In re Lear Corp. S'holder Litig. - 967 A.2d 640 (Del. Ch. 2008)

Rule:

When a fiduciary takes on a paying role, her duty of loyalty requires that she make a good faith effort to carry out those duties. Although everyone has off days, fidelity to one's duty is inconsistent with persistent shirking and conscious inattention to duty. Directors can be held culpable in the monitoring context if they breach their duty of loyalty by a sustained or systematic failure to exercise oversight, or were conscious of the fact that they were not doing their jobs as monitors. To hold a disinterested director liable for a breach of the fiduciary duty of loyalty for acting in bad faith, a strong showing of misconduct must be made.

Facts:

The company prepared to restructure. The company's chief executive officer (CEO) was concerned about losing his retirement benefits. The bidder presented the CEO and the directors with a merger option promising to help both the shareholders and the CEO. After support for the merger deal did not materialize, the directors asked the bidder to raise the stock's per share price. The bidder then requested in return a $ 25 million termination fee if the shareholders rejected the merger. The directors approved a revised merger agreement incorporating those terms. The shareholders voted to reject the merger. The shareholders then sued the directors and the bidder. 

Issue:

Did the complaint fail to state with particularity a non-exculpated claim for breach of fiduciary duty?

Answer:

Yes.

Conclusion:

The court found on their motion to dismiss that (1) the shareholders had not stated a non-exculpated claim for breach of fiduciary duty because they had not alleged facts pursuant to Del. Code Ann. tit. 8, § 102(b)(7) to show the directors acted in bad faith, (2) the shareholders' claim of corporate waste against the directors was frivolous, and (3) the shareholders, regarding their claims against the bidder, failed to plead facts sustaining claims for aiding and abetting breaches of fiduciary duty or unjust enrichment.