claims that boards have somehow violated their duty of care to the corporation. The case that follows, Aronson, is the leading restatement of the business judgment presumption. 
  2. 2 Show/Hide More Kamin v. Am. Express
    Original Creator: Brian JM Quinn Current Version: Brian JM Quinn
    The business judgment presumption creates a great deal of space for boards to make decisions related to the operation and strategic direction of the business. Provided boards are disinterested and act in good faith in an informed manner, courts will give those board decisions great lattitude when they are challenged by stockholders.  The following case is an example of a stockholder challenge to a board decision and the court's implementation of the business judgment presumption.
  3. 3 Show/Hide More Williams v. Geier
    Original Creator: Brian JM Quinn Current Version: Brian JM Quinn
    Absent the taint of self-interest, boards have great latitude with respect to decisions how to manage the business and affairs of the corporation.  Board decisions to amend the certificate of incorporation, like other business decisions, receive the benefit of the business judgment presumption.  In the following case, the effect of a fully-informed, uncoerced stockholder vote on the challenged transaction is that the challenged transaction receives the benefit of the business judgment presumption.
  4. 4 Show/Hide More Smith v. Van Gorkom
    Original Creator: Brian JM Quinn Current Version: Brian JM Quinn
    Van Gorkom is a controversial case of the Duty of Care in the context of a corporate acquisition. Van Gorkom occurred before and was the impetus for the adoption of the §102(b)(7)'s exculpation provision. Consequently, the result in Van Gorkom is unlikely to occur again. However, the Van Gorkom case is worth reading because it demonstrates the kinds of director failures that may well rise to the level of a violation of the duty of care.
  5. 6 Show/Hide More Malpiede v. Townson
    Original Creator: Brian JM Quinn Current Version: Brian JM Quinn

    The effect of 102(b)(7) provisions on litigation is significant. Exculpation provisions eliminate of monetary liability directors for violations of their duty of care. Consequently, if a plaintiffs alleges only that directors violated their duty of care and that caused them some damage, there is no remedy available at law for these plaintiffs. Where the court is unable to provide a remedy, judicial economy requires that a case be dismissed.

    In Malpiede, the Delaware courts ecounter just such a situation. The result is not surprising: a duty of care claim is dismissed for failure to state a claim for which there is a remedy available.

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December 12, 2013

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Brian JM Quinn

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