Case Title: Data Key Partners v. Permira Advisers, LLC

Citation: 2014 WI 86

Docket Number: 2012AP001967

State: wisconsin

Court: Wisconsin Supreme Court

Date: 2014-07-23T00:00:00Z

Document:
2014 WI 86 
 
SUPREME COURT OF WISCONSIN 
 
 
 
 
 
CASE NO.: 
2012AP1967   
COMPLETE TITLE: 
Data Key Partners, 
          Plaintiff-Appellant, 
     v. 
Permira Advisers LLC, Raphael Holding Company 
and Raphael  
Acquisition Corp., 
          Defendants-Respondents, 
Terrance D. Paul, Judith Ames Paul, Addison L. 
Piper,  
Harold E. Jordan, Mark D. Musick, Randall J. 
Erickson,  
and Glenn R. James, 
          Defendants-Respondents-Petitioners, 
Renaissance Learning, Inc., 
          Defendant. 
 
 
 
 
 
REVIEW OF A DECISION OF THE COURT OF APPEALS 
Reported at 350 Wis. 2d 347, 837 N.W.2d 624 
(Ct. App. 2013 – Published) 
PDC No: 2013 WI App 107 
 
 
OPINION FILED: 
July 23, 2014 
SUBMITTED ON BRIEFS: 
        
ORAL ARGUMENT: 
March 18, 2014 
 
 
SOURCE OF APPEAL: 
 
 
COURT: 
Circuit    
 
COUNTY: 
Wood  
 
JUDGE: 
Jon B. Counsell 
 
 
 
JUSTICES: 
 
 
CONCURRED: 
        
 
DISSENTED: 
ABRAHAMSON, C.J., BRADLEY, CROOKS, JJ., dissent. 
(Opinion filed.)   
 
NOT PARTICIPATING:         
 
 
 
ATTORNEYS: 
 
For 
the 
defendants-respondents-petitioners, 
there 
were 
briefs by Jonathan C. Medow and Mayer Brown LLP, Chicago; Leon 
S. Schmidt Jr. and Schmidt & Grace, Wisconsin Rapids; and Howard 
A. Pollack, Michael B. Apfeld, and Godfrey & Kahn, S.C., 
 
 
2 
Milwaukee; and oral argument by Jonathan C. Medow and Michael B. 
Apfeld.   
 
For the plaintiff-appellant, there was a brief by Richard B. 
Brualdi and The Brualdi Law Firm, P.C., New York; and Stacy 
Taeuber, Madison; and oral argument by Richard B. Brualdi. 
 
 
 
 
 
2014 WI 86
NOTICE 
This opinion is subject to further 
editing and modification.  The final 
version will appear in the bound 
volume of the official reports.   
No.  2012AP1967   
(L.C. No. 
2011CV563) 
STATE OF WISCONSIN  
 
 
   : 
IN SUPREME COURT 
 
 
Data Key Partners, 
 
          Plaintiff-Appellant, 
 
     v. 
 
Permira Advisers LLC, Raphael Holding Company 
and Raphael Acquisition Corp., 
 
          Defendants-Respondents, 
 
Terrance D. Paul, Judith Ames Paul, Addison L. 
Piper, Harold E. Jordan, Mark D. Musick, 
Randall J. Erickson, and Glenn R. James, 
 
          Defendants-Respondents-Petitioners, 
 
Renaissance Learning, Inc., 
 
          Defendant. 
FILED 
 
JUL 23, 2014 
 
Diane M. Fremgen 
Clerk of Supreme Court 
 
 
 
 
REVIEW of a decision of the Court of Appeals.  Reversed.   
 
¶1 
PATIENCE DRAKE ROGGENSACK, J.   We review a decision 
of the court of appeals1 reversing, in part, an order of the 
                                                 
1 Data Key Partners v. Permira Advisers LLC, 2013 WI App 
107, 350 Wis. 2d 347, 837 N.W.2d 624.  
No. 
  2012AP1967 
 
2 
 
circuit court2 that dismissed the Second Amended Complaint 
because it failed to state a claim upon which relief could be 
granted.  Plaintiffs claim that defendants violated their 
fiduciary 
duties 
to 
the 
minority 
shareholder 
by 
selling 
Renaissance Learning, Inc. to Permira Advisers, LLC.3  Defendant 
directors contend that plaintiffs have not pled facts sufficient 
to show that they are entitled to relief because they have not 
pled around the business judgment rule, codified at Wis. Stat. 
§ 180.0828 (2011-12).4  As to the majority shareholders, they 
claim that plaintiffs have likewise failed to plead facts 
sufficient to show that they are entitled to relief. 
¶2 
We 
conclude 
that 
Wis. 
Stat. 
§ 180.0828(1) 
unequivocally sets forth the terms on which directors may be 
held liable for their decisions.  The business judgment rule is 
both a substantive law and a procedural device by which to 
allocate a burden.  Reget v. Paige, 2001 WI App 73, ¶¶17-18, 242 
Wis. 2d 278, 626 N.W.2d 302 (the rule "immunize[s] individual 
directors from liability and protects the board's actions" and 
"creates an evidentiary presumption that the acts of the board 
                                                 
2 The Honorable Jon M. Counsell of Wood County presided. 
3 The Second Amended Complaint reflects that plaintiffs are 
the entity, Data Key Partners, and "partners of Data Key 
Partners" who are suing individually because Data Key Partners 
"owned shares of Renaissance's common stock."  Second Amended 
Complaint, ¶10.  The caption, however, indicates that the 
partners are suing on behalf of the entity, Data Key Partners.   
4 All subsequent references to the Wisconsin Statutes are to 
the 2011-12 version unless otherwise indicated. 
No. 
  2012AP1967 
 
3 
 
of directors were done in good faith").  As such, a party 
challenging the decision of a director must plead facts 
sufficient to plausibly show that he or she is entitled to 
relief, i.e., facts that show the director's actions constitute:  
a "willful failure to deal fairly" with a "shareholder[] in 
connection with a matter in which the director has a material 
conflict of interest"; a "violation of criminal law"; a 
"transaction from which the director derived an improper 
personal profit"; or "[w]illful misconduct."  § 180.0828(1)(a)–
(d).  This is a straightforward application of notice pleading 
standards to the substantive law of the case because substantive 
law drives what facts must be pled.   
¶3 
The Second Amended Complaint does not plead facts 
sufficient to plausibly show that the directors' actions come 
within the terms of potential liability, or that Judith and 
Terrance Paul (the Pauls) received an improper material benefit 
at the expense of the minority shareholders.  Accordingly, we 
reverse the decision of the court of appeals in regard to the 
issues presented to us for review.  
I.  BACKGROUND 
¶4 
This lawsuit arises out of the merger and sale 
(hereinafter sale) of Renaissance Learning, Inc., a publicly 
traded corporation.  Plaintiffs are Data Key Partners, a 
partnership whose type is not apparent from the pleadings, and 
three partners, Lawrence Bass, Paul Berger and Robert Garfield.  
The partners allege indirect interests in Renaissance due to the 
shares of Renaissance that Data Key Partners owned.   
No. 
  2012AP1967 
 
4 
 
¶5 
The Pauls are the founders of Renaissance.  They were 
directors 
of 
Renaissance 
and 
controlled 
69 
percent 
of 
outstanding Renaissance shares at the time of the sale.  
Defendants Addison Piper, Harold Jordan, Mark Musick, Randall 
Erickson and Glenn James also were directors of Renaissance at 
the time of the challenged transaction (hereinafter non-Paul 
directors).   
¶6 
Defendants 
Permira 
Advisers 
LLC, 
Raphael 
Holding 
Company 
and 
Raphael 
Acquisition 
Corporation 
are 
business 
organizations involved in the purchase of Renaissance.  The 
claims made against all defendants for failure to disclose and 
against these corporate defendants for aiding and abetting are 
not part of this review.5  (Counts III and IV, Second Amended 
Complaint.) 
¶7 
During 2010, the Pauls decided to sell their interest 
in Renaissance.  Permira approached Renaissance, and made 
several offers to purchase the entire company.  In its final 
offer, Permira offered to pay $15 per share to the Pauls and 
$16.60 per share to the minority shareholders.  Renaissance's 
                                                 
5 Plaintiffs claimed that the directors failed to disclose 
necessary information in the proxy statement, such as the Pauls' 
relationship to Goldman Sachs, a commercial banking firm that 
the directors hired to handle the financial aspects of the 
transaction.  Plaintiffs also claimed Permira aided and abetted 
the directors and the Pauls in breaching their obligations to 
minority shareholders.  The circuit court dismissed these claims 
and the court of appeals affirmed that dismissal.  Data Key, 350 
Wis. 2d 347, ¶¶47-59.  The plaintiffs have not sought review of 
the court of appeals decision; accordingly, these two claims are 
not before us.   
No. 
  2012AP1967 
 
5 
 
board of directors approved Permira's offer and Renaissance's 
shareholders accepted it, with the sale set to close October 19, 
2011. 
 
As 
part 
of 
Permira's 
contract 
with 
Renaissance, 
Renaissance was obligated to pay a $13 million penalty if 
Renaissance cancelled the sale to Permira.   
¶8 
On September 27, 2011, after the agreement to sell 
Renaissance to Permira was reached, Plato Learning, Inc. began a 
bidding war.  In one bid, Plato offered to purchase Renaissance 
for a payment to the Pauls of $15.10 per share and a payment to 
minority shareholders of $18 per share.  That bid was not 
accepted.  As a final bid, Plato offered $16.90 per share for 
all shareholders' interests, with no difference between minority 
and majority shares.  This last offer would have netted the 
Pauls roughly $38 million more than the sale to Permira.  It 
also was rejected, but not before plaintiffs sued to stop the 
Permira sale. 
¶9 
On 
October 7, 
2011, 
plaintiffs 
sued 
in 
federal 
district court, claiming violations of the Securities Exchange 
Act of 1934 and breach of defendants' fiduciary duty.  They 
sought to enjoin the sale to Permira.  On October 14, 2011, the 
federal district court denied plaintiffs' motion to enjoin the 
sale, concluding that plaintiffs did not have "any likelihood of 
success" on the merits of their claims.  Plaintiffs withdrew the 
federal claims, thereby raising a question of whether the 
federal court had jurisdiction.  On November 28, 2011, the 
federal case was dismissed.   
No. 
  2012AP1967 
 
6 
 
¶10 On 
September 23, 
2011, 
plaintiffs 
commenced 
the 
lawsuit that is now before us in Wood County.  Plaintiffs 
contend that Renaissance directors, which include the Pauls, 
breached their fiduciary duty to the minority shareholders.  
(Count I, Second Amended Complaint.)  Plaintiffs also contend 
that defendants "are not entitled to any protection of Sec. 
180.0828, Wis. Stat. or any protective provision in the 
Company's Articles of Incorporation or Bylaws."6   
¶11 Plaintiffs further contend that the Pauls breached 
their fiduciary duty as majority shareholders by choosing to 
sell their majority interest in Renaissance to Permira. (Count 
II, Second Amended Complaint.)  Plaintiffs alleged that the 
"Pauls have put . . . their personal interest in monetizing 
their holdings in the Company . . . ahead of that of the Company 
and the Company's minority shareholders."7  
¶12 The circuit court heard argument that Plato's offer 
was subject to many contingencies, and that the board of 
directors of Renaissance was concerned that Plato could not 
fulfill them in the time remaining before the sale to Permira 
was set to close.  The Pauls supported the transaction with 
Permira because it was more certain to result in an actual sale 
for all shareholders and because Renaissance would be subject to 
                                                 
6 Second 
Amended 
Complaint, 
¶27. 
 
As 
we 
mentioned 
previously, Wis. Stat. § 180.0828 is Wisconsin's codification of 
the business judgment rule, which is central to the directors' 
actions in regard to the sale of Renaissance. 
7 Id., ¶30.  
No. 
  2012AP1967 
 
