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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. Indiana's seatbelt law is not punishable as a crime. It is an infraction. Apparently some of our Circuit judges have deemed settled law inapplicable if it fails to fit their litmus test of political correctness. Extrapolating to redefine terms of behavior in a violation of immigration law to the entire body of criminal law leaves a smorgasbord of opportunity for judicial mischief.

  2. I wonder if $10 diversions for failure to wear seat belts are considered moral turpitude in federal immigration law like they are under Indiana law? Anyone know?

  3. What a fine article, thank you! I can testify firsthand and by detailed legal reports (at end of this note) as to the dire consequences of rejecting this truth from the fine article above: "The inclusion and expansion of this right [to jury] in Indiana’s Constitution is a clear reflection of our state’s intention to emphasize the importance of every Hoosier’s right to make their case in front of a jury of their peers." Over $20? Every Hoosier? Well then how about when your very vocation is on the line? How about instead of a jury of peers, one faces a bevy of political appointees, mini-czars, who care less about due process of the law than the real czars did? Instead of trial by jury, trial by ideological ordeal run by Orwellian agents? Well that is built into more than a few administrative law committees of the Ind S.Ct., and it is now being weaponized, as is revealed in articles posted at this ezine, to root out post moderns heresies like refusal to stand and pledge allegiance to all things politically correct. My career was burned at the stake for not so saluting, but I think I was just one of the early logs. Due, at least in part, to the removal of the jury from bar admission and bar discipline cases, many more fires will soon be lit. Perhaps one awaits you, dear heretic? Oh, at that Ind. article 12 plank about a remedy at law for every damage done ... ah, well, the founders evidently meant only for those damages done not by the government itself, rabid statists that they were. (Yes, that was sarcasm.) My written reports available here: Denied petition for cert (this time around): http://tinyurl.com/zdmawmw Denied petition for cert (from the 2009 denial and five year banishment): http://tinyurl.com/zcypybh Related, not written by me: Amicus brief: http://tinyurl.com/hvh7qgp

  4. Justice has finally been served. So glad that Dr. Ley can finally sleep peacefully at night knowing the truth has finally come to the surface.

  5. While this right is guaranteed by our Constitution, it has in recent years been hampered by insurance companies, i.e.; the practice of the plaintiff's own insurance company intervening in an action and filing a lien against any proceeds paid to their insured. In essence, causing an additional financial hurdle for a plaintiff to overcome at trial in terms of overall award. In a very real sense an injured party in exercise of their right to trial by jury may be the only party in a cause that would end up with zero compensation.

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