Business Judgment Rule: Fiduciary Duties of Corporate Directors, 6th Edition (1-year Online Subscription)

VOLUME I

Chapter I. The Business Judgment Rule–An Introduction

A. Historical Origins

B. Rationale

C. The Rule’s Presumption and Its Effect

• 1. The Presumption
• 2. The Shareholder Plaintiff’s Burden
• 3. The Fairness Standard Where the Presumption Is Overcome
• 4. Business Judgment Versus Fairness
• 5. Collective Versus Director-By-Director Review of Director Conduct

D. Elements of the Rule

• 1. A Business Decision
• 2. Disinterestedness and Independence
• 3. Due Care
• 4. Good Faith
• 5. No Abuse of Discretion

E. Fraud, Illegality and Ultra Vires Conduct

F. Waste

G. Application of the Business Judgment Rule to Officers

H. Efforts to Codify the Business Judgment Rule

• 1. The Model Business Corporation Act
• 2. Principles of Corporate Governance: Analysis and Recommendations

Chapter II. Fiduciary Duties of Corporate Directors and Controlling Shareholders

A. The Director’s Duty of Care

• 1. The Relationship Between the Business Judgment Rule and the Duty of Care
• 2. The General Standard of Care
• 3. Oversight and Monitoring
• 4. Liability
• 5. Reliance and Delegation
• 6. Shareholder Ratification
• 7. Director Protection Statutes
• 8. Directors of Financial Institutions
• 9. Considerations Involving Damages

B. The Director’s Duty of Loyalty

• 1. The Relationship Between the Business Judgment Rule and the Duty of Loyalty
• 2. Interested Director Transactions
• 3. The Corporate Opportunity Doctrine
• 4. Director and Officer Compensation
• 5. Stock Options
• 6. Insider Trading

C. The Controlling Shareholder’s Duty of Loyalty

• 1. The Definition of Control
• 2. The Controlling Shareholder’s Rights as a Shareholder Versus its Fiduciary Duties as a Controlling Shareholder
• 3. Sale of Control at a Premium
• 4. The General Scope of the Controlling Shareholder’s Obligation to Demonstrate Fairness
• 5. Parent-Subsidiary Transactions: Sinclair and Its Progeny
• 6. Wholly-Owned Subsidiaries
• 7. Two Roads to Going Private: Merger Agreements and Tender Offers Followed by Short-Form Mergers
• 8. Merger Agreements with Controlling Shareholders

VOLUME II

• 8. Merger Agreements with Controlling Shareholders (Cont'd)
• 9. Tender Offers by Controlling Shareholders Followed by Short-Form Merger
• 10. Efforts to Unify the Legal Standards Governing the Two Roads to Going Private
• 11. The Fairness Standard in Controlling Shareholder Transactions Other Than Going Private Transactions
• 12. Principles of Corporate Governance and the Committe on Corporate Laws Guideline

D. Appraisal

• 1. Procedural Prerequisites
• 2. Determining Fair Value
• 3. Differences Between Appraisal and Fiduciary Duty Proceedings
• 4. When Appraisal Constitutes an Exclusive Remedy
• 5. The Different Rules Governing Short-Form Mergers
• 6. Quasi-Appraisal
• 7. Interest in Appraisal Cases

E. The Duty of Disclosure

• 1. The Reach of the Duty of Disclosure and the Difference Between Cases Where Shareholder Action Is and Is Not Requested
• 2. The Role of the Business Judgment Rule
• 3. Materiality
• 4. Remedies

F. Acquiescence

• 1. The Supreme Court’s Bershad Rule
• 2. Court of Chancery Decisions Limiting Bershad in Light of Lynch and Rabkin

G. Wrongful Coercion

• 1. Voting
• 2. Offers to Purchase Shares

H. Conflicts Among Shareholders

• 1. The Extent to Which Common Shareholders Must Be Treated Equally
• 2. Involving Different Classes of Common Stock
• 3. Preferred Shareholders

I. Fiduciary Duties of Directors of Financially Troubled Corporations

• 1. Fiduciary Duties Generally Not Owed to Creditors of Solvent Corporations
• 2. The Fiduciary Duties Owed to Creditors – and the Community of Interests – of Insolvent Corporations
• 3. Determining When a Corporation Is Insolvent
• 4. The “Vicinity” or “Zone” of Insolvency

Chapter III. The Business Judgment Rule in Transactions Involving Defensive Measures, Corporate Control and Merger Agreements

A. Introductory Issues

• 1. Should the Rule Apply to Defensive Measures at All?
• 2. The Unocal Doctrine
• 3. The Revlon and QVC Doctrine
• 4. The Blasius Doctrine
• 5. Consideration of Non-Shareholder Constituencies
• 6. Standing Considerations

B. White Squire Stock Transactions

• 1. Friendly Stock Acquisitions
• 2. Employee Stock Ownership Plans (“ESOPs”)
• 3. Bridge Financing

