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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. A traditional parade of attorneys? Really Evansville? Y'all need to get out more. When is the traditional parade of notaries? Nurses? Sanitation workers? Pole dancers? I gotta wonder, do throngs of admiring citizens gather to laud these marching servants of the constitution? "Show us your billing records!!!" Hoping some video gets posted. Ours is not a narcissistic profession by any chance, is it? Nah .....

  2. My previous comment not an aside at court. I agree with smith. Good call. Just thought posting here a bit on the if it bleeds it leads side. Most attorneys need to think of last lines of story above.

  3. Hello everyone I'm Gina and I'm here for the exact same thing you are. I have the wonderful joy of waking up every morning to my heart being pulled out and sheer terror of what DCS is going to Throw at me and my family today.Let me start from the !bebeginning.My daughter lost all rights to her 3beautiful children due to Severe mental issues she no longer lives in our state and has cut all ties.DCS led her to belive that once she done signed over her right the babies would be with their family. We have faught screamed begged and anything else we could possibly due I hired a lawyer five grand down the drain.You know all I want is my babies home.I've done everything they have even asked me to do.Now their saying I can't see my grandchildren cause I'M on a prescription for paipain.I have a very rare blood disease it causes cellulitis a form of blood poisoning to stay dormant in my tissues and nervous system it also causes a ,blood clotting disorder.even with the two blood thinners I'm on I still Continue to develop them them also.DCS knows about my illness and still they refuse to let me see my grandchildren. I Love and miss them so much Please can anyone help Us my grandchildren and I they should be worrying about what toy there going to play with but instead there worrying about if there ever coming home again.THANK YOU DCS FOR ALL YOU'VE DONE. ( And if anyone at all has any ideals or knows who can help. Please contact (765)960~5096.only serious callers

  4. He must be a Rethuglican, for if from the other side of the aisle such acts would be merely personal and thus not something that attaches to his professional life. AND ... gotta love this ... oh, and on top of talking dirty on the phone, he also, as an aside, guess we should mention, might be important, not sure, but .... "In addition to these allegations, Keaton was accused of failing to file an appeal after he collected advance payment from a client seeking to challenge a ruling that the client repay benefits because of unreported income." rimshot

  5. I am not a fan of some of the 8.4 discipline we have seen for private conduct-- but this was so egregious and abusive and had so many points of bad conduct relates to the law and the lawyer's status as a lawyer that it is clearly a proper and just disbarment. A truly despicable account of bad acts showing unfit character to practice law. I applaud the outcome.

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