7 
 
a $13 million penalty if Renaissance's contract with Permira was 
breached.  Renaissance was sold, and the sale netted the 
minority shareholders a 40 percent premium on the value of their 
shares when compared with the public exchange price prior to the 
bidding war.  Because of the difference in the per share price 
paid to minority and majority shareholders, the minority 
shareholders received $10 million more than what they would have 
received if all shareholders were paid the same per share price 
by Permira.  
¶13 Based on this information, the circuit court dismissed 
the Second Amended Complaint after concluding that it failed to 
state a claim upon which relief can be granted.  The court 
reasoned 
that 
the 
business 
judgment 
rule 
protected 
the 
directors' actions and that the Pauls violated no legal duty 
when they chose to sell Renaissance to Permira.   
¶14 The court of appeals reversed in part.8  Data Key 
Partners v. Permira Advisers LLC, 2013 WI App 107, 350 Wis. 2d 
347, 837 N.W.2d 624.  It concluded that there were sufficient 
facts alleged to show breach of fiduciary duty claims against 
the directors and the Pauls.  (Counts I and II, Second Amended 
Complaint.)  The court of appeals criticized the circuit court 
for noting that there was a reasonable inference that a deal 
with Plato might not close and concluded that the business 
judgment rule should not be used to dismiss a complaint.  Id., 
¶23.  
                                                 
8 See supra, note 5. 
No. 
  2012AP1967 
 
8 
 
¶15 We granted defendants' petition for review, and now 
reverse the court of appeals on the claims presented to us for 
review. 
II.  DISCUSSION 
¶16 Before us, plaintiffs contend that defendants, in 
their role as directors of Renaissance, breached their fiduciary 
duty to minority shareholders when the sale to Permira occurred.  
Plaintiffs 
further 
contend 
that 
the 
Pauls, 
as 
majority 
shareholders, also breached their fiduciary duty to minority 
shareholders when they voted their shares in favor of the sale 
to Permira.  Defendants raise the business judgment rule and the 
insufficiency of the facts pleaded in the Second Amended 
Complaint as requiring dismissal for failure to state a claim.  
A.  Standard of Review 
¶17 Whether a complaint states a claim upon which relief 
can be granted is a question of law for our independent review; 
however, we benefit from discussions of the court of appeals and 
circuit court.  DeBruin v. St. Patrick Congregation, 2012 WI 94, 
¶10, 343 Wis. 2d 83, 816 N.W.2d 878.  
¶18 When 
we 
review 
a 
motion 
to 
dismiss, 
factual 
allegations in the complaint are accepted as true for purposes 
of our review.  Strid v. Converse, 111 Wis. 2d 418, 422-23, 331 
N.W.2d 350 (1983).  However, legal conclusions asserted in a 
complaint 
are 
not 
accepted, 
and 
legal 
conclusions 
are 
insufficient to withstand a motion to dismiss.  John Doe 67C v. 
Archdiocese of Milwaukee, 2005 WI 123, ¶19, 284 Wis. 2d 307, 700 
No. 
  2012AP1967 
 
9 
 
N.W.2d 180; Mitchell v. Lawson Milk Co., 532 N.E.2d 753, 756 
(Ohio 1988).    
B.  Well-Pleaded Complaint 
¶19 "A motion to dismiss for failure to state a claim 
tests the legal sufficiency of the complaint."  John Doe 1 v. 
Archdiocese of Milwaukee, 2007 WI 95, ¶12, 303 Wis. 2d 34, 734 
N.W.2d 827 (quoting BBB Doe v. Archdiocese of Milwaukee, 211 
Wis. 2d 312, 331, 565 N.W.2d 94 (1997)).  Upon a motion to 
dismiss, we accept as true all facts well-pleaded in the 
complaint and the reasonable inferences therefrom.  Kaloti 
Enters., Inc. v. Kellogg Sales Co., 2005 WI 111, ¶11, 283 
Wis. 2d 555, 699 N.W.2d 205.  However, a court cannot add facts 
in the process of construing a complaint.  John Doe 67C, 284 
Wis. 2d 307, ¶19.  Furthermore, legal conclusions stated in the 
complaint are not accepted as true, and they are insufficient to 
enable a complaint to withstand a motion to dismiss.  Id.; 
Mitchell, 532 N.E.2d at 756.  Therefore, it is important for a 
court considering a motion to dismiss to accurately distinguish 
pleaded facts from pleaded legal conclusions.   
¶20 Wisconsin Stat. § 802.02(1) sets the requirements for 
a complaint if it is to withstand a motion to dismiss for 
failure to state a claim.  Section 802.02(1)(a) provides: 
General rules of pleading.  (1) Contents of 
pleadings.  A pleading or supplemental pleading that 
sets forth a claim for relief, whether an original or 
amended claim, counterclaim, cross claim or 3rd-party 
claim, shall contain all of the following: 
(a) A short and plain statement of the claim, 
identifying the transaction or occurrence or series of 
No. 
  2012AP1967 
 
10 
 
transactions or occurrences out of which the claim 
arises and showing that the pleader is entitled to 
relief. 
¶21 In order to satisfy Wis. Stat. § 802.02(1)(a), a 
complaint must plead facts, which if true, would entitle the 
plaintiff to relief.  Strid, 111 Wis. 2d at 422-23 ("It is the 
sufficiency 
of 
the 
facts 
alleged 
that 
control[s] 
the 
determination of whether a claim for relief is properly 
[pled].").  Bare legal conclusions set out in a complaint 
provide no assistance in warding off a motion to dismiss.  See 
John Doe 67C, 284 Wis. 2d 307, ¶19.  Plaintiffs must allege 
facts that, if true, plausibly suggest a violation of applicable 
law.9 
¶22 In Bell Atlantic Corporation v. Twombly, 550 U.S. 544 
(2007), the United States Supreme Court clarified what notice 
pleading requires in order to state a claim under Federal Rule 
8(a)(2), the federal counterpart of Wis. Stat. § 802.02(1)(a).10  
Twombly involved a § 1 Sherman Act claim.  Section 1 prohibits 
"restraints of trade . . . effected by a contract, combination, 
or conspiracy."  Id. at 553 (quoting Copperweld Corp. v. 
Independence Tube Corp., 467 U.S. 752, 775 (1984)).  The 
district court had dismissed the complaint for failure to state 
                                                 
9 Factual assertions are evidenced by statements that 
describe:  "who, what, where, when, why, and how."  See State v. 
Allen, 2004 WI 106, ¶23, 274 Wis. 2d 568, 682 N.W.2d 433.   
10 Subsection 1 of Wis. Stat. § 802.02 is based on Federal 
Rule 8(a).  Charles D. Clausen & David P. Lowe, The New 
Wisconsin Rules of Civil Procedure:  Chapters 801-803, 59 Marq. 
L. Rev. 1, 37 (1976).   
No. 
  2012AP1967 
 
11 
 
a claim because the complaint alleged "parallel behavior" 
without also alleging "additional facts that 'ten[ded] to 
exclude independent self-interested conduct as an explanation 
for defendants' parallel behavior.'"  Id. at 552 (further 
citation omitted).  The additional necessary facts were critical 
because self-interest in defending one's own territory, although 
consistent with a violation, is not, in and of itself, contrary 
to the Sherman Act.  Id.   
¶23 The Court of Appeals for the Second Circuit reversed, 
concluding that the district court had tested the complaint "by 
the wrong standard."  Id. at 553.  The Second Circuit "held that 
'plus factors are not required to be pleaded to permit an 
antitrust 
claim 
based 
on 
parallel 
conduct 
to 
survive 
dismissal.'"  Id. (further citation omitted).   
¶24 The Supreme Court disagreed.  It concluded that while 
"a 
showing 
of 
parallel 
'business 
behavior 
is 
admissible 
circumstantial evidence from which the fact finder may infer 
agreement,' it falls short of 'conclusively establish[ing] 
agreement 
or 
. . . 
itself 
constitut[ing] 
a 
Sherman 
Act 
offense.'"  Id. (quoting Theatre Enters., Inc. v. Paramount Film 
Distrib. Corp., 346 U.S. 537, 540-41 (1954)).  
¶25 The Supreme Court explained that the case before it 
presented the question "of what plaintiff must plead in order to 
state a claim under § 1 of the Sherman Act."  Id. at 554-55.  
The Court explained that Federal Rule 8(a)(2) requires "a short 
and plain statement of the claim showing that the pleader is 
entitled to relief."  Id. at 555; Fed. R. Civ. P. 8(a)(2).  The 
No. 
  2012AP1967 
 
12 
 
Court explained that the district court had applied the correct 
standard because plaintiff's pleading obligation required "more 
than labels and conclusions, and a formulaic recitation of the 
elements of a cause of action."  Id. at 555.  Furthermore, on a 
motion to dismiss, "courts are not bound to accept as true a 
legal conclusion couched as a factual allegation."  Id. 
(citation and internal quotation marks omitted). 
¶26 The Court explained that "[t]he need at the pleading 
stage 
for 
allegations 
plausibly 
suggesting 
(not 
merely 
consistent with) agreement reflects the threshold requirement of 
Rule 8(a)(2) that the 'plain statement' possess enough heft to 
'sho[w] that the pleader is entitled to relief.'"  Id. at 557 
(emphasis added).  In demonstrating the deficiency of alleging 
only parallel conduct as a Sherman Act violation, the Court 
instructed that, "it gets the complaint close to stating a 
claim, but without some further factual enhancement it stops 
short of the line between possibility and plausibility of 
'entitle[ment] to relief.'"  Id.   
¶27 The Court instructed that plaintiffs were not free to 
ignore substantive law that governed their claim, and had to 
allege facts that suggested more than a "possibility" of a 
claim.  Id.  This was so because with a mere possibility as the 
standard "a plaintiff with a 'largely groundless claim' [would] 
be allowed to 'take up the time of a number of other people, 
with the right to do so representing an in terrorem increment of 
the 
settlement 
value.'" 
 
Id. 
at 
557-58 
(quoting 
Dura 
Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336, 347 (2005)).  
No. 
  2012AP1967 
 
13 
 
Given the potential for abuse, the Court held that "basic 
deficienc[ies] should . . . be exposed at the point of minimum 
expenditure of time and money by the parties and the court."11  
Id. at 558 (citation and internal quotation marks omitted).   
¶28 To amplify the force of its decision, the Court 
overruled Conley v. Gibson, 355 U.S. 41 (1957).  Twombly, 550 
U.S. at 562-63.  The passage oft quoted from Conley was:  "the 
accepted rule that a complaint should not be dismissed for 
failure to state a claim unless it appears beyond doubt that the 
plaintiff can prove no set of facts in support of his claim 
which would entitle him to relief."  Conley, 355 U.S. at 45-46.   
¶29 In overruling Conley, the Supreme Court clarified that 
this statement is not a correct statement of Federal Rule 
8(a)(2)'s pleading requirements.  Twombly, 550 U.S. at 563 
(explaining that "this famous observation has earned its 
retirement[,]" 
as 
the 
"phrase 
is 
best 
forgotten 
as 
an 
incomplete, negative gloss on an accepted pleading standard").  
The Court explained that Conley's "no set of facts" language 
could be incorrectly read as saying that "any statement 
revealing the theory of the claim will suffice unless its 
factual impossibility may be shown from the face of the 
pleadings," 
when 
more 
facts 
actually 
are 
required 
to 
sufficiently state a claim that can proceed.  Id. at 561.   
                                                 
11 The Supreme Court recognized that discovery in civil 
cases "accounts for as much as 90 percent of litigation costs 
when discovery is actively employed."  Bell Atlantic Corp. v. 
Twombly, 550 U.S. 544, 559 (2007).   
No. 
  2012AP1967 
 
14 
 
¶30 The Supreme Court's decision in Twombly is consistent 
with our precedent.  See, e.g., Strid, 111 Wis. 2d at 422-23 
(concluding that "[i]t is the sufficiency of the facts alleged 
that control[s] the determination of whether a claim for relief 
is properly [pled]").  
¶31 In sum, Twombly makes clear the sufficiency of a 
complaint depends on substantive law that underlies the claim 
made because it is the substantive law that drives what facts 
must be pled.  Plaintiffs must allege facts that plausibly 
suggest they are entitled to relief.  With Twombly and Strid in 
mind, we turn to the substantive law that underlies plaintiffs' 
claims. 
C.  All Directors 
1.  Potential liability 
¶32 As a general principle, a corporate director has a 
"fiduciary duty to act in good faith and to deal fairly in the 
conduct of all corporate business."  Reget, 242 Wis. 2d 278, 
¶12; Modern Materials, Inc. v. Advanced Tooling Specialists, 
Inc., 206 Wis. 2d 435, 442, 557 N.W.2d 835 (Ct. App. 1996).  In 
Wisconsin, the business judgment rule "immunize[s] individual 
directors from liability and protects the board's actions from 
undue scrutiny by the courts."  Reget, 242 Wis. 2d 278, ¶17 
(citing Kenneth B. Davis, Jr., Once More, The Business Judgment 
No. 
  2012AP1967 
 