C. Crown Jewel Asset Sales

D. White Knight Transactions and Deal Protection Measures in Merger Agreements

• 1. Leg-Up and Lock-Up Stock Options
• 2. Lock-Up Asset Options
• 3. No Shop, No Talk and Fiduciary Out Provision

VOLUME III

• 3. No Shop, No Talk and Fiduciary Out Provision (Cont'd)
• 4. Market Check and Go Shop Provisions
• 5. Termination Fees and Expense Reimbursement Provisions
• 6. Matching Rights
• 7. Topping Fees
• 8. Non-Termination Provisions

E. Self-Tender Offers, Exchange Offers and Extraordinary Dividends

• 1. Self-Tender Offers and Exchange Offers
• 2. Extraordinary Dividends

F. Super-Voting Common Stock

• 1. Statutory Authority for Super-Voting Stock
• 2. SEC Rule 19c-4 and Its Aftermath
• 3. Cases Upholdingthe Adoption of Super-Voting Stock Plans
• 4. Cases Enjoining the Adoption of Super-Voting Stock Plans
• 5. Claims Involving Previously Adopted Super-Voting Stock Plans

G. Poison Pill Shareholder Rights Plans

• 1. Adoption of Poison Pill Rights Plans
• 2. Use of Poison Pill Rights Plans During a Contest for Control
• 3. Shareholder Resolutions

H. Shareholder Meeting Dates and Shark Repellent Charter and Bylaw Provisions

• 1. Shareholder Meeting Dates
• 2. Shark Repellent Charter and Bylaw Provisions

I. Golden Parachute Severance Agreements

• 1. Barriers to Judicial Review
• 2. The Standard of Review
• 3. Legislation
• 4. Funding Trusts
• 5. Employee Tin Parachutes

J. Antitrust and Other Regulatory Defenses

K. The Pac-Man Defense

L. Litigation

M. Settlements

• 1. Greenmail
• 2. Standstill Agreements

Chapter IV. The Business Judgment Rule in Shareholder Derivative Litigation

A. The Nature of Shareholder Derivative Litigation and the Special Rules Governing Shareholder Derivative Litigation

• 1. Basic Principles
• 2. Distinguishing Derivative from Non-Derivative Actions
• 3. Heightened Pleading Requirements
• 4. The Contemporaneous and Continuing Ownership Requirements
• 5. The Fair and Adequate Representation Requirement
• 6. Security for Expenses
• 7. The Demand Requirement
• 8. Termination by Special Litigation Committee
• 9. Settlement
• 10. Double Derivative Actions
• 11. Diversity Jurisdiction Issues

B. The Demand Requirement

• 1. Basic Principles
• 2. Demand Futility

VOLUME IV

• 2. Demand Futility (Cont'd)
• 3. Wrongful Refusal
• 4. Universal Demand States
• 5. Section 16(b) Cases
• 6. Demand on Shareholders

C. Termination by Special Litigation Committees

• 1. The Power to Terminate
• 2. The Scope of Judicial Review – Auerbach Versus Zapata
• 3. Special Litigation Committee Independence
• 4. Discovery on the Termination Issue
• 5. The Special Litigation Committee – Some Practical Considerations

D. Derivative Litigation in General Partnerships, Limited Partnerships and Limited Liability Companies

• 1. The Demand Requirement
• 2. Refusals of Demands
• 3. Special Litigation Committees

E. Privilege and Work Product Considerations

• 1. The Garner Doctrine
• 2. Privilege in the Context ofa Board Committee Investigation
• 3. Public Access to Court Filings
• 4. Perrigo

F. Section 220 Books and Records Inspections

• 1. The Development of Section 220 as a “Tool at Hand”
• 2. The Required Showing of Mismanagement
• 3. The Scope of the Inspection
• 4. Privilege and Work Product Issues
• 5. Confidentiality Issues
• 6. Subsidiaries
• 7. Requests for Books and Records by Directors and Former Directors

Chapter V. Indemnification and Insurance

A. Indemnification

• 1. Policy Considerations
• 2. Directors, Officers, Employees and Agents
• 3. Mandatory Indemnification
• 4. Permissive Indemnification
• 5. Advancement
• 6. Court-Ordered Indemnification and Advancement
• 7. Types of Proceedings Covered
• 8. Types of Conduct Covered
• 9. Expenses Incurred Other Thanas a Defendant
• 10. and Non-Exclusivity Provisions
• 11. Additional Public Policy Limitations
• 12. Notice to Shareholders

B. Insurance

• 1. Statutory Provisions Authorizing Insurance
• 2. The Need for Insurance
• 3. Public Policy Limitations

C. The D & O Crisis of the Mid-1980s and Its Aftermath

• 1. The Crisis
• 2. Responses
• 3. The Market Since the 1980s

Table of Cases and Other Authorities