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Topic: Business judgment rule

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	Business judgment rule - Wikipedia, the free encyclopedia
		In effect, the business judgment rule creates a strong presumption in favor of the Board of Directors of a corporation, freeing its members from possible liability for decisions that result in harm to the corporation.
		The rationale for the rule is the recognition by courts that, in the inherently risky environment of business, Boards of Directors need to be free to take risks without a constant fear of lawsuits affecting their judgment.
		The presumption raised by the Business Judgment Rule may be rebutted by the plaintiff.
	en.wikipedia.org /wiki/Business_judgment_rule (270 words)

	ProfessorBainbridge.com: The business judgment rule (Site not responding. Last check: 2007-11-03)
		The modern conception of the business judgment rule as a standard of liability is largely the handiwork of Delaware supreme court justices Henry Horsey and Randy Holland.
		The business judgment rule is the offspring of the fundamental principle … [that] the business and affairs of a Delaware corporation are managed by or under its board of directors.
		Variants of the encouraging risk-taking and judicial expertise rationales for the business judgment rule are well-accepted in the literature.
	www.professorbainbridge.com /2004/01/the_business_ju.html (4489 words)

	[No title] (Site not responding. Last check: 2007-11-03)
		A further reason was the reluctance expressed by the Courts in scrutinising business judgments made by the board. General principles and guidelines were thought to have developed to ascertain sufficiently the standard of care and diligence required of company directors.
		Business Judgment Rule 1ST BASE The judgment must make it to ‘home base’ before the director is protected The merits of the business judgment will not be subject to review by the Courts.
		The relevance of the concept of control to the business judgment rule is in the context of the independence of the director — the requirement that the director does not have a ‘material personal interest’.
	www.bond.edu.au /law/blr/vol11-1/Greenhow.doc (8304 words)

	Thacher Proffitt & Wood - "Who Says the Business Judgment Rule Does not Apply to Directors of Ne (Site not responding. Last check: 2007-11-03)
		Significantly, it is both a procedural and substantive rule of law in that it both shields the directors from liability for the consequences of the decision and protects the decision itself from reversal by a court.
		The application of the business judgment rule may dictate whether such challenges are ultimately successful, or at least whether plaintiffs` lawyers are able to commence discovery, escalate defense costs and perhaps extract undeserving settlements to avoid the high costs of litigation.
		Curiously, the business judgment rule was asserted as an affirmative defense.
	www.thacherproffitt.com /Page.aspx?Doc_ID=2199 (7345 words)

	TCS Daily - The Importance of an 'Esoteric' Rule
		As it is usually phrased, the business judgment rule is "a presumption" that the directors or officers of a corporation acted on an informed basis, in good faith, and in the honest belief that the action taken was in the best interests of the company.
		Yet, the one thing about the business judgment rule on which everyone agrees is that it insulates directors from liability for negligence.
		The function of the business judgment rule thus is to act as a filter for self-dealing and fraud.
	www.tcsdaily.com /article.aspx?id=020306D (1163 words)

	Judicial Deference to Management Decisions in Planned Unit Developments
		The business judgment rule is a legal doctrine that restrains a court from overturning the management decisions of a corporation's board of directors or holding the board liable for any loss resulting from those decisions.
		After ruling that the fee was not authorized under the cooperative's governing documents and was violative of the state's business corporation statute, the court considered the effect of the business judgment rule on its decision.
		The reasons for setting aside judicial deference are the same under both the rule of reasonableness and the business judgment rule-lack of board power, failure to act for legitimate purposes and breach of fiduciary duty.
	www.abanet.org /rppt/publications/magazine/2001/01jf/jf01dilorenzo.html (3104 words)

	Rethinking the Business Judgment Rule in Discrimination Cases
		Such judgments may involve reviewing a prospective employee's qualifications for assuming a position, evaluating a current employee's level of performance to assure continued productivity, examining performance history to assess an employee's suitability for promotion, or examining performance to determine the need to demote and even terminate employment.
		The Court probably means one in the same when it states "employer's reasons" and "employer's business judgment." After all, the reason behind an employer's decision is the same as and a reflection of the business judgment underlying that decision.
		Blindly applying the business judgment rule, however, a limitation on plaintiff's evidence, operates merely to remove otherwise material evidence from the jury.
	www.expertlaw.com /library/employment/business_judgment.html (2696 words)

	HARHEN v. BROWN, et al. (Site not responding. Last check: 2007-11-03)
		The Massachusetts business judgment rule applicable to individual business decisions of directors and officers is similar to the business judgment rule described in Principles of Corporate Governance, supra at Sect.
		For all the foregoing reasons, the final judgment dismissing the complaint is reversed, and the case is remanded to the Superior Court for further proceedings consistent with this opinion.
		Consequently, as in the case of a business corporation, the exercise of the power to terminate derivative litigation by a committee of the board of a mutual insurance company is governed by the same law as governs the board itself.
	world.std.com /~cir/harhen.html (7115 words)