15 
 
Rule, 2000 Wis. L. Rev. 573 (2000)).  Wisconsin's business 
judgment rule is codified in Wis. Stat. § 180.0828(1).12 
¶33 The business judgment rule is substantive law because 
"acts of the board of directors done in good faith and in the 
honest belief that its decisions were in the best interest of 
the company" cannot form the basis for a legal claim against 
directors.  Reget, 242 Wis. 2d 278, ¶18.  Honest errors of 
judgment by directors cannot subject them to personal liability.  
Id., ¶17. 
                                                 
12 Wisconsin Stat. § 180.0828(1) provides as follows: 
Limited liability of directors.  (1) Except as 
provided in sub. (2), a director is not liable to the 
corporation, its shareholders, or any person asserting 
rights 
on 
behalf 
of 
the 
corporation 
or 
its 
shareholders, for damages, settlements, fees, fines, 
penalties or other monetary liabilities arising from a 
breach of, or failure to perform, any duty resulting 
solely from his or her status as a director, unless 
the person asserting liability proves that the breach 
or 
failure 
to 
perform 
constitutes 
any 
of 
the 
following: 
(a) A willful failure to deal fairly with the 
corporation or its shareholders in connection with a 
matter in which the director has a material conflict 
of interest. 
(b) A violation of criminal law, unless the 
director had reasonable cause to believe that his or 
her conduct was lawful or no reasonable cause to 
believe that his or her conduct was unlawful. 
(c) A transaction from which the director derived 
an improper personal profit. 
(d) Willful misconduct. 
No. 
  2012AP1967 
 
16 
 
¶34 The business judgment rule is also procedural because 
it limits judicial review of internal corporate business 
decisions made in good faith.  Einhorn v. Culea, 2000 WI 65, 
¶19, 235 Wis. 2d 646, 612 N.W.2d 78; Reget, 242 Wis. 2d 278, ¶18 
("Procedurally, 
the 
business 
judgment 
rule 
creates 
an 
evidentiary presumption that the acts of the board of directors 
were done in good faith and in the honest belief that its 
decisions were in the best interest of the company.").  In so 
doing, 
it 
precludes 
courts 
from 
second-guessing 
business 
decisions.  Id.  As we have explained: 
[T]his court will not substitute its judgment for that 
of the board of directors and assume to appraise the 
wisdom of any corporate action.  The business of a 
corporation 
is 
committed 
to 
its 
officers 
and 
directors, and if their actions are consistent with 
the exercise of honest discretion, the management of 
the corporation cannot be assumed by the court. 
Steven v. Hale-Haas Corp., 249 Wis. 205, 221, 23 N.W.2d 620 
(1946).   
¶35 Wisconsin's codification of the business judgment 
rule, Wis. Stat. § 180.0828(1), provides the framework for 
analyzing whether the facts pled relative to directors' business 
decisions are sufficient to state a claim.  This is so because 
§ 180.0828(1) provides that "a director is not liable" unless 
the facts describing the director's actions constitute:  (1) a 
"willful failure to deal fairly" with a "shareholder[] in 
connection with a matter in which the director has a material 
conflict of interest"; (2) acts from which "the director derived 
No. 
  2012AP1967 
 
17 
 
an improper personal profit"; or (3) "[w]illful misconduct."  
§ 180.0828(1)(a), (c) and (d) (emphasis added).13   
¶36 Stated otherwise, these exceptions to the substantive 
shield 
from 
liability 
for 
a 
director's 
actions 
identify 
potential breaches of a director's fiduciary duty.  Accordingly, 
plaintiff must plead sufficient facts to plausibly show the 
director's acts fall within the parameters of Wis. Stat. 
§ 180.0828(1) in order to survive a motion to dismiss.   
¶37 This approach is not an addition to the requirements 
of notice pleading; rather, this framework applies notice 
pleading by requiring facts that show plaintiff is entitled to 
relief.  See Twombly, 550 U.S. at 555 (explaining that plaintiff 
is required to plead "more than labels and conclusions, and a 
formulaic recitation of the elements of a cause of action" and 
that "courts are not bound to accept as true a legal conclusion 
couched 
as 
a 
factual 
allegation" 
(citation 
and 
internal 
quotation marks omitted)). 
¶38 Twombly's 
analysis 
of 
pleading 
requirements 
is 
instructive of the pleading analysis that is required upon a 
claim that a director breached his or her fiduciary duty.  To 
explain further, in Twombly, the pleading of "parallel action" 
was insufficient to state a claim because self-interest in 
protecting one's own territory by action parallel to that of 
another merchant did not contravene anti-trust law.  Id. at 556-
                                                 
13 Wisconsin Stat. § 180.0828(1)(b) addresses a violation of 
criminal law.  There is no such contention here, so we do not 
address it in this opinion. 
No. 
  2012AP1967 
 
18 
 
57.  It is only when there is parallel action by agreement that 
the Sherman Act engages.  Therefore, in order to state a claim 
under the Sherman Act, the pleader must allege facts that create 
a plausible claim that parallel actions were taken by agreement.  
Id. at 557.   
¶39 In a similar manner, not all directors' acts are 
subject to judicial review because of Wis. Stat. § 180.0828's 
limitation on director liability.  In order to fall outside of 
the protection that the legislature has granted directors, 
plaintiffs must plead facts that create a plausible claim that 
the 
directors' 
acts 
were 
taken 
in 
contravention 
of 
§ 180.0828(1).  Therefore, to survive a motion to dismiss, 
plaintiffs must plead facts sufficient to plausibly show that 
the directors' actions constitute:  (1) a "willful failure to 
deal fairly" with the minority shareholders on a matter in which 
the director has "a material conflict of interest"; (2) receipt 
of an "improper personal profit"; or (3) "[w]illful misconduct."  
§ 180.0828(1)(a), (c) and (d).  
¶40 A minority of jurisdictions have adopted a different 
approach, carving out an exception to notice pleading when the 
business judgment rule is at issue.  Stephen A. Radin, The 
Business Judgment Rule: Fiduciary Duties of Corporate Directors, 
58-61 (6th ed. 2009).  A leading case taking this approach seems 
to be In re Tower Air, Inc., 416 F.3d 229 (3d Cir. 2005).14  
                                                 
14 In re Tower Air, Inc., 416 F.3d 229 (3d Cir. 2005), was 
decided before Twombly. 
No. 
  2012AP1967 
 
19 
 
There, the court held that it generally would "not rely on an 
affirmative defense such as the business judgment rule to 
trigger dismissal of a complaint under Rule 12(b)(6)."  Id. at 
238.  However, because the plaintiff raised the business 
judgment rule on the face of the complaint, the court held that 
he "must plead around the business judgment rule."  Id.   
¶41 Plaintiffs in the case before us also asserted the 
business judgment rule on the face of the Second Amended 
Complaint, claiming that the directors "are not entitled to any 
protection of Sec. 180.0828, Wis. Stat."15  To support this 
contention, they repeated the legal conclusions set out in 
§ 180.0828(1), arguing that the directors engaged in "willful 
misconduct by willfully failing to deal fairly with the 
Plaintiffs and the Company's other minority public shareholders 
in a matter in which they have a material conflict of 
interest."16  They failed, however, to plead facts supporting 
those conclusions, as we explain in the application section.  
Therefore, we note that even if we were to adopt the approach of 
Tower Air, we would conclude that the Second Amended Complaint 
must be dismissed.  
¶42 More 
importantly, 
we 
conclude 
that 
Tower 
Air's 
assertion that the pleadings must overcome the business judgment 
rule only when it is raised first in the complaint suffers from 
two fatal flaws.  First, as we explained above, the business 
                                                 
15 Second Amended Complaint, ¶27. 
16 Id. 
No. 
  2012AP1967 
 
20 
 
judgment rule is a rule of substantive law, not merely an 
affirmative defense to be raised in subsequent pleadings.  See 
Kaye v. Lone Star Fund V (U.S.), L.P., 453 B.R. 645, 679 (N.D. 
Tex. 2011) (concluding that the protections of the business 
judgment rule are substantive and largely independent of the 
notice purpose of procedural rules of pleading).17  Second, from 
a policy perspective, if plaintiffs could bring claims that the 
business judgment rule precludes simply by not mentioning the 
rule in the complaint, plaintiffs would be given "a powerful and 
perverse incentive to 'dummy-up' about the obvious implications 
of the business judgment rule."  Id. at 679-80 (citation 
omitted).  This would promote unnecessary, meritless litigation.  
¶43 Having 
explained 
that 
notice 
pleading 
requires 
plaintiffs to plead facts sufficient to avoid the business 
judgment rule, even when it is not raised on the face of the 
complaint, we now explain that plaintiffs have not done so. 
2.  Application 
¶44 Plaintiffs' Second Amended Complaint is not completely 
devoid of facts.  It contains facts showing that the Pauls and 
the other directors favored the sale to Permira, rather than 
pursuing Plato to see if a sale to Plato could be put together.  
It also alleges that the directors and the Pauls received 
                                                 
17 See also NCS Healthcare, Inc. v. Candlewood Partners, 
LLC, 827 N.E.2d 797, 802-03 (Ohio Ct. App. 2005) ("Fed. R. Civ. 
P. 12(b)(6) and Del. Ch. R. 12(b)(6) are textually identical," 
and therefore, a plaintiff must allege "facts sufficient to 
overcome the business-judgment-rule protections" under state 
law). 
No. 
  2012AP1967 
 
21 
 
benefits from the Permira sale, including the continuing ability 
to serve on the board, vesting of certain stock options, 
indemnification, and liquidity for retirement.  We now explain, 
however, that these factual allegations are not enough because 
they fall far short of plausibly showing that plaintiffs are 
entitled to relief.  
¶45 We begin with plaintiffs' allegation that the non-Paul 
directors were not disinterested decision-makers because the 
Pauls could, as majority shareholders, vote them off the board 
at any time.18  This may imply that a desire to remain a director 
created a material conflict of interest for the directors.  
However, if desiring to continue on as a director created a 
"material conflict of interest" and evidenced "willful failure 
to deal fairly with shareholders," no director would be 
protected by the business judgment rule because each director 
consents to serve, thereby evidencing a desire to be a board 
member. Therefore, a plaintiff may not rebut the business 
judgment rule by "merely alleg[ing] that a certain decision 
might lead to the potential of giving a director a longer tenure 
on the board of directors."  Wash. Bancorporation v. Said, 812 
F. Supp. 1256, 1268 (D.D.C. 1993).   
¶46 Additionally, because the directors each owned shares 
in the company, any benefit they would receive in their fees as 
directors may not have been material, as the fees could be 
offset by a decrease in the value of their shares if they made a 
                                                 
18 Second Amended Complaint, ¶5.   
No. 
  2012AP1967 
 
22 
 
poor decision in regard to selling.  See generally McGowan v. 
Ferro, 859 A.2d 1012, 1030 (Del. Ch. 2004).  Contrary to 
plaintiffs' characterization, "stockholdings in a company by 
directors create powerful incentives to get the best deal in the 
sale of that company."  Id.    
¶47 Plaintiffs also allege that the directors breached 
their duty by supporting the sale to Permira because the Pauls 
would not support a potential sale to Plato.19  This allegation 
fails for at least three reasons.  First, a "controlling 
interest of majority stock ownership does not deprive the 
corporation's directors of the 'presumptions of independence.'" 
Weinstein Enters., Inc. v. Orloff, 870 A.2d 499, 512 (Del. 2005) 
(quoting Aronson v. Lewis, 473 A.2d 805, 815 (Del. 1984) 
(overruled on other grounds by Brehm v. Eisner, 746 A.2d 244 
(Del. 2000))).   
¶48 Second, "allegations challenging the independence of 
directors fail when the directors alleged to lack independence 
are not beholden to anyone who is interested in the transactions 
challenged."  Radin, supra, at 108 (citation and internal 
quotation marks omitted).  As we explain in the next section, 
plaintiffs have failed to show that the Pauls acted improperly.  
It matters not, then, if the directors deferred to the Pauls.  
¶49 Most importantly, the pleadings do not show that the 
directors' actions were not the product of business judgment. 
The bids from Plato were far from creating a certain sale.  In 
                                                 
