The Federalist Society

Business Judgment Rule on the Line: Tower Air, IT Group, and Notice Pleading in Federal Court

February 3, 2007

Randall W. Bodner, Peter L. Welsh

The business judgment rule has long been a cornerstone of corporate law and business practice in America. Under the law of corporations of most states, the business judgment rule provides a presumption that the directors of a corporation have acted on an informed basis and in the best interest of the corporation. In order to bring an action against corporate directors and officers, plaintiffs have long been required both to plead and to prove facts sufficient to overcome the protections of the business judgment rule. As applied for decades by Delaware courts, plaintiffs have long been required to advance more than merely conclusory allegations that corporate fiduciaries have breached their fi duciary duties or mismanaged the aff airs of the corporation. Rather, plaintiffs must allege specific facts sufficient to rebut the business judgment rule’s presumptions....

Business Judgment Rule on the Line: Tower Air, IT Group and Notice Pleading in Federal Court  


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