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RE: fiduciary duty, entire fairness and opportunity cost

From: Baker, John <JMB@STRADLEY.COM>
Date: Thu, 11 Mar 2004 17:22:26 -0500
Message-ID: <LYRIS-24436-16768-2004.03.11-17.22.45--www-validator-css#w3.org@list.law.umaryland.edu>
To: "BIZLAW" <bizlaw@list.law.umaryland.edu>

	The problem is that the firm, which can take on only a limited amount of leverage and therefore has to select between desirable transactions, is forgoing the more desirable transaction in order to benefit an insider.  When the question is presented on those terms, I don't think the insider can win.  The corporate fiduciaries have obviously violated their fiduciary duty, whether or not an entire fairness standard is applied.

	As Richard Booth points out, the plaintiff likely has difficult issues of proof in showing that the insider transaction, though still a profitable transaction, was clearly less valuable to the firm but was nonetheless chosen to benefit an insider.  If the plaintiff can make that showing, though, the defendant is going to be in a bad way.

John Baker

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Received on Thursday, 11 March 2004 17:23:00 UTC

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