19 Id., ¶25.  
No. 
  2012AP1967 
 
23 
 
this regard, the directors considered Plato's bids, and they 
also considered the significant risks associated with an 
evaluation that would be occurring in the eleventh hour, as the 
Permira sale was only days away from closing and contained a $13 
million penalty if Renaissance backed out of that deal to try to 
put together a sale to Plato.  
¶50 The sale of a corporation of this size would involve 
numerous documents, the terms of which would require negotiation 
if a new buyer were chosen; new proxy statements would have to 
be submitted to and reviewed by the Securities and Exchange 
Commission, to state only a few tasks that trailed along after 
Plato began its bidding war.20  Furthermore, no sale could go 
forward without the Pauls' support; they controlled 69 percent 
of the shares.  The directors could in good faith conclude that 
a bird in the hand was worth two in the bush.  There is nothing 
improper about such a decision.  See Tower Air, 416 F.3d at 239 
(when it is apparent at pleading that there is "an ostensibly 
legitimate 
business 
purpose 
for 
an 
allegedly 
egregious 
decision," the complaint should be dismissed).  
¶51 Next, plaintiffs allege that the directors obtained a 
benefit when the directors' restricted shares vested upon the 
sale of Renaissance to Permira.21  However, the record shows that 
the shares would vest "upon termination of . . . service as a 
                                                 
20 Petitioners' Brief, p. 31.  
21 Second Amended Complaint, ¶¶26, 62(a).   
No. 
  2012AP1967 
 
24 
 
director," regardless of to whom Renaissance was sold.22  In this 
regard, the court of appeals appears to have added facts to 
those plead, contrary to our direction in John Doe 67C, 284 
Wis. 2d 307, ¶19, when it asserted that ¶62 of the Second 
Amended Complaint "supports a reasonable inference that the 
directors would have received this [vesting] benefit only from a 
sale to Permira."  Data Key, 350 Wis. 2d 347, ¶28.  The Second 
Amended Complaint never alleges that vesting would occur only 
upon a sale to Permira.  
¶52 In coming to its conclusion about stock vesting, the 
court of appeals' rationale also is inconsistent.  The court of 
appeals says that the plaintiffs may "concede" that vesting 
would be available on the sale of Renaissance to any purchaser, 
not just upon a sale to Permira.  Id., ¶29.  However, the court 
of appeals then discounts plaintiffs' concession and instead 
employs vesting as a basis for refusing to dismiss the claim 
against the non-Paul directors.  Id.   
¶53 Plaintiffs also alleged that the directors obtained 
rights of indemnification from the sale to Permira.23  They do 
not assert that this benefit would occur only upon the sale to 
Permira.  Furthermore, this allegation cannot satisfy any term 
of potential liability in Wis. Stat. § 180.0828(1) because Wis. 
Stat. § 180.0851 generally requires "mandatory indemnification" 
                                                 
22 Renaissance's 
filing 
with 
Securities 
and 
Exchange 
Commission, Appellant's Supplemental Appendix, pp. 110-11. 
23 Second Amended Complaint, ¶62(e). 
No. 
  2012AP1967 
 
25 
 
for corporate directors when sued for actions taken as a 
director.  See also Malpiede v. Townson, 780 A.2d 1075, 1085 
(Del. 2001) (explaining that "[e]xcept in egregious cases, the 
threat of personal liability for approving a merger transaction 
does not in itself provide a sufficient basis to question the 
disinterestedness of directors because the risk of litigation is 
present whenever a board decides to sell the company."). 
¶54 To explain further, the exceptions from mandatory 
indemnification under Wis. Stat. § 180.0851 are the same as the 
four 
exceptions 
set 
out 
in 
Wis. 
Stat. 
§ 180.0828(1).  
§ 180.0851(2). 
 
Therefore, 
plaintiffs 
must 
allege 
facts 
sufficient to show that indemnification was not required due to 
the same terms of potential liability as are set out in 
§ 180.0828 in regard to the business judgment rule.   
¶55 Legislatures, including Wisconsin's, enacted statutory 
provisions requiring director indemnification because directors 
often were sued for actions taken on behalf of corporations and 
that litigation was causing directors to resign and to refuse to 
serve on boards of directors.  See A Comprehensive Approach:  
Director and Officer Indemnification in Wisconsin, 71 Marq. L. 
Rev. 407, 411 n.23 (1988).  "The director and officer liability 
crisis of recent years has led to the expansion of corporate 
laws which give added protection to corporate officials who act 
within the scope of their corporate duties."  Id. at 407.  
¶56 In sum, plaintiffs have not plead facts sufficient to 
set forth a plausible claim that the directors' actions leading 
up to the sale to Permira fall within the terms of potential 
No. 
  2012AP1967 
 
26 
 
liability set out in § 180.0828(1).  Plaintiffs have not pleaded 
facts that, if true, would constitute a "willful failure" to 
deal fairly with minority shareholders on matters in which the 
directors had a "material conflict of interest"; or that the 
directors received an "improper personal profit"; or that their 
actions demonstrated "willful misconduct."  Accordingly, the 
Second Amended Complaint in regard to directors' actions must be 
dismissed.  
D.  Majority Shareholders 
¶57 The business judgment rule, as codified in Wis. Stat. 
§ 180.0828, applies by its terms to officers and directors.  
There is no mention of protection for majority shareholders.  
Therefore, we do not look to § 180.0828 in regard to plaintiffs' 
claims against the Pauls in their role as majority shareholders 
of Renaissance.  
¶58 Plaintiffs' claim against the Pauls is grounded in the 
Pauls' vote to sell Renaissance to Permira.  However, unless 
restricted by the articles of incorporation or a statute, and 
the Second Amended Complaint contains no such allegation, each 
outstanding share "is entitled to one vote on each matter voted 
on at a shareholders' meeting."  Wis. Stat. § 180.0721.  
Therefore, the Pauls had a statutory right to vote their shares 
in approval of the sale to Permira.  Accordingly, any limitation 
on the Pauls' statutory right to vote their shares as they saw 
fit must be a common law limitation.  
¶59 Under common law, majority shareholders have a very 
limited fiduciary duty to minority shareholders.  Simply stated, 
No. 
  2012AP1967 
 
27 
 
majority shareholders cannot use their voting power to require 
corporate action that grants majority shareholders an improper 
material benefit at the expense of minority shareholders.  Notz 
v. Everett Smith Group, Ltd., 2009 WI 30, ¶4, 316 Wis. 2d 640, 
764 
N.W.2d 
904 
(concluding 
that 
"majority 
shareholders' 
appropriation of the due diligence paid for by the corporation 
[was a] constructive dividend to the majority shareholder[s]" at 
the expense of minority shareholders, thereby supporting a 
breach of majority shareholders' fiduciary duty); Theis v. Durr, 
125 Wis. 651, 661-62, 104 N.W. 985 (1905) (concluding that the 
corporate resolution that reduced the amount of capital stock in 
the corporation benefitted the majority shareholders, who owed 
subscription debt, at the expense of the minority shareholders, 
who had fully paid for their shares).  
¶60 Plaintiffs contend that the Pauls' receipt of a non-
exclusive, non-transferrable license to employ Renaissance's 
software for the internal educational use of the Pauls' family 
was the receipt of an "improper personal profit," through which 
the Pauls breached their fiduciary duty to the minority 
shareholders.24  However, nowhere in the Second Amended Complaint 
do 
the 
plaintiffs 
allege 
that 
this 
non-exclusive, 
non-
transferrable license is worth more than the $10 million bonus 
that the minority shareholders received.  Accordingly, because 
the Pauls may receive benefits in addition to cash payments for 
their shares so long as the benefits are not achieved at the 
                                                 
24 Id., ¶62(b).   
No. 
  2012AP1967 
 
28 
 
expense of the minority shareholders, and because there is no 
allegation that this license was worth more than the $10 million 
minority shareholder bonus, plaintiffs have not pled facts that 
plausibly demonstrate that the Pauls received an improper 
material benefit at the expense of minority shareholders.   
¶61 Plaintiffs also allege that the Pauls' personal banker 
was involved in the sale.  They do not explain, however, how the 
personal banker's services benefitted the Pauls.  Nor do they 
allege that the personal banker engaged in any kind of improper 
behavior or had something to gain from the Permira sale rather 
than a sale to Plato.  See generally, McMillan v. Intercargo 
Corp., 768 A.2d 492, 496 (Del. Ch. 2000) (director who was a 
partner in a law firm that participated in a merger was not 
"interested" because "[n]othing in the complaint indicates that 
[the director or firm] stood to obtain legal work [from the 
company] after the merger").  Again, we fail to see how this 
allegation shows that plaintiffs are entitled to relief. 
¶62 Finally, plaintiffs allege that the Pauls breached 
their fiduciary duty by putting "their personal interest in 
monetizing their holdings in the Company . . . ahead of that of 
the Company and the Company's minority shareholders."25  There is 
no allegation that Renaissance was sold at fire-sale prices or 
that the Pauls were facing a financial emergency that required 
them to sell their interest in Renaissance quickly.  Without 
pleading additional facts, the allegation that the Pauls wanted 
                                                 
25 Id., ¶30. 
No. 
  2012AP1967 
 
29 
 
to sell their interest cannot support the conclusion that they 
caused the corporation to provide them with an improper material 
benefit at the expense of the minority shareholders.  
¶63 In re Synthes, Inc. Shareholder Litigation, 50 A.3d 
1022 (2012), provides a useful comparison with the case now 
before us.  There, a Delaware court considered a minority 
shareholder's claim for breach of duty based on conduct of the 
majority shareholder.  Id. at 1024.  The majority shareholder 
and founder of Synthes was ready to retire and wanted to divest 
his stockholdings in Synthes.  Id. at 1025.  In the lawsuit that 
followed Synthes' sale, plaintiffs alleged that the majority 
shareholder 
breached 
his 
fiduciary 
duty 
because 
minority 
shareholders received the same equity and cash payment per share 
as did the majority shareholders, rather than a full cash 
payment.  Id. at 1039.  In dismissing the complaint for failing 
to plead facts sufficient to state a claim, the court instructed 
that because the minority and majority shareholders received pro 
rata payment when the majority shareholder could have sought a 
premium for his controlling interest, the majority shareholder 
was in a safe harbor from litigation.  Id. at 1024.  
¶64 The Pauls' sale of their controlling interest in 
Renaissance is on all fours with the majority shareholder's sale 
of his interest in Synthes.  Both were founders of the 
corporations; both wanted to retire; neither had a pressing need 
to sell their interests at fire-sale prices; neither received 
more per share than did the minority shareholders.  As with the 
sale of Synthes, plaintiffs here have stated no claim that 
No. 
  2012AP1967 
 
30 
 
prevents the Pauls' from coming within the safe harbor, as the 
minority shareholders received more than a pro rata payment——
they received a premium.  Accordingly, we conclude that the 
Second Amended Complaint fails to state a claim upon which 
relief can be granted in regard to the Pauls and accordingly, it 
must be dismissed in its entirety.   
III.  CONCLUSION 
¶65 We 
conclude 
that 
Wis. 
Stat. 
§ 180.0828(1) 
unequivocally sets forth the terms on which directors may be 
held liable for their decisions.  It is both a substantive law 
and a procedural device by which to allocate a burden.  Reget, 
242 Wis. 2d 278, ¶¶17-18 (the rule "immunize[s] individual 
directors from liability and protects the board's actions" and 
"creates an evidentiary presumption that the acts of the board 
of directors were done in good faith").  As such, a party 
challenging the decision of a director must plead facts 
sufficient to plausibly show that they are entitled to relief, 
i.e., facts that show the director's actions constituted:  a 
"willful failure to deal fairly" with a "shareholder[] in 
connection with a matter in which the director has a material 
conflict of interest"; a "violation of criminal law"; a 
"transaction from which the director derived an improper 
personal profit"; or "[w]illful misconduct."  § 180.0828(1)(a)-
(d).  This is a straightforward application of notice pleading 
standards to the substantive law of the case because substantive 
law drives what facts must be pled.   
No. 
  2012AP1967 
 
31 
 
¶66 The Second Amended Complaint does not plead facts 
sufficient to plausibly show that the directors' actions come 
within the terms of potential liability, or that the Pauls 
received an improper material benefit at the expense of the 
minority shareholders.  Accordingly, we reverse the decision of 
the court of appeals in regard to the issues presented to us for 
review.  
By the Court.—The decision of the court appeals is 
reversed. 
 
