Corporate Governance

Fiduciary Duties of Officers and Directors: Gantler v. Stephens (An Introduction) (part 1)

By J. Robert Brown

We are a bit behind on our review of cases arising out of Delaware.  Over the next few posts we take a look at Gantler v. Stephens, a recent decision by the Delaware Supreme Court.  It is a rare victory for shareholders, with the Supreme Court overturning the decision of the Chancery Court to dismiss the suit.

While there are problems with the decision -- problems that arise out of entrenched positions of the Delaware courts -- the opinion was remarkably balanced, essentially allowing shareholders to circumvent a motion to dismiss to have the right to discovery and the right to make a case based upon the actual facts rather than what can be gleaned from public sources.  The opinion also breaks some new ground, once and for all clarifying that officers have fiduciary obligations identical to those of directors on the board.  Moreover, the Court agreed that the plaintiffs had alleged sufficient facts to raise issues about possible fiduciary violations not only by the CEO but also the CFO.

We will do a series of posts on the case and explore some of the implications.  As usual, primary materials from the Chancery Court can be found on the DU Corporate Governance web site.

Full post as published by The Race to the Bottom on February 11, 2009 (boomark / email).