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Justices answer certified question

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The Indiana Supreme Court Monday answered the certified question sent to them by the U.S. District Court in New York about what standard should be applied in determining whether a director is “disinterested” under Indiana Code Section 23-1-32-4(d).

The U.S. District Court for the Southern District of New York certified the question of “What standard should be applied in determining whether a director is ‘disinterested’ within the meaning of Indiana Code § 23-1-32-4(d), and more specifically, is it the same standard as is used in determining whether a director is disinterested for purposes of excusing demand on the corporation’s directors under Federal Rule of Civil Procedure 23.1 and Rales v. Blasband, 634 A.2d 927, 936 (Del. 1993)?”

The justices accepted the question in November 2009. The question comes from the case, In re ITT Derivative Litigation, Sylvia B. Piven, et al. v. ITT Corp., et al.,  No. 94S00-0911-CQ-508. One of ITT’s business units supplies night vision equipment to the military; ITT was charged and fined because it exported military technology to other countries in violation of the U.S. State Department restrictions. The instant case is a derivative action, on behalf of ITT, brought by ITT shareholders against ITT directors. The plaintiffs want to recover the criminal fines and penalties paid, alleging that the directors violated fiduciary duties by not monitoring and supervising management of the unit.

Shareholder Robert Wilkinson didn’t make any demand on ITT’s board to pursue the claims; shareholder Anthony Reale did. The board appointed a Special Litigation Committee to consider whether the corporation should pursue the claims in question, and the District Court ruled the three, independent, outside directors appointed to the committee were not “disinterested” under I.C. Section 23-1-32-4.

The high court held that the Indiana Business Corporation Law employs the same standard for showing a “lack of disinterestedness” both as to the composition of special board committees under the statute and to the requirement that a shareholder must make a demand that the corporation’s board act unless the demand would be futile.

The District Court properly concluded that in assessing the futility of a demand, Indiana law determines whether a director is “disinterested” by asking whether a derivative claim poses a significant risk of personal liability for the director, which is the Rales standard, wrote Chief Justice Randall T. Shepard.

“Determining that a named director is ‘interested’ as respects all claims save for the outright frivolous would likely preclude most directors from serving on an SLC which considers shareholder demands,” wrote the chief justice. “Ousting directors from such roles on a broader basis than that mandated by Rales undermines the intent of Indiana’s BCL.”

Neither the statutory language nor the policies underlying the BCL suggest that the standard for showing a lack of disinterestedness under the statute should be more “plaintiff-friendly” than the showing required in the demand futility context, the justice continued.

Justice Frank Sullivan did not participate in answering the certified question.
 

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  1. I enrolled America's 1st tax-free Health Savings Account (HSA) so you can trust me. I bet 1/3 of my clients were lawyers because they love tax-free deposits, growth and withdrawals or total tax freedom. Most of the time (always) these clients are uninformed about insurance law. Employer-based health insurance is simple if you read the policy. It says, Employers (lawyers) and employees who are working 30-hours-per-week are ELIGIBLE for insurance. Then I show the lawyer the TERMINATION clause which states: When you are no longer ELIGIBLE! Then I ask a closing question (sales term) to the lawyer which is, "If you have a stroke or cancer and become too sick to work can you keep your health insurance?" If the lawyer had dependent children they needed a "Dependent Conversion Privilege" in case their child got sick or hurt which the lawyers never had. Lawyers are pretty easy sales. Save premium, eliminate taxes and build wealth!

  2. Ok, so cheap laughs made about the Christian Right. hardiharhar ... All kidding aside, it is Mohammad's followers who you should be seeking divine protection from. Allahu Akbar But progressives are in denial about that, even as Europe crumbles.

  3. Father's rights? What about a mothers rights? A child's rights? Taking a child from the custody of the mother for political reasons! A miscarriage of justice! What about the welfare of the child? Has anyone considered parent alienation, the father can't erase the mother from the child's life. This child loves the mother and the home in Wisconsin, friends, school and family. It is apparent the father hates his ex-wife more than he loves his child! I hope there will be a Guardian Ad Litem, who will spend time with and get to know the child, BEFORE being brainwashed by the father. This is not just a child! A little person with rights and real needs, a stable home and a parent that cares enough to let this child at least finish the school year, where she is happy and comfortable! Where is the justice?

  4. "The commission will review applications and interview qualified candidates in March and April." Riiiiiight. Would that be the same vaulted process that brought us this result done by "qualified candidates"? http://www.theindianalawyer.com/justices-deny-transfer-to-child-custody-case/PARAMS/article/42774 Perhaps a lottery system more like the draft would be better? And let us not limit it to Indiana attorneys so as to give the untainted a fighting chance?

  5. Steal a little, and they put you in jail. Steal a lot, and they make you king. Bob Dylan ala Samuel Johnson. I had a very similar experience trying to hold due process trampling bureaucrats responsible under the law. Consider this quote and commentary:"'When the president does it, that means it is not illegal,' [Richard] Nixon told his interviewer. Those words were largely seen by the American public -- which continued to hold the ex-president in low esteem -- as a symbol of his unbowed arrogance. Most citizens still wanted to believe that no American citizen, not even the president, is above the law." BWHaahaaahaaa!!!! http://www.philly.com/philly/blogs/attytood/When-the-president-does-it-that-means-it-is-not-illegal.html

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