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20 Cards in this Set
- Front
- Back
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Business Judgment Rule and Wriggly Stadium
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Kamin v. Amex
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"Facts: P filed a derivative shareholder suit against Am ex. for negligently decided on how to issue a dividend. Directors bought a stock at 30 mil it lost value ended up at 4 mil they decided to give it to shareholders as a dividend instead of offsetting their capital gains with these capital losses saving 8 million in taxes. Amex argued that recognizing such a significant loss in the open market would adversely affect the stock price.
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Van Gorkam
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"Facts: 5 inside directors and 5 outside Sold and merged the company at 55 dollars a share. Directors owed duty of loyalty and care so plaintiffs need to overcome BJR. Plaintiffs need to prove that there was disloyalty, bad faith, or lack of informed basis.
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Francis v. United Jersey Bank and Failure to monitor
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"Facts:Mother was extremely uninvolved, her sons stole over $12mm from the corp, the court found her liable also.
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Reasoning/Law: Mother committed nonfeasance-->removes BJR. She was not up to snuff with minimal action to meet duty of care:(1)
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Be familiar with what the corp is doing (2)Regular (3)review of financial statements (4)Attend some board meetings (5) A rudimentary understanding of the business of the corp (6) (nothing too exacting)
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102(b)7
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"Allows almost complete elimination of Care. Protects Directors for grossly negligent decision making processes on huge matters. However, even if you can still be liable for disloyalty and bad faith.
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Caremark Rule
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“Compliance with a director’s duty of care can never appropriately be judicially determined by reference to the content of the board decision that leads to a corporate loss, apart from consideration of the good faith or rationality of the process employed”
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Three types of Loyalty
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Self Dealing, Usurping Corporate Opportunity, Cash-Out Mergers
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Self-Dealing
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"A transaction where one director stands on both sides of a transaction will be judged under RIGOROUS scrutiny.
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Usurping (Rule)
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"Usurping Corporate Opportunity
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Cash out Mergers (loyalty)
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"Cash-Out Mergers
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Bayer v. Beran
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F:Plaintiffs argued that hiring wife as singer for radio advertisement was a breach of the duty of loyalty.
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144(A) 1,2,3
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"Defense against Breach of Loyalty 144(a) 1,2,3
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What are Disinterested Directors?
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"Usually outside directors.
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Broz V. Cellular
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"Facts: Broz the sole stockholder of RFB cellular was also on the board of CIS, as an outside director, when he outbid them in a cellular communications contract. Broz contacted several directors of CIS who said that they were not interested in acquiring the contract and they were not in any financial position to pursue the opportunity.
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Corporate Opportunity Doctrine
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"Owed by directors and Majority shareholders to minority shareholder.
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Interest Expectancy Test (Minority)
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"Interest or Expectancy test; (minority test); does the corporation have an interest or expectancy in the opportunity? Do they have a contractual option to buy the opportunity?
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Line Of Business (DE line of Business Test)
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"Line of Business test; (DE test most important)
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Stone V. Ritter
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"Facts: AmSouth Bank allowed a Ponzi scheme in without much questioning and failed to meet some regulations. They were fined. The plaintiff said fines were proximately caused by the boards failure to meet their Caremark duties (failure to monitor).
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AP Smith Mfg v. Barlow"
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"A corporation may participate in the creation and maintenance of community, charitable, and philanthropic funds as the directors deem appropriate and will, in their judgment, contribute to the protection of corporate interests. AP Smith Mfg. v. Barlow
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