	FROF Articles - Shareholder Suits In Delaware: Delaware Supreme Court Applies High Standards of Review (Site not responding. Last check: 2007-11-03)
		The rule requires that a plaintiff filing a derivative action first make a demand on the board of directors or plead particularized facts demonstrating that a majority of the board of directors did not comply with the Business Judgment Rule.
		If the presumption of the business judgment rule is rebutted, the burden shifts to the director/defendants to prove to the trier of fact that the challenged transaction was "entirely fair" to the shareholder/plaintiff.
		Unlike the business judgment rule presumption, notwithstanding a Section 102(b)(7) provision, the type of transactions that require judicial review by an entire fairness standard do so because, by definition, the inherently "interested nature" of those transactions are inextricably intertwined with issues of loyalty.
	www.frof.com /articles/artDetail.asp?id=435 (1674 words)

	Judgment Calls - CFO Magazine - February Issue 2004 - CFO.com (Site not responding. Last check: 2007-11-03)
		A second ruling by the Chancery Court, in June 2003, reexamined another of the required conditions for the protection of the business-judgment rule: an independent board.
		The court agreed: it ruled that because the two SLC members were professors at Stanford University and three of the four defendants were either major donors to or professors at Stanford, the SLC was not independent.
		This ruling was inconsistent with previous Delaware decisions, which had held that absent a material economic relationship, personal connections were not enough to show lack of independence.
	www.cfo.com /article.cfm/3011471?f=related&origin=archive (642 words)

	Corporate officers and the business judgment rule: a reply to Professor Johnson. \| Business (General)
		He states as his thesis that the business judgment rule "does not and should not be extended to corporate officers in the same broad manner in which it is applied to directors." (6) With similar circumspection, Johnson concludes his article with the assertion that "stockholders and directors...
		Third, we present a critique of Professor Johnson's treatment of the policy justifications for the business judgment rule, and conclude that he has unduly discounted their application to corporate officers.
		"Corporate officers and the business judgment rule: a reply to Professor Johnson." is an article from the Business (General) category.
	www.allbusiness.com /periodicals/article/499081-1.html (838 words)

	D&O Liability and the 2001 CBCA reform
		This rule is an extension of the fundamental principle that the business and affairs of a corporation are managed by or under the direction of its board of directors.
		The judgment of the Alberta Court of Appeal in Westfair seems to be such as to fall within the rather rare class of cases where relief is awarded under the oppression remedy, but no real substantial fault that might give rise to liability is found with the actions and decisions of the directors.
		The business decision and the directors' liability are thus intertwined in the American business judgment rule.
	www.masse.org /director_liability.html (11039 words)

	'Disney': Severance and the Business Judgment Rule (Site not responding. Last check: 2007-11-03)
		On the second issue the court considers whether (a) in approving the severance agreement and (b) in agreeing thereafter to a Non-Fault Termination pursuant to that agreement, the board was protected by the business judgment rule.
		But the rule prescribed by it cannot, against the protest of a shareholder, be used to justify payments of sums as salaries so large as in substance and effect to amount to spoliation or waste of corporate property.
		In that case, a complainant might overcome the presumption of the business judgment rule, even in a Delaware court, on the basis of an unreasonable absence of attention over a lengthy period of time, rather than on the basis of the size of the award alone.
	www.jebachelder.com /articles/981229.html (1851 words)

	Blog 702: A "Business Judgment Rule" for Medical Malpractice?
		Yes, I know no court adopts a "business judgment" rule for medical malpractice, though this sort of discretion is given attorneys in legal malpractice cases.
		In one, the rule is seen as a special standard of liability, under which directors may not be held liable for merely negligent business decisions, but only for decisions breaching some more forgiving standard of care (whose precise nature and contours remain subject to considerable indeterminacy and debate).
		As judicial interpretation of the new liability standard developed, a greater number of cases might be taken from the jury on summary judgment, in which event the statistical risk of successive verdicts imposing incompatible standards of conduct might be reduced.
	www.daubertontheweb.com /2006/06/business-judgment-rule-for-medical.html (1322 words)

	85141 -- Gray v. Manhattan Med. Center, Inc. -- Beier -- Kansas Court of Appeals
		A corporation may invoke the business judgment rule to short-circuit a shareholder derivative suit by demonstrating that the members of its board of directors who took the questioned action would be protected by the rule if they were sued individually.
		The business judgment rule gives a corporation's directors the authority to interpret and apply in the corporation's best interest the bylaws and applicable leases to which the corporation is a party.
		Although it relied upon its interpretation of the documents and we rely on the business judgment rule to give summary judgment to the defense on the shareholder derivative action, the outcome is the same.
	www.kscourts.org /kscases/ctapp/2001/20010209/85141.htm (3248 words)

