Category Archives: Commentary

Peeling Back the Business Judgment Rule: Corporate Responsibility After Chiquita

By Matthew Goeller
Articles Editor, Delaware Journal of Corporate Law

Enacted in the first Judiciary Act of 1798, the Alien Tort Statute (“ATS”) provides federal jurisdiction to aliens alleging violations of international law. What remained a largely unused statute, the ATS reemerged in 1980 as a creative tool to hold violators of international law liable in U.S. courts, even when those violations occurred abroad or the actors were foreign citizens. As ATS jurisprudence unfolded over the last thirty years, the statute’s jurisdictional grant extended first to foreign state actors, then to private citizens, and eventually even to corporations. The Supreme Court’s decision in Kiobel v. Royal Dutch Petroleum Co., however, seemed to narrow the scope to which the ATS applies to corporations. Despite the Supreme Court’s holding, many circuit courts and commentators maintained that ATS liability is nonetheless still possible for corporations.

In Cardona v. Chiquita, Colombian citizens brought suit against Chiquita under the ATS, claiming that Chiquita’s support of known terrorist groups funded a brutal campaign of torture, drug trafficking, and imprisonment. The Eleventh Circuit’s holding that the ATS does not reach corporations highlights the current uncertainty as to whether the statute applies to corporations.

Adding to this uncertainty is an emerging concern that participation in international law violations might perhaps implicate a breach of fiduciary duties. Corporate directors, whose business decisions directly or indirectly involve the corporation with violators of international law, might ordinarily seek the protection of the deferential business judgment rule. However, more nuanced interpretations of fiduciary duties and more probative efforts of understanding the precise nature of those business decisions might well evince a breach of fiduciary duty. This analysis, coupled with the already present uncertainty as to the applicability of the ATS, should encourage directors of corporations to adopt more stringent governance policies that provide structural mechanisms to ensure compliance with internationally recognized legal norms.

Download the full article Peeling Back the Business Judgment Rule – Corporate Responsibility After Chiquita.

Suggested Citation: Matthew B. Goeller, Peeling Back the Business Judgment Rule: Corporate Responsibility After Chiquita, INST. DEL. CORP. & BUS. L. (May 28, 2015), http://blogs.law.widener.edu/delcorp/#sthash.7Nk3jxjd.dpbs

Random Thoughts on Proxy Access and Judicial Review

sclaesOfJusticeDarkLawrence A. Hamermesh
Ruby R. Vale Professor of Corporate and Business Law
Widener University School of Law, Wilmington, Delaware

On July 22, while I was vacationing and enjoying relatively cool temperatures in northern Maine, the District of Columbia Court of Appeals, suffering in Washington’s heat and humidity, issued an opinion invalidating Rule 14a-11, which the Securities and Exchange Commission had adopted about a year earlier.

Now that I’m back in the office and have had a chance to reflect on the Court of Appeals’ opinion, I can only begin to describe how mixed my feelings are on this whole subject.  On one hand, I was involved with the preparation of the rule while employed with the Commission Continue reading

Amylin Pharmaceuticals and a Substantive Duty of Care?

San Antonio Fire & Police Pension Fund v. Amylin Pharm., Inc., 2009 WL 3182602 (Del.).

In the trial below, the plaintiffs claimed, among other issues, that the board violated their fiduciary duty of care because they were not explicitly aware of the proxy puts when they approved the Indenture and credit agreements. The board had retained highly-qualified counsel and asked if there was anything “unusual or not customary” in the terms of the agreement.  It was told there was not.  The Proxy Puts exposed the Company to immediate repayment and repurchase obligations if Amylin shareholders elected a board of directors that did not include a majority of the incumbent directors, or directors approved by the incumbent directors.  These obligations could have required Amylin to remit more than $900 million – an amount exceeding the Company’s available cash. Continue reading

Bainbridge on Fiduciary Duties and Preferred Stockholders

The Court of Chancery’s recent decision in In Re: Trados Incorporated Shareholder Litigation, No. 1512-CC, 2009 WL 2225958 (July 24, 2009) prompted Professor Bainbridge to question the basic issue of whether there ought to be fiduciary duties to preferred stock holders at all   Professor Bainbridge gives a brief overview of this area of Delaware corporate law and concludes that Jedwab v. MGM Grand Hotels, Inc., 509 A.2d 584 (Del. Ch. 1986) should be overturned on both doctrinal and policy grounds.

For the full commentary see the post on his blog.