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Thursday, November 21, 2013

Lyondell Chemical Co. v. Ryan case brief

Lyondell Chemical Co. v. Ryan case brief summary
970 A.2d 235 (2009)


CASE SYNOPSIS
Appellant stockholders filed a class action suit against appellee directors alleging a breach of the fiduciary duties of care, loyalty and candor. The Court of Chancery (Delaware) denied the directors' motion for summary judgment in order to obtain a more complete record before deciding the issue of bad faith. The court accepted an interlocutory appeal to consider the claim that the directors did not act in good faith in selling the company.

CASE FACTS
The trial court found that the company charter included an exculpatory provision, pursuant toDel. Code tit. 8, § 102(b)(7), protecting the directors from personal liability for breaches of the duty of care. Thus, the case turned on whether the alleged shortcomings also implicated the duty of loyalty, a breach of which was not exculpated.

ISSUE
The sole issue was whether the directors were entitled to summary judgment on the failure to act in good faith claim.

HOLDING
The court found that they were.

DISCUSSION

  • The directors were disinterested and independent; they were aware of the company's value and its prospects; and they considered the offer, under the buyer's time constraints, with the assistance of financial and legal advisors. 
  • There was no evidence from which to infer that they knowingly ignored their responsibilities, thereby breaching their duty of loyalty. 
  • The trial court should have inquired whether the directors utterly failed to attempt to obtain the best sale price. 
  • The directors did not breach their duty of loyalty by failing to act in good faith. 
  • In concluding otherwise, the chancery court reversibly erred.

CONCLUSION
The court reversed the decision of the chancery court and remanded the matter for entry of judgment in favor of the directors.

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