Business Judgment Rule Motion To Dismiss

While the business judgment rule offers a good deal of protection to a director from any personal liability that protection can end up coming with a large price tag for legal fees.

Business judgment rule motion to dismiss. By a delaware corporation to dismiss any derivative action 2 on the theoreti cal level zapata in its refusal to apply traditional business judgment rule criteria to resolution of motions to terminate has revolutionized the legal basis for these motions and consequently the factual and legal analysis which these motions will entail. Additionally these lawsuits tend to be difficult to dismiss or dispose of before trial whether by motion to dismiss or motion for summary judgment. Also when a director facing liability cites the business judgment rule as a defense it is difficult to dispose of a lawsuit prior to trial.

Business judgment rule 11 the presumption of the business judgment rule attaches ab initio and to sur vive a motion to dismiss a plaintiff must allege well pleaded facts to overcome the presumption. The appellate court ruled that based upon wisconsin s liberal notice pleading requirements applying the business judgment rule at the motion to dismiss stage is disfavored because application of the rule generally requires a fact intensive analysis that would be incompatible with notice pleading. 6 2013 whether the decisions of corporate directors are protected by the business judgment rule is a fact intensive inquiry that cannot generally be resolved at the motion to dismiss stage a state appeals court recently clarified.

However a minority of courts have held that the business judgment rule is an affirmative defense that cannot be. Business judgment rule generally the business judgment rule is a judicial doctrine arising from courts respect for corporate self governance as well as their dislike for second guessing the business decisions of corporate directors and officers. In addition florida state courts generally disapprove of granting summary judgment in tort cases.

Sumptions of the business judgment rule. Several courts have resisted and questioned dismissing business judgment rule cases in a motion to dismiss. In an age of prevalent shareholder derivative lawsuits for breach of fiduciary duty the business judgment rule provides an important defense to corporate directors and may often provide a legal basis on which to dismiss such suits at the pleading stage.

Historically the business judgment rule as interpreted by state and federal courts presumed that directors of corporations making decisions on behalf of shareholders were correct if they acted 1 in good faith 2 on an informed basis 3 in a disinterested manner 4 with due care and 5 without discretion or waste. The business judgment rule has been described in delaware case law as follows.