June 08, 2006
Disney (Arguments) on Ice: The Business Judgment Rule and Officers
Posted by Christine Hurt

As Gordon and our readers have pointed out, the Delaware Supreme Court declined to address issues that it decided did not need to be addressed at this point.  One interesting side issue that was raised on appeal by the appellants was whether the business judgment rule applied to officers or only directors.  The appellants argued that the BJR did not apply to decisions made by mere officers.  At the time, I blogged about this here and so did Steve Bainbridge.  It seemed like a good time for the court to clear that question mark up once and far all.

Or not.  In footnote #38, the court puts that question on ice:

These claims are asserted against the Disney defendants in their capacity as directors. The appellants also advance, as an alternative claim, an argument that Disney defendants Eisner, Litvack and Russell, are liable in their separate capacity as officers who, unlike directors, are not protected by the business judgment rule or the exculpatory provision of the Disney charter. That alternative argument is procedurally barred, because it was not fairly presented to the Court of Chancery. SUP. CT. R. 8. Indeed, the Chancellor noted in his Post-trial Opinion that the application of the business judgment to Eisner and Litvack was not contested, and that the “parties essentially treat both officers and directors as comparable fiduciaries, that is, subject to the same fiduciary duties and standards of substantive review.” Post-trial Op. at *50, n. 588. To the extent the argument is advanced against Russell, it also is not grounded in fact, because Russell was not an officer of Disney.

From the wording of the footnote, I cannot tell whether the fact that the parties "treat both officers and directors as comparable fiduciaries. . . subject to the same fiduciary duties and standards of substantive review" has substantive importance or merely procedural impact.

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