Document: Sutherland v. Sutherland, C.A. No. 2399-VCN (Del. Ch. May 3, 2010)

This opinion, which is the latest installment in a series of opinions arising from a dispute among siblings in a family-run corporation, involved allegations of waste and breaches of the fiduciary duties of care and loyalty.  In electing to partially grant and partially deny the defendants’ motion for summary judgment, the Court of Chancery held that 1) the decision to appoint a special litigation committee does not constitute an admission of self-dealing as a substantive matter – in other words it may be an admission of an appearance or possibility of impropriety, but not of actual impropriety – but the matter could not be decided at summary judgment; 2) a claim regarding alleged misuse of a private jet was barred by the statute of limitations, but importantly, the Court noted that it would have otherwise been dismissed on the basis of the plaintiff’s failure to rebut the presumptions of the business judgment rule; 3) in fulfilling its obligations under the duty of care, a board would generally be deemed to fulfill its obligations by considering material facts that are reasonably available and would generally not be held liable unless the conduct rises to the level of gross negligence; 4) it was not improper for the corporation to pay the costs to defend a prior lawsuit demanding access to certain books and records of the corporation as it is generally customary for the corporation to pay such expenses absent a finding of bad faith in refusing access to such books and records; 5) it is a well-settled proposition of Delaware law that the adoption of a charter provision immunizing directors for personal monetary liability for breach of the duty of care, as authorized by § 102(b)(7) of the General Corporation Law, does not constitute self dealing – even when the provision is adopted under the threat of imminent litigation; and 6) absent some reason to suspect improper and unaccounted-for payment of company funds, the Court usually will not mandate an accounting from fiduciaries.