	Publications: Articles: Guarding Yourself from Liability Using the Business Judgment Rule - Becker & Poliakoff
		After hearing the opinion of the professionals, the Board determined that in its "business judgment," there is "immediate" need for the repairs and levied the special assessment.
		In affirming this decision, the Court found that the Business Judgment Rule protects a corporate Board of Directors' business decisions as long as the Board acted in a "reasonable" manner in passing the special assessment.
		The Business Judgment Rule is further discussed in Chapter 617.0830, Florida Statutes, which establishes the general standards for directors.
	www.becker-poliakoff.com /publications/article_archive/guarding_yourself_liability.htm (827 words)

	Business Judgment Rule Should Not Apply To Officers \| Bowne Digest (Site not responding. Last check: 2007-11-03)
		The cases rarely explain why the business judgment rule should extend to protect officers, but the three common policy rationales for applying it to directors do not support the extension, reasons the author.
		The rule encourages individuals to serve as directors by lessening the risk of liability for decisions that, hindsight indicates, were imprudent.
		The third rationale is that the rule preserves the board's statutory centralized authority over corporate affairs; absent the rule, shareholders could too readily challenge that authority by simply filing a lawsuit.
	www.bowne.com /newsletters/newsletter.asp?storyID=1224 (812 words)

	US Corporate Law: Directors - Wikibooks, collection of open-content textbooks
		The idea behind this rule is that forcing unanimous consent ensures that opposing argument will not be silenced during the decision-making process: if a director opposes the action, they can force a meeting by refusing to sign the consent.
		Under the business judgment rule there is no protection for directors who have made "an unintelligent or unadvised judgment." A director's duty to inform himself in preparation for a decision derives from the fiduciary capacity in which he serves the corporation and its stockholders.
		Thus, a director's duty to exercise an informed business judgment is in the nature of a duty of care, as distinguished from a duty of loyalty.
	en.wikibooks.org /wiki/US_Corporate_Law:_Directors (1888 words)

	SSRN-The Business Judgment Rule as Abstention Doctrine by Stephen Bainbridge
		The business judgment rule is corporate law's central doctrine, pervasively affecting the roles of directors, officers, and controlling shareholders.
		Increasingly, moreover, versions of the business judgment rule are found in the law governing the other types of business organizations, ranging from such common forms as the general partnership to such unusual ones as the reciprocal insurance exchange.
		One views the business judgment rule as a standard of liability under which courts undertake some objective review of the merits of board decisions.
	papers.ssrn.com /sol3/papers.cfm?abstract_id=429260 (541 words)

	American Bar Association
		This Article suggests that the formulation of the duty of care is not an accurate statement of the law as applied by the courts and that the formulation of the business judgment rule is similarly flawed but to a lesser degree.
		This Article examines the unprecedented developments in the law surrounding the business judgment rule in shareholder derivative litigation in the 1980s, both in the context of when a prelitigation demand is required and the scope of judicial review of board decisions to refuse a shareholder's demand that litigation be commenced.
		The Article contends that the business judgment rule, therefore, should be de-emphasized as an analytical construct in the law of director fiduciary duties and should be sharply differentiated from the broader-gauged duty of due care.
	www.abanet.org /buslaw/tbl/mci/busjudrule.html (1350 words)

	2003 NYSlipOp 14001
		The court declined to apply the business judgment rule to sustain the shareholders' vote and the Board's issuance of the Notice of Termination.
		The business judgment rule is a common law doctrine by which courts exercise restraint and defer to good faith decisions made by boards of directors in business settings (see generally Davis, Jr., Once More, the Business Judgment Rule, 2000 Wis L Rev 573 [2000]).
		Procedurally, the business judgment standard will be applied across the cases, but the manner in which it presents itself varies with the form of the lawsuit.
	www.courts.state.ny.us /reporter/corrects/14001.htm (2888 words)

	Houston's Clear Thinkers: Directors and the business judgment rule
		These two academics continued their generous contributions over the past week with a couple of timely pieces in regard to director liability and the business judgment rule that should be required reading for any director of a public company or any advisor of a director.
		Under the business judgment rule, the directors have broad discretion to decide what to do and in whose interests to act.
		Thus, in a business climate in which many companies are having difficulty finding qualified independent board members, the message from these two corporate governance experts to directors and their advisors is clear -- embrace the tried-and-true business judgment rule.
	blog.kir.com /archives/002876.asp (725 words)

	MODIFIED BUSINESS JUDGMENT RULE APPLIED BY N.J. HIGH COURT (Site not responding. Last check: 2007-11-03)
		Unlike the traditional approach, the modified business judgment rule places an initial burden on directors to demonstrate that they acted reasonably, in good faith, and in a disinterested fashion in arriving at their decision to reject a shareholder's demand or to terminate existing litigation."
		This rule "protects a board of directors from being questioned or second-guessed on conduct of corporate affairs except in instances of fraud, self-dealing, or unconscionable conduct.
		Some consider the rule extremely deferential to directors, making it difficult for shareholders to maintain a derivative suit due to discovery limitations and their general inability to obtain facts necessary to overturn a board's decision.
	www.felahfd.com /hfdlaw/notebook/72.htm (1216 words)

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