Friday, November 22, 2013

Brehm v. Eisner case brief

Brehm v. Eisner case brief summary
746 A.2d 244 (2000)


CASE SYNOPSIS
Plaintiff shareholders appealed a New Castle County Court of Chancery (Delaware) order that dismissed their shareholder derivative suit with prejudice for failure to comply with Del. Chancery Ct. R. 23.1 pleading standards.

CASE FACTS
Plaintiffs, shareholders of a publicly traded entertainment corporation, appealed the dismissal with prejudice of their derivative suit against defendants, former and current corporate directors and officers, for failure to properly plead particularized facts creating a reasonable doubt that director defendants were disinterested and independent or that their conduct in approving an extravagant and wasteful employment agreement for the president, and the subsequent agreement to a non-fault termination of that agreement, was protected by the business judgment rule.

DISCUSSION

  • The court affirmed, except as to the non-fault termination claim, remanding to allow plaintiffs to replead facts creating a reasonable doubt that the decision allowing non-fault termination was protected by the business judgment rule. 
  • The court applied de novo review, holding that plaintiffs failed to meet Del. Chancery Ct. R. 23.1 stringent pleading requirements of factual particularity with respect to lack of due care in decisionmaking and for waste of corporate assets.

CONCLUSION
Order affirmed in part, reversed in part, and remanded to allow plaintiffs to replead facts creating a reasonable doubt that a board of directors' decision allowing non-fault termination was protected by the business judgment rule. The dismissal with prejudice was affirmed in all other respects.

Recommended Supplements for Corporations and Business Associations Law

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