So says Friend of Glom Lyman Johnson over at CLS Blue Sky. That's a title that's going to get the attention of some corporate types!
Lyman first objects to Chancellor Leo Strine's recent decision In re MFW S’holders Litig. to give bjr protection to a controlling shareholder in a self-dealing transaction when there's an independent committee and majority-of-the-minority shareholder approval (for more see here and here), calling this move "incoherent" because shareholders don't exercise business judgment in the way directors do.
But then, he says, let's call the whole thing off:
As just one law professor who has grappled with teaching this material to law students for almost thirty years, I can say that presenting students with a coherent and cogent understanding of fiduciary duties is made more difficult by Delaware’s current business judgment rule construct. Students – having studied the concept of legal duty in diverse curricular offerings such as torts, trusts and estates, agency and partnership law, and professional responsibility – understand the importance of legal duties, including the scope of duty and situations of no-duty. The concepts of care and loyalty, in all their manifestations, are relatively easy to grasp, if of somewhat surprising contours.
Analytically and doctrinally, the teaching could stop there – with fiduciary duties and their breach – and students would have a solid and workable understanding. Little but unnecessary complexity in the law and pedagogy is added by then filtering all of the above through the threshold of the business judgment rule construct as a standard of review, particularly with the Cede breach of duty/burden shift feature.
Go read the whole thing.
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