No.  2012AP1967.ssa 
 
1 
 
¶67 SHIRLEY S. ABRAHAMSON, C.J.   (dissenting).  I would 
affirm the court of appeals.  I would follow Wisconsin law and 
conclude that as a general rule, parties need not plead specific 
facts at the motion-to-dismiss phase.  In the instant case, 
although the plaintiffs raised the business judgment rule in 
their complaint, the plaintiffs also set forth sufficient facts 
to plead around the rule and provide notice to the defendants of 
the claim being alleged.1 
¶68 The majority opinion holds that "plaintiffs must 
allege facts that, if true, plausibly suggest a violation of 
applicable law,"2 the majority opinion relies on Bell Atlantic 
Corp. v. Twombly, 550 U.S. 544 (2007).3  In the federal courts, 
Twombly's standard is interpreted with the subsequent case 
Ashcroft v. Iqbal, 556 U.S. 662 (2009).  Twombly required a 
plaintiff in an antitrust case alleging violations of the 
federal Sherman Act to "state a claim to relief that is 
plausible on its face."4  Iqbal required a plaintiff who alleged 
a Bivens5 action against federal law enforcement officers for 
                                                 
1 See Data Key Partners v. Permira Advisors LLC, 2013 WI App 
107, ¶25, 350 Wis. 2d 347, 837 N.W.2d 624. 
2 Majority op., ¶21 (emphasis added).  The footnote cited 
for this proposition does not describe "plausibility" at all.  
Majority op., ¶21 n.9. 
3 See majority op., ¶¶22, 28-31, 37-38.   
4 Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). 
5 Bivens v. Six Unknown Named Agents of Fed. Bureau of 
Narcotics, 403 U.S. 388 (1971). 
No.  2012AP1967.ssa 
 
2 
 
liability regarding the harsh conditions of his confinement to 
plead facts that "state a plausible claim for relief."6   
¶69 No one is sure what Twombly means:  "Exactly how 
implausible 
is 
'implausible' 
remains 
to 
be 
seen . . . ."7  
Twombly and Iqbal have created confusion and chaos in the 
federal 
courts 
regarding 
the 
current 
state 
of 
pleading 
requirements.8  Under Twombly/Iqbal, federal district courts have 
increased the rate at which they grant motions to dismiss.9   
¶70 No Wisconsin case has adopted the rule as stated in 
Twombly and Iqbal.  Twombly was not argued or briefed in the 
instant case.  The majority opinion relies on the Twombly 
heightened pleading standard without any briefing or argument.  
I have written before that this court should give counsel the 
opportunity to develop arguments before the court in the 
adversarial system:   
                                                 
6 Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009) 
7 Courie v. Alcoa Wheel & Forged Prods., 577 F.3d 625, 630 
(6th Cir. 2009) (granting a motion to dismiss a plaintiff's 
claim that his union discriminated against him on the basis of 
race, 
despite 
deeming 
the 
plaintiff's 
claim 
for 
relief 
"plausible").  See generally 5 Charles Alan Wright & Arthur R. 
Miller et al., Federal Practice & Procedure § 1216 (3d ed. 2014) 
("[C]ourts continue to struggle to categorize what allegations 
meet 
the 
[Twombly 
and 
Iqbal] 
decisions' 
amorphous 
requirements."). 
8 Patricia W. Hatamyar, The Tao of Pleading: Do Twombly and 
Iqbal Matter Empirically?, 59 Am. U. L. Rev. 553, 583 (2010).   
9 See, e.g., David Freeman Engstrom, The Twiqbal Puzzle and 
Empirical Study of Civil Procedure, 65 Stan. L. Rev. 1203, 1231 
(2013) 
(collecting 
empirical 
studies 
of 
post-Twombly/Iqbal 
grants of motions to dismiss in federal district courts, all of 
which demonstrate increases). 
No.  2012AP1967.ssa 
 
3 
 
Some justices proceed to make decisions without 
benefit of arguments or briefs by the parties.  Others 
prefer more restraint.  Some justices apparently 
perceive that the rule of law is advanced by a sua 
sponte approach.  We do not. 
. . . . 
The rule of law is generally best developed when 
matters are tested by the fire of adversarial briefs 
and oral argument. 
. . . . 
Indeed, a court's sua sponte determination of an issue 
may raise due process considerations:  A court may be 
depriving parties of their right to a meaningful 
appeal, to due process notice, and to adversary 
counsel.10 
¶71 As Justice Bradley has recently written, this court's 
role is to weigh the arguments of counsel, not to make arguments 
as counsel:   
By 
raising 
sua 
sponte 
a 
brand 
new 
outcome 
determinative issue, an appellate court tends to blur 
the lines between the role of the lawyer as advocate 
and the role of the judge as impartial decision maker. 
In contrast to the other branches of government, the 
judicial branch's role seems better fitted to respond 
to issues presented rather than creating issues to 
present.11 
                                                 
10 Maurin v. Hall, 2004 WI 100, ¶¶119-121, 274 Wis. 2d 28, 
682 N.W.2d 866 (Abrahamson, C.J., & Crooks, J., concurring), 
(overruled on other grounds by Bartholomew v. Wis. Patients 
Comp. Fund, 2006 WI 91, 293 Wis. 2d 38, 717 N.W.2d 216.)   
11 Attorney's Title Guar. Fund v. Town Bank, 2014 WI 63, 
¶56, ___ Wis. 2d ___, ___ N.W.2d ___ (Bradley, J., dissenting); 
see also Maurin, 274 Wis. 2d 28, ¶120 (Abrahamson, C.J. & 
Crooks, J., concurring) ("The rule of law is generally best 
developed when matters are tested by the fire of adversarial 
briefs and oral arguments."). 
No.  2012AP1967.ssa 
 
4 
 
¶72 Rather than provide a detailed critique of the 
majority opinion, I am setting forth the opinion I think should 
have been written by this court. 
* * * * 
¶73 This is a review of a published decision of the court 
of appeals reversing an order of the circuit court for Wood 
County, Jon M. Counsell, Judge.12  The circuit court dismissed 
the complaint, concluding that the complaint failed to state a 
claim upon which relief can be granted.  The court of appeals 
reversed the order of the circuit court.  I would affirm the 
decision of the court of appeals and remand the matter to the 
circuit court for further proceedings.  
¶74 The plaintiff is Data Key Partners, a minority 
shareholder of Renaissance Learning, Inc., a publicly traded 
Wisconsin 
corporation 
headquartered 
in 
Wisconsin 
Rapids, 
Wisconsin.  The complaint alleges a breach of fiduciary duty by 
the directors and the majority shareholders in accepting a 
purchase agreement for the corporation from Permira Advisors 
LLC. 
¶75 The defendants are Permira Advisors LLC, Raphael 
Holding 
Company, 
and 
Raphael 
Acquisition 
Corporation 
(collectively the buyer-defendants); Terrance D. Paul and Judith 
Ames Paul (collectively the Pauls); Addison L. Piper, Harold E. 
Jordan, Mark D. Musick, Randall J. Erickson, and Glenn R. James 
(collectively the non-Paul director-defendants); and Renaissance 
Learning, Inc.     
                                                 
12 Data Key Partners v. Permira Advisors LLC, 2013 WI App 
107, 350 Wis. 2d 347, 837 N.W.2d 624. 
No.  2012AP1967.ssa 
 
5 
 
¶76 The  claims in the complaint at issue here allege that 
minority shareholders were harmed by: (1) the non-Paul director-
defendants' 
breach 
of 
fiduciary 
duties 
for 
failing 
to 
independently investigate the multiple bids for purchase of the 
corporation and for acting in their own personal interests 
against those of the shareholders; and (2) the Pauls as majority 
shareholders for engaging in self-dealing, breaching their 
fiduciary duties in accepting the purchase agreement favorable 
to their personal interests.13 
¶77 The defendants assert that the complaint fails to 
allege a claim upon which relief can be granted because it does 
not allege facts that, if proven, would establish an exception 
to the business judgment rule.14  
                                                 
13 The other two claims——a claim against the directors for 
failure to disclose information and a claim against Permira for 
allegedly aiding and abetting breaches of fiduciary duty by the 
other defendants——were dismissed by the circuit court. The court 
of appeals upheld dismissal of these claims.  The parties do not 
address these claims, and neither do I. 
14 Wisconsin Stat. § 180.0828 creates a statutory version of 
the business judgment rule: A director is not liable for damages 
for liabilities arising from a breach of, or failure to perform, 
any duty resulting solely from his or her status as a director, 
unless the claimant proves that the breach or failure to perform 
falls within one of the exceptions set forth in the statute.   
Section 180.0828 reads in full as follows: 
(1) Except as provided in sub. (2), a director is not 
liable to the corporation, its shareholders, or any 
person asserting rights on behalf of the corporation 
or its shareholders, for damages, settlements, fees, 
fines, penalties or other monetary liabilities arising 
from a breach of, or failure to perform, any duty 
resulting solely from his or her status as a director, 
unless the person asserting liability proves that the 
No.  2012AP1967.ssa 
 
6 
 
¶78 For the reasons set forth, I agree with the court of 
appeals that the complaint satisfies Wisconsin's requirements of 
notice pleading.  Our pleading rules require only that a 
complaint plead a "short and plain statement of the claim, 
identifying 
the 
transaction 
or 
occurrence 
or 
series 
of 
transactions or occurrences out of which the claim arises and 
showing that the pleader is entitled to relief."  Wis. Stat. 
§ 802.02(1).   
¶79 The complaint in the instant case gives fair notice to 
the defendants of the claims upon which relief can be granted.  
This court is not presented with sufficient reason to create an 
exception to our notice pleading requirements in the present 
case.  Our decision involves only the motion-to-dismiss phase of 
the proceedings.  I do not comment on the application of the 
                                                                                                                                                             
breach or failure to perform constitutes any of the 
following: 
(a) A willful failure to deal fairly with the 
corporation or its shareholders in connection with a 
matter in which the director has a material conflict 
of interest. 
(b) A violation of criminal law, unless the director 
had reasonable cause to believe that his or her 
conduct was lawful or no reasonable cause to believe 
that his or her conduct was unlawful. 
(c) A transaction from which the director derived an 
improper personal profit. 
(d) Willful misconduct. 
(2) A corporation may limit the immunity provided 
under this section by its articles of incorporation.  
A limitation under this subsection applies if the 
cause of action against a director accrues while the 
limitation is in effect. 
No.  2012AP1967.ssa 
 
7 
 
business judgment rule to later stages of the proceeding, and I 
do not comment on the merits of the plaintiff's claims, only the 
sufficiency of the complaint. 
¶80 I commend the court of appeals for its thorough 
analysis of the claims.  I benefited substantially from its 
cogent discussion, notably the interplay between our state's 
notice pleading rules and the business judgment rule.  
¶81 Accordingly, I would affirm the decision of the court 
of appeals holding that the circuit court erred in granting the 
motions to dismiss the two claims discussed above, and I would 
remand the matter to the circuit court for further proceedings 
consistent with this opinion. 
I 
 
¶82 The facts and procedural history set forth herein are 
based on the complaint.   
 
¶83 Renaissance Learning, Inc. was a publicly traded 
Wisconsin corporation founded by the Pauls in 1986.  The Pauls 
were majority shareholders, collectively controlling or owning 
69% of the 29 million shares of Renaissance stock.  The Pauls 
served as directors and occasionally served as corporate 
officers.     
¶84 Data 
Key 
was 
a 
minority 
shareholder, 
among 
approximately 269 total shareholders. 
 
¶85 The Pauls decided to retire and end their involvement 
in Renaissance.  Because their number of shares was substantial, 
the Pauls decided to sell the corporation rather than attempt to 
sell their shares on the open market. 
No.  2012AP1967.ssa 
 
8 
 
¶86 To facilitate the sale, Renaissance selected the 
Pauls' personal banker, Goldman Sachs, as a financial advisor 
for the sale, at the Pauls' request.  The sale attracted two 
bidders:  the buyer-defendant, Permira Advisers LLC, and Plato 
Learning, Inc.   
 
