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RE: fiduciary duty, entire fairness and opportunity cost

From: Kleinberger, Daniel <DKleinberger@WMitchell.edu>
Date: Thu, 11 Mar 2004 20:44:05 -0600
Message-ID: <LYRIS-24436-16788-2004.03.11-21.42.59--www-validator-css#w3.org@list.law.umaryland.edu>
To: "BIZLAW" <bizlaw@list.law.umaryland.edu>

This seems to me a very interesting intermediate position.  The presence
of the loyalty breach does not raise the duty of care standard
generally.  Instead the loyalty breach (besides stripping away the
protective presumptions of the BJR) calls into question the quality of
the board's decision making process -- was that process inadequate
because tainted by improper influences. 

Professor Daniel S. Kleinberger
William Mitchell College of Law
875 Summit Avenue
St. Paul, MN  55105
voice:   651/290-6387
fax:      651/290-6414
dkleinberger@wmitchell.edu


-----Original Message-----
From: Baker, John [mailto:JMB@STRADLEY.COM] 
Sent: Thursday, March 11, 2004 4:22 PM
To: BIZLAW
Subject: RE: fiduciary duty, entire fairness and opportunity cost


	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 21:42:46 GMT

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