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USA · 2L · Business Associations

Fiduciary Duties (Delaware & NY)

The corporate law canon.

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  1. 1.Meinhard v. Salmon (N.Y. 1928) — standard?

    Joint venturers owe each other the duty of finest loyalty — "the punctilio of an honor the most sensitive" (Cardozo C.J.).

    Meinhard v. Salmon, 249 N.Y. 458 (1928)

  2. 2.Dodge v. Ford Motor Co. (Mich. 1919) — principle?

    A business corporation is organised primarily for the profit of its shareholders; directors were ordered to pay a special dividend.

    Dodge v. Ford Motor Co., 204 Mich. 459 (1919)

  3. 3.What is the business judgment rule?

    A presumption that in making a business decision directors acted on an informed basis, in good faith and in the honest belief the action was in the company's best interests.

    Aronson v. Lewis, 473 A.2d 805 (Del. 1984)

  4. 4.Smith v. Van Gorkom (Del. 1985) — held?

    Directors breached the duty of care by approving a merger in a two-hour meeting without adequate information; Delaware then enacted DGCL § 102(b)(7).

    Smith v. Van Gorkom, 488 A.2d 858 (Del. 1985)

  5. 5.DGCL § 102(b)(7)?

    A certificate of incorporation may eliminate directors' personal monetary liability for breaches of the duty of care, but not for breaches of loyalty, bad faith or knowing violations of law.

    8 Del. C. § 102(b)(7)

  6. 6.Unocal Corp. v. Mesa Petroleum (Del. 1985) — test?

    Defensive measures against a takeover get enhanced scrutiny: reasonable grounds to believe a threat existed, and a response reasonable in relation to the threat.

    Unocal Corp. v. Mesa Petroleum Co., 493 A.2d 946 (Del. 1985)

  7. 7.Revlon v. MacAndrews & Forbes (Del. 1986) — duty?

    Once the sale or break-up of the company is inevitable, the board's duty becomes getting the best price reasonably available for shareholders.

    Revlon, Inc. v. MacAndrews & Forbes Holdings, 506 A.2d 173 (Del. 1986)

  8. 8.In re Caremark International (Del. Ch. 1996) — duty?

    Directors must make a good-faith effort to ensure an adequate information and reporting system exists; liability needs a sustained or systematic failure of oversight.

    In re Caremark Int'l Inc. Derivative Litig., 698 A.2d 959 (Del. Ch. 1996)

  9. 9.Marchand v. Barnhill (Del. 2019) — significance?

    A Caremark claim survived dismissal where Blue Bell's board had no system to monitor food safety, its central compliance risk.

    Marchand v. Barnhill, 212 A.3d 805 (Del. 2019)

  10. 10.Walkovszky v. Carlton (N.Y. 1966) — issue?

    Veil piercing: splitting a taxi business into many thinly capitalised corporations was not enough by itself to hold the shareholder personally liable without more.

    Walkovszky v. Carlton, 18 N.Y.2d 414 (1966)