¶87 Permira's first offer to purchase Renaissance was for 
$14.85 per share.  Renaissance entered into an "Agreement and 
Plan of Merger" for this price.   
¶88 Subsequently, Plato put in a higher bid of $15.50 per 
share.  The Renaissance board of directors rejected the Plato 
offer, deferring to the Pauls' reasoning that the Permira offer 
was more likely to be consummated and that Permira would exact a 
$13 million penalty if Renaissance backed out of the sale 
agreement. 
¶89 The Renaissance board of directors then amended its 
agreement with Permira.  The new terms were that Permira would 
pay $15 per share to the majority shareholders (the Pauls) and 
$16.60 per share to the minority shareholders, totaling about 
$455 million. 
 
¶90 Plato put in a new bid, offering $15.10 per share to 
the Pauls and $18 per share for the minority shareholders, 
totaling about $471 million.  The Pauls informed the other 
directors that the Pauls would not vote in favor of the revised 
Plato offer.  The Pauls were concerned that the Plato deal had a 
higher risk of non-consummation; that the Plato deal would take 
longer to close; that the Pauls might be held personally liable 
if the Permira offer were rejected; and that the Plato deal did 
No.  2012AP1967.ssa 
 
9 
 
not include a licensing grant to Base Camp Learning Services, 
Inc., another company controlled by the Pauls. 
 
¶91 Plato made yet another higher bid, this time of $496 
million, leaving open to further negotiation the exact price per 
share for the Pauls and the minority shareholders.   
 
¶92 The Renaissance board of directors rejected the latest 
offer from Plato and finalized the sale to Permira at $15 per 
share for the Pauls and $16.60 per share for the minority 
shareholders.   
 
¶93 The plaintiff initiated a suit alleging four separate 
claims, of which only the following two are relevant here: 
(1) Against the Pauls as directors and the other director-
defendants, for breach of fiduciary duties of good 
faith, loyalty, fair dealing, and due care regarding 
the sale, including, inter alia, that the non-Paul 
director-defendants abdicated their responsibility by 
allowing the Pauls to manage the sale and that the 
Pauls 
received 
personal 
benefits 
including 
indemnification from the sale;15 
(2) Against the Pauls as majority shareholders for breach 
of fiduciary duties to the minority shareholders 
regarding the sale, specifically that they used their 
                                                 
15 For a general discussion of a director's fiduciary duty 
to the corporation and shareholders, see American Law Institute, 
Principles 
of 
Corporate 
Governance: 
Analysis 
and 
Recommendations, Part V. Duty of Fair Dealing, Introductory Note 
at 199-204 (1994). 
No.  2012AP1967.ssa 
 
10 
 
influence on the board to force the sale to Permira 
for their own personal benefit. 
¶94 The defendants filed motions, pursuant to Wis. Stat. 
§ 802.06(2)(a)6., to dismiss the complaint for failure to state 
a claim upon which relief can be granted.16   
¶95 Regarding the first claim described above for the non-
Paul director-defendants' breach of fiduciary duty, the circuit 
court ruled that the complaint failed to allege sufficient facts 
to overcome the business judgment rule, "which limits judicial 
review of corporate decision making when corporate directors 
make decisions on an informed basis in good faith and in the 
honest belief that the action taken is in the best interests of 
the company."  
¶96 Regarding the second claim described above for the 
Pauls' breach of fiduciary duty, the circuit court ruled that 
the Pauls had the right to sell their shares and to vote their 
shares in their own interests.   
¶97 The court of appeals reversed the circuit court with 
regard to both claims.  Regarding the first claim, the court of 
appeals reasoned that the complaint adhered to the requirements 
of notice pleading and that the circuit court erred in applying 
                                                 
16 Wisconsin Stat. 802.06(2)(a)6. provides:  
[T]he following defenses may at the option of the 
pleader be made by motion:  
. . . .  
6. Failure to state a claim upon which relief can be 
granted.  
No.  2012AP1967.ssa 
 
11 
 
the business judgment rule in deciding the motion to dismiss the 
complaint.  
¶98 Regarding the second claim, the court of appeals 
reasoned that the allegations in the complaint were sufficient 
to give rise to an inference that the Pauls' actions and undue 
influence over the board's actions went beyond the mere sale of 
their 
shares 
and 
violated 
the 
Pauls' 
duty 
to 
minority 
shareholders. 
¶99 The court of appeals remanded the matter to the 
circuit court for further proceedings on these surviving claims. 
II 
¶100 A motion to dismiss a complaint tests the legal 
sufficiency of the complaint.  Whether the complaint states a 
claim upon which relief can be granted is a question of law.17  
Accordingly, this court decides a motion to dismiss a complaint 
for failure to state a claim upon which relief can be granted 
independently of the circuit court and court of appeals, 
benefiting from their analysis.18     
¶101 For purposes of deciding a motion to dismiss, a court 
must accept as true the facts pleaded and all reasonable 
inferences that may be drawn from the pleadings.19  The pleadings 
                                                 
17 Johnson v. Rogers Mem'l Hosp., Inc., 2001 WI 68, ¶15, 244 
Wis. 2d 364, 627 N.W.2d 890. 
18 MBS-Certified Public Accountants, LLC v. Wis. Bell, Inc., 
2012 WI 15, ¶25, 338 Wis. 2d 647, 809 N.W.2d 857. 
19 Below v. Norton, 2008 WI 77, ¶18, 310 Wis. 2d 713, 751 
N.W.2d 351. 
No.  2012AP1967.ssa 
 
12 
 
are to be liberally construed so as to do substantial justice.20  
The complaint is not required to state all the ultimate facts 
constituting each cause of action.21  The complaint should be 
dismissed as legally insufficient only if it is clear that under 
no circumstances can the claimant recover.22  A court should not 
dismiss a claim unless it appears to a certainty that no relief 
can be granted under any set of facts that a claimant can prove 
in support of the allegations in the complaint.23    
 
¶102 To survive a motion to dismiss, the complaint must 
satisfy the notice pleading requirements of Wisconsin's Rules of 
Civil Procedure.  Wisconsin Stat. § 802.02 requires that a 
pleading contain a short and plain statement identifying the 
transaction or occurrences out of which the claim arises and 
showing that the pleader is entitled to relief.   
¶103 Section 802.02 provides as follows:  
                                                 
20 Wis. Stat. § 802.02(6) ("All pleadings shall be so 
construed as to do substantial justice."); Doe v. Archdiocese of 
Milwaukee, 2005 WI 123, ¶35, 284 Wis. 2d 307, 700 N.W.2d 180 
("[C]laims are to be liberally construed so as to do substantial 
justice.") (internal quotation marks and citations omitted); 
Kaloti Enters., Inc. v. Kellogg Sales Co., 2005 WI 111, ¶11, 283 
Wis. 2d 555, 
699 
N.W.2d 205 
("[P]leadings 
are 
liberally 
construed."). 
21 Ollerman v. O'Rourke Co., Inc., 94 Wis. 2d 17, 24, 288 
N.W.2d 95 (1980) (citations omitted); Anderson v. Cont'l Ins. 
Co., 85 Wis. 2d 675, 683, 271 N.W.2d 368, 373 (1978) (citing 
Charles D. Clausen & David P. Lowe, The New Wisconsin Rules of 
Civil Procedure: Chapters 801-803, 59 Marq. L. Rev. 1, 38 
(1976)). 
22 Anderson, 85 Wis. 2d at 683 (citing Clausen & Lowe, supra 
note 21, at 38); Ollerman, 94 Wis. 2d at 24 (citations omitted).  
23 Doe, 284 Wis. 2d 307, ¶20 (internal quotation marks and 
citations omitted). 
No.  2012AP1967.ssa 
 
13 
 
(1) Contents of pleadings. A pleading or supplemental 
pleading that sets forth a claim for relief, whether 
an original or amended claim, counterclaim, cross 
claim or 3rd-party claim, shall contain all of the 
following: 
(a) A short and plain statement of the claim, 
identifying the transaction or occurrence or series of 
transactions or occurrences out of which the claim 
arises and showing that the pleader is entitled to 
relief. 
(b) A demand for judgment for the relief the pleader 
seeks. 
Wis. Stat. § 802.02(1). 
¶104 When Wisconsin adopted Wis. Stat. § 802.02(1) in 1976 
as part of a revision of the Wisconsin Rules of Civil Procedure, 
the state discarded the concept of "ultimate fact" pleading and 
instead endorsed the notion of "notice pleading."24  Notice 
pleading in § 802.02(1) is based on the Federal Rules of Civil 
Procedure.25 
¶105 Under notice pleading, a pleading need provide only 
fair notice to the defendant sufficient for the defendant to 
raise a defense:  "[I]t is immaterial whether a pleading states 
'facts' or 'conclusions' so long as fair notice is given, and 
                                                 
24 For background on the adoption of notice pleading, see 
Charles D. Clausen and David P. Lowe, The New Wisconsin Rules of 
Civil Procedure: Chapters 801-803, 59 Marq. L. Rev. 1, 36-42 
(1976).  See also Alonge v. Rodriquez, 89 Wis. 2d 544, 552-53, 
279 N.W.2d 207 (1979) (describing the change from "ultimate 
fact" pleading to "notice" pleading). 
25 "Subsection (1) [of Wis. Stat. § 802.02] is based on 
Federal Rule 8(a).  Unlike the Federal Rule, however, this rule 
does not require a jurisdictional statement in the original 
pleading 
since 
Wisconsin 
state 
courts 
do 
not 
have 
the 
jurisdictional problems of minimum dollar amount or diversity of 
citizenship."  Clausen & Lowe, supra note 21, at 37.  
No.  2012AP1967.ssa 
 
14 
 
the statement of the claim is short and plain."26  In other 
words, "[t]he purpose of pleadings is to notify the opposing 
party of the pleader's position in the case and to frame the 
issues to be resolved in the action for the benefit of the 
litigants and the court."27 
¶106 This is not to say that the complaint can be 
completely devoid of facts.  The pleading must identify the 
transaction, occurrence, or event out of which the claim arises.  
Notice pleading "forbids pleadings which are so vague or 
ambiguous that a party cannot reasonably be required to frame a 
responsive pleading."28  As the court recently stated regarding 
the factual requirements of notice pleading: 
A bare conclusion does not fulfill a plaintiff's duty 
of stating the elements of a claim in general terms.  
In short, we will dismiss a complaint if, under the 
guise of notice pleading, the complaint before us 
requires the court to indulge in too much speculation 
leaving too much to the imagination of the court.  It 
is not enough for the plaintiff to contend that the 
requisite facts will be supplied by the discovery 
process.29 
 
¶107 Specific and limited exceptions to notice pleading 
exist.  For example, Wis. Stat. § 802.03(2) governs pleadings 
for 
fraud 
or 
mistake, 
requiring 
that 
"the 
circumstances 
                                                 
26 Id. at 38. 
27 Hansher v. Kaishian, 79 Wis. 2d 374, 385, 255 N.W.2d 564 
(1977). 
28 Clausen & Lowe, supra note 21, at 39 (citing Wis. Stat. 
§ 802.06(5)). 
29 Doe, 284 Wis. 2d 307, ¶36 (internal quotations marks and 
citations omitted). 
No.  2012AP1967.ssa 
 
15 
 
constituting 
fraud 
or 
mistake 
shall 
be 
stated 
with 
particularity" but allowing that "[m]alice, intent, knowledge, 
and other condition of mind of a person may be averred 
generally."   Similarly, § 802.03(6) governs pleadings for libel 
and slander, requiring that "the particular words complained of 
shall be set forth in the complaint, but their publication and 
their application to the plaintiff may be stated generally."  
None of the provisions in § 802.03 governing exceptions to 
notice pleading applies to the instant case. 
 
¶108 Thus, this court must determine whether the complaint 
sets forth a short and plain statement of the claim, identifying 
the transaction or occurrence or series of transactions or 
occurrences out of which the claim arises and showing that the 
pleader is entitled to relief.  
 
¶109 I look to each claim in turn, first the claim against 
the Pauls as directors and the non-Paul director-defendants, and 
then the claim against the Pauls as majority shareholders. 
III 
 
¶110 I first examine the plaintiff's claim that the 
director-defendants 
(including 
the 
Pauls) 
breached 
their 
fiduciary duty to the shareholders.  Because the plaintiff's 
claim focuses on the directors' abdication of their duties by 
entrusting the sale of the company to the Pauls, I look 
specifically at the claim against the non-Paul director-
defendants. 
¶111 The elements for a claim of breach of fiduciary duty 
are as follows: (1) the defendant had a fiduciary duty; (2) the 
No.  2012AP1967.ssa 
 
16 
 
defendant breached that duty; and (3) the breach of duty caused 
injury to the plaintiff.30     
¶112 On the first element, the plaintiff alleges that the 
defendants, as directors of a publicly held company, owe 
fiduciary duties to the shareholders.31 
¶113 The plaintiff's allegation is in accord with our 
state's law.  Wisconsin has long recognized that a trust 
relationship exists between the shareholders and the directors 
and that fiduciary duties of the directors to the shareholders 
arise from the relationship.32  Directors owe fiduciary duties to 
individual stockholders, not merely to the corporation itself.33  
"[O]fficers and directors of a corporation occupy a position of 
trust and confidence, and are considered in the law as standing 
in a fiduciary relation toward the stockholders and as trustees 
for them."34     
                                                 
30 Reget v. Paige, 2001 WI App 73, ¶12, 242 Wis. 2d 278, 626 
N.W.2d 302. 
31 Second Amended Complaint, ¶24. 
32 Grognet v. Fox Valley Trucking Serv., 45 Wis. 2d 235, 
241-42, 172 N.W.2d 812 (1969). 
33 Rose v. Schantz, 56 Wis. 2d 222, 228, 201 N.W.2d 593 
(1972). 
34 Grognet, 45 Wis. 2d at 242 (internal quotation marks) 
(citing Timme v. Kopmeier, 162 Wis. 571, 575, 156 N.W. 961 
(1916)). 
No.  2012AP1967.ssa 
 
17 
 
 
¶114 On the second element, the nature of this fiduciary 
duty is one of good faith, fair dealing, and loyalty.35 
¶115 The plaintiff alleges essentially two breaches of 
fiduciary duty: (1) that the directors abdicated their duty of 
care in allowing the Pauls to run the sale of the company 
without oversight; and (2) that the directors received self-
interested benefits that led them to vote for the Permira offer 
over the Plato offer. 
¶116 I conclude that the plaintiff sufficiently alleges a 
breach of the directors' fiduciary duty. 
¶117 The director-defendants assert that the complaint does 
not overcome the business judgment rule and consequently must be 
dismissed for failure to state a claim.  The director-defendants 
point to Wis. Stat. § 180.0828 for support.  They argue that 
because the complaint fails to state facts demonstrating 
specific circumstances that overcome the business judgment rule, 
the complaint cannot survive a motion to dismiss.   
¶118 Wisconsin Stat. § 180.0828 creates a statutory version 
of the business judgment rule:  A director is not liable for 
damages for liabilities arising from a breach of, or failure to 
perform, any duty resulting solely from his or her status as a 
director, unless the claimant proves that the breach or failure 
                                                 
35 See Zastrow v. Journal Communic'ns, Inc., 2006 WI 72, 
¶¶28-29, 291 Wis. 2d 426, 718 N.W.2d 51 (holding that fiduciary 
duty includes duty of loyalty and duty to refrain from acting in 
self-interest); Modern Materials, Inc. v. Advanced Tooling 
Specialists, Inc., 206 Wis. 2d 435, 442, 557 N.W.2d 835 (Ct. 
App. 1996) ("It is well established that a corporate officer 
or director is under a fiduciary duty of loyalty, good faith and 
fair dealing in the conduct of corporate business."). 
No.  2012AP1967.ssa 
 
18 
 
to perform falls within one of the exceptions set forth in the 
statute.   
¶119 Section 180.0828, the business judgment rule statute, 
reads in full as follows: 
(1) Except as provided in sub. (2), a director is not 
liable to the corporation, its shareholders, or any 
person asserting rights on behalf of the corporation 
or its shareholders, for damages, settlements, fees, 
fines, penalties or other monetary liabilities arising 
from a breach of, or failure to perform, any duty 
resulting solely from his or her status as a director, 
unless the person asserting liability proves that the 
breach or failure to perform constitutes any of the 
following: 
(a) A willful failure to deal fairly with the 
corporation or its shareholders in connection with a 
matter in which the director has a material conflict 
of interest. 
(b) A violation of criminal law, unless the director 
had reasonable cause to believe that his or her 
conduct was lawful or no reasonable cause to believe 
that his or her conduct was unlawful. 
(c) A transaction from which the director derived an 
improper personal profit. 
(d) Willful misconduct. 
(2) A corporation may limit the immunity provided 
under this section by its articles of incorporation.  
A limitation under this subsection applies if the 
cause of action against a director accrues while the 
limitation is in effect (emphasis added).36 
¶120 The director-defendants read this statute as providing 
blanket immunity for directors unless the complaint alleges that 
the directors' liability is based on conduct falling within Wis. 
                                                 
36 Limitations provided by articles of incorporation are not 
at issue in the present case. 
No.  2012AP1967.ssa 
 
19 
 
Stat. § 180.0828 (1)(a)-(d).  Thus the director-defendants 
request that the court create an exception to the notice 
pleading requirements of Wis. Stat. § 802.02(2) and require the 
complaint to plead facts that, if proven, would meet the 
enumerated statutory circumstances necessary to overcome the 
business judgment rule and impose liability on directors. 
¶121 The director-defendants argue that the notice pleading 
requirements are surpassed by the need for specific fact 
pleading in a suit against corporate directors for breach of 
fiduciary duty.  Specific fact pleading in the complaint is 
required, according to the director-defendants, to limit court 
involvement in business decisions in which courts have no 
expertise and to encourage people to serve as directors by 
ensuring that honest errors of judgment will not subject them to 
personal liability.37     
¶122 Like the court of appeals, I reject the director-
defendants' position.  I agree with the court of appeals that 
courts in notice pleading jurisdictions traditionally disfavor 
application of the business judgment rule at the motion-to-
dismiss stage because the rule generally requires a fact-
intensive analysis incompatible with notice pleading.  I agree 
with the court of appeals that the complaint is not required to 
                                                 
37 "The business judgment rule . . . contributes to judicial 
economy by limiting court involvement in business decisions 
where courts have no expertise and contributes to encouraging 
qualified people to serve as directors by ensuring that honest 
errors of judgment will not subject them to personal liability." 
Reget, 242 Wis. 2d 278, ¶17 (a summary judgment case). 
No.  2012AP1967.ssa 
 
20 
 
include allegations with considerable specificity sufficient to 
defeat the defense of the business judgment rule.38     
¶123 Regardless of whether the business judgment rule is 
viewed as a "mere rule of evidence,"39 an "affirmative defense,"40 
an "evidentiary presumption,"41 or, as the defendants aver, a 
"blanket rule of non-liability,"42 application of the business 
judgment rule is inherently fact-based, ordinarily requiring 
investigation of the particular acts, interests, and decision-
making processes of various actors.43     
¶124 My holding that notice pleading requirements disfavor 
specific fact pleading regarding the business judgment rule at 
the motion-to-dismiss stage is supported by cases in other 
notice-pleading jurisdictions.  The paradigmatic case in this 
regard is In re Tower Air, Inc., 416 F.3d 229, 238-39 (3d Cir. 
2005).   
                                                 
38 The court of appeals discusses its reasoning in more 
detail in its opinion, Data Key Partners, 350 Wis. 2d 347, ¶¶23-
26. 
39 Defendants-Respondents-Petitioners' Brief at 17. 
40 Data Key Partners, 350 Wis. 2d 347, ¶24; Defendants-
Respondents-Petitioners' Brief at 16. 
41 Reget, 242 Wis. 2d 278, ¶¶18-22. 
42 Defendants-Respondents-Petitioners' Brief at 16. 
43 See Yates v. Holt-Smith, 2009 WI App 79, ¶¶22-26, 319 
Wis. 2d 756, 768 N.W.2d 213 (business judgment rule does not 
shield director who evidence shows has acted in bad faith); 
Reget, 242 Wis. 2d 278, ¶20 (deciding application of business 
judgment rule on summary judgment after review of "sufficient 
evidentiary facts").   
No.  2012AP1967.ssa 
 
21 
 
¶125 In Tower Air, the United States Court of Appeals for 
the Third Circuit stated that as a general rule it would not 
rely on the business judgment rule to trigger dismissal under 
Federal Rule of Civil Procedure 12(b)(6), the analogous federal 
rule to Wisconsin's § 802.06(2)(a)6.  The Third Circuit reasoned 
that the business judgment rule is an affirmative defense, which 
will trigger dismissal if it is raised and unanswered on the 
face of the complaint itself.   
¶126 In Tower Air, the shareholder claimant alleged, inter 
alia, that the directors of Tower Air breached their fiduciary 
duty to act in good faith by ignoring various deficiencies in 
Tower Air's management and business deals and by failing to 
review and provide oversight for those deficiencies.  In Tower 
Air, the trial court dismissed the complaint, requiring the 
claimant to allege specific facts upon which the claim is based.   
¶127 The Third Circuit rejected the trial court's position, 
stating that the trial court "erroneously preempted discovery on 
certain claims by imposing a heightened pleading standard not 
required by [the] Federal Rule[s] of Civil Procedure" by 
requiring the shareholder to plead specific facts.44  The Third 
Circuit distinguished between Delaware's heightened pleading 
requirements and the relaxed pleading standards of the federal 
courts that "do not require a claimant to set out in detail the 
facts upon which he bases his claim."45     
                                                 
44 In re Tower Air, Inc., 416 F.3d 229, 237 (3d Cir. 2005). 
45 Id. 
at 
237 
(quoting 
Leatherman 
v. 
Tarrant 
County 
Narcotics Intelligence & Coordination Unit, 507 U.S. 163, 168 
(1993)). 
No.  2012AP1967.ssa 
 
22 
 
¶128 In a notice pleading jurisdiction, "supporting facts 
should be alleged, but only those necessary to provide the 
defendant fair notice of the plaintiff's claim and the grounds 
upon which it rests."  Tower Air, 416 F.3d at 237 (internal 
quotation marks and citation omitted).   
¶129 Based on this reasoning, the Third Circuit held that 
as a general rule, "we will not rely on an affirmative defense 
such as the business judgment rule to trigger dismissal of a 
complaint . . . ."  Tower Air, 416 F.3d at 238.  
¶130 The Tower Air court's analysis did not stop here.  It 
further reasoned that if "an unanswered affirmative defense 
appears on [the] face" of the complaint, the shareholder 
claimant had to "plead around the business judgment rule."  
Tower Air, 416 F.3d at 238 (citing ALA, Inc. v. CCAIR, Inc., 29 
F.3d 855, 859 (3d Cir. 1994)).46   
                                                                                                                                                             
Tower Air was decided prior to Twombly, 550 U.S. 544, and 
Iqbal, 555 U.S. 1030, regarding the federal pleading standard 
necessary to survive a motion to dismiss under Rule 12(b)(6).   
No Wisconsin case has adopted the Twombly/Iqbal standard of 
heightened pleading requirements.   
46 When the business judgment rule is not explicitly stated 
on the face of the complaint, courts applying the Tower Air rule 
have "rejected the argument that dismissal is appropriate where 
the business judgment rule is implicitly raised."  See Ad Hoc 
Committee of Equity Holders of Tectonic Network, Inc. v. 
Wolford, 554 F. Supp. 2d 538, 557 (D. Del. 2008) (emphasis 
added) (citing Shamrock Holdings, Inc. v. Arenson, 456 F. Supp. 
2d 599 (2006)).  Absent an explicit mention of the business 
judgment rule, "defendants are not required to plead around the 
business judgment rule at [the motion-to-dismiss] stage in the 
proceedings."  Shamrock, 456 F. Supp. 2d at 609. 
No.  2012AP1967.ssa 
 
23 
 
¶131 In Tower Air, the shareholder claimant specifically 
alleged in each of his claims that the decisions of the 
directors "merited no business judgment protection because they 
were taken in bad faith."  Tower Air, 416 F.3d at 234.   Thus, 
the Tower Air court reasoned that the shareholder claimant had 
"[pled] around the business judgment rule."  Id. at 238. 
¶132 In the instant case, the plaintiff refers to the 
business judgment rule statute, Wis. Stat. § 180.0828, on the 
face of the complaint and also pleads around the rule.   
¶133 Specifically, the plaintiff alleges that the rule is 
inapplicable in the instant case because the director-defendants 
engaged in "willful misconduct," one of the exceptions to the 
applicability of Wis. Stat. § 180.0828: 
Notably, 
because 
the 
Director 
Defendants 
have 
willfully failed to deal fairly with the minority 
shareholders, and have derived or will derive an 
improper personal benefit and/or have engaged in 
willful misconduct, they are not entitled to any 
protection of Sec. 180.0828, Wis. Stat. or any 
protective provision in the Company's Articles of 
Incorporation or Bylaws. 
Second Amended Complaint, ¶27. 
¶134 I agree with the court of appeals that, construed 
liberally, the complaint sufficiently alleges facts that, if 
true, plead around the business judgment rule: 
Data Key alleged in its complaint, among many other 
substantive allegations, that the directors engaged in 
"willful misconduct by willfully failing to deal 
fairly with the Plaintiffs and the Company's other 
minority public shareholders in a matter in which they 
have a material conflict of interest." The defendants 
acknowledge this allegation but nonetheless argue that 
Data 
Key's 
complaint 
comes 
"nowhere 
close 
to 
satisfying" the exceptions to the business judgment 
No.  2012AP1967.ssa 
 
24 
 
rule and that "nothing resembling" willful misconduct 
is alleged in Data Key's complaint. The defendants 
thus appear to take the position that application of 
the rule at the motion to dismiss stage of proceedings 
requires that a plaintiff plead facts sufficient to 
defeat the defense with considerable specificity. Such 
specificity is generally not required for purposes of 
notice pleading. 
Data Key Partners, 350 Wis. 2d 347, ¶25 (emphasis added). 
 
¶135 To successfully plead the "willful misconduct" of the 
director-defendants necessary to fall within the exception to 
the 
business 
judgment 
rule 
listed 
in 
Wis. 
Stat. 
§ 180.0828(1)(d), the plaintiff need not state the ultimate 
facts.   
 
¶136 The plaintiff's allegations sufficiently plead facts 
regarding the deliberate, intentional, or knowing misconduct of 
the director-defendants that could give rise to "willful 
misconduct."  The plaintiff alleged that the director-defendants 
"abdicated their responsibilities" by allowing the Pauls to run 
the sale and deliberately failed to independently investigate 
the sale due to their self-interested dealings in receiving 
payments and benefits from the Permira sale.47  
¶137 In the instant case, I would embrace the holding of 
Tower Air that, as a general rule, courts in notice pleading 
jurisdictions will not rely on the business judgment rule to 
dismiss a complaint on a motion to dismiss.   
¶138 The Third Circuit's reasoning is consistent with the 
general trend of federal cases both before and after Tower Air, 
which note that the business judgment rule is a fact-intensive 
                                                 
47 See ¶93, infra. 
No.  2012AP1967.ssa 
 
25 
 
inquiry that is inappropriate for resolution at the motion-to-
dismiss phase.48   
¶139 The director-defendants assert that to survive a 
motion to dismiss, a claimant must allege facts to overcome the 
presumption of the business judgment rule.  They claim that "a 
majority of jurisdictions outside of Wisconsin . . . require 
allegations of fact that call into question the availability of 
the Business Judgment Rule . . . ."49  They cite 1 Stephen A. 
Radin, The Business Judgment Rule 58-61 (6th ed. 2009), as 
support for this proposition of law.  I do not read Radin this 
way. 
¶140 Radin 
contrasts 
Delaware 
law, 
which 
requires 
a 
complaint to plead facts with specificity, with federal law, 
which requires notice pleading.50  Radin's overview of the 
federal case law supports the proposition that the Tower Air 
test is the norm in federal courts, in which no special fact 
                                                 
48 The court of appeals, Data Key Partners, 350 Wis. 2d 347, 
¶23, cites one commentator who summarizes the general view in 
federal case law that "determination and application of the 
business judgment rule requires a fact-intensive analysis that 
is inappropriate at the motion-to-dismiss stage." Zachary H. 
Starnes, The Business Judgment Rule After Twombly and Iqbal: 
Must Plaintiffs Now Plead Around the Rule to Survive a 12(b)(6) 
Motion To Dismiss?, 35 Am. J. Trial Advoc. 639, 655 (Spring 
2012) (footnotes omitted). 
49 See Defendants-Respondents-Petitioners' Brief at 26. 
50 The court of appeals rejected an argument from the 
director-defendants based on Delaware law, which relied heavily 
on Mendel v. Carroll, 651 A.2d 297 (Del. Ch. 1994).  The court 
of appeals determined that the case was inapplicable, because of 
the 
differences 
between 
Wisconsin 
and 
Delaware 
pleading 
requirements.  Data Key Partners, 350 Wis. 2d 347, ¶¶30-33. 
No.  2012AP1967.ssa 
 
26 
 
pleading requirements exist.  These cases under federal notice 
pleading do not rely on the business judgment rule at the motion 
to dismiss phase.51  These federal decisions construing the 
federal counterpart to Wis. Stat. § 802.02(1) of the Wisconsin 
Rules 
of 
Civil 
Procedure 
are 
persuasive 
in 
interpreting 
§ 802.02(1), but are not controlling.52 
¶141 Perhaps the paradigmatic post-Tower Air 
case is 
Shamrock Holdings, Inc. v. Arenson, 456 F. Supp. 2d 599 (D. Del. 
2006). 
In 
Shamrock, 
plaintiff 
corporate 
directors 
and 
shareholders sought a judgment declaring that they did not 
breach their fiduciary duty during the sale of the corporation.  
The 
defendant 
minority 
shareholders 
filed 
a 
counterclaim 
alleging that the directors and shareholders breached their 
fiduciary duty by acting in bad faith, by being grossly 
negligent, and by self-dealing.  The plaintiff corporate 
directors and shareholders filed a motion to dismiss the 
counterclaim, alleging that the minority shareholders implicitly 
raised the business judgment rule by the nature of their 
allegations and were required to plead around the business 
judgment rule. 
                                                 
51 1 Stephen A. Radin, The Business Judgment Rule 60-61 & 
n.247 (6th ed. 2009).  See also FDIC v. Baldini, 983 F. Supp. 2d 
772, 783, (S.D. W. Va. 2013), listing "overwhelming [federal] 
authority to support . . . [the position] that the business 
judgment 
rule 
is 
highly 
fact 
dependent 
and, 
therefore, 
inappropriate for consideration on a motion to dismiss."  
52 Wilson v. Cont'l Ins. Cos., 87 Wis. 2d 310, 316, 274 
N.W.2d 679 (1979). 
No.  2012AP1967.ssa 
 
27 
 
¶142 The Shamrock court denied the motion to dismiss.  
Citing Tower Air, the court declared that as a general rule the 
court will not rely on the business judgment rule to trigger 
dismissal of a complaint at the motion-to-dismiss stage.  
Shamrock, 456 F. Supp. 2d at 609.53    
¶143 The director-defendants, by urging that the plaintiff 
be required to plead particular facts to overcome the business 
judgment rule at the motion-to-dismiss phase, are essentially 
asking that this court adopt specific fact pleading rules in 
Wisconsin.  I would adhere to the Third Circuit's decision in 
Tower Air and subsequent decisions of other courts that have 
refused to change notice pleading rules for a cause of action 
against corporate directors for breach of fiduciary duty.   
¶144 The defendants attempt to find support in older 
Wisconsin cases, which required specific fact pleading regarding 
a director's breach of fiduciary duty.  They cite, for example,  
Polacheck v. Michiwaukee Golf Club Land Co., 198 Wis. 78, 82, 
223 N.W. 233 (1929), which sustained a demurrer based on the 
complaint's failure to allege specific abuse of power by 
corporate officers, and Thauer v. Gaebler, 202 Wis. 296, 232 
N.W. 561 (1930), which held that a complaint against directors 
was insufficient without allegations of abuse of power, bad 
faith, willful abuse of discretion, or positive fraud.   
¶145 These cases predate Wisconsin's notice pleading rules 
adopted in 1976 and have limited applicability in current notice 
                                                 
53 See also Wolford, 554 F. Supp. 2d at 556-59 (a complaint 
must meet the notice pleading requirements of the federal rules 
and does not have to plead around the business judgment rule). 
No.  2012AP1967.ssa 
 
28 
 
pleading. 
 
The 
court 
explained 
the 
change 
in 
pleading 
requirements as follows: 
[T]he new rules of civil procedure provide for notice 
pleading, and the resolution of the precise facts 
which sustain the claim is left to discovery. 
. . . . 
Although 
under 
the 
prior 
demurrer 
provision, 
complaints were to be construed liberally in favor of 
stating a cause of action, under the new rules 
complaints are to be construed even more liberally.  A 
complaint which might well have failed under the old 
procedure for failure to state sufficient facts now 
will be sustained if reasonable notice is given to the 
defendant in respect to the nature of the claim.54   
¶146 Like the court of appeals,55 I cannot locate any 
Wisconsin case in which the business judgment rule was applied 
at the motion-to-dismiss phase after our state's shift to notice 
pleading. 
¶147 After analyzing Wis. Stat. § 802.02(1) and the federal 
decisions interpreting the Wisconsin counterpart to the federal 
rules, I conclude that the complaint is sufficient to state a 
claim for breach of fiduciary duty against the director-
defendants in alleging the following: 
• The directors allowed the Pauls to run the sale 
process exclusively;56 
                                                 
54 Anderson, 85 Wis. 2d at 683-84 (citing Clausen & Lowe, 
supra note 21, at 38). 
55 Data Key Partners, 350 Wis. 2d 347, ¶21. 
56 Second Amended Complaint, ¶47. 
No.  2012AP1967.ssa 
 
29 
 
• The directors failed to independently investigate the 
deadlines given by the Pauls for the end of the 
bidding process;57 
• The directors refused to investigate the higher bid 
fairly, and accepted the lower bid;58 
• The 
directors 
received 
particular 
payments 
and 
benefits from their vesting stock options and would 
not have received them absent the sales agreement with 
Permira;59 
• The directors received indemnification for breaches of 
their fiduciary duties and would not have received 
them absent the sales agreement with Permira;60 
• The directors 
"engaged in willful misconduct by 
willfully failing to deal fairly with the [plaintiffs 
and other shareholders]."61 
¶148 The allegations in the complaint, which this court 
must accept as true, constitute a breach of loyalty upon which 
relief can be granted.  The complaint thus survives a motion to 
dismiss. 
¶149 On the third element, requiring an allegation that the 
breach of duty caused injury to the plaintiff, the complaint 
                                                 
57 Id., ¶49. 
58 Id., ¶57. 
59 Id., ¶¶62-63. 
60 Id. 
61 Id., ¶27. 
No.  2012AP1967.ssa 
 
30 
 
alleges that the sale of the corporation to Permira resulted in 
the minority shareholders' receiving less than the full value of 
their shares and that the sale of the corporation led to a loss 
of control of its shares.   
¶150 The director-defendants argue that this is not a harm, 
because the complaint does not allege that if the corporation 
had not been sold, the stock would have been worth more than the 
$16.60 per share it actually received.   
¶151 Like the court of appeals, I am not persuaded by the 
director-defendants' argument.  As the court of appeals notes, 
the plaintiff relies on the difference in the value of the two 
offers:  "[T]he Plato offers illustrate that the price that [the 
plaintiff] actually received from [the buyer-defendant] was less 
than the shares' value."62  The complaint details that the Plato 
offer would have paid $18 per share; the buyer-defendant's offer 
ended up paying $16.60 per share.  This difference in price is, 
for purposes of notice pleading and a motion to dismiss,  
sufficient to allege an injury caused by an alleged breach of 
fiduciary duty.  The exact form of injury suffered need not be 
spelled out in a complaint under the rules of notice pleading.63   
¶152 I agree with the court of appeals that the complaint 
in the present case alleges a sufficient harm and that the 
                                                 
62 Data Key Partners, 350 Wis. 2d 347, ¶45. 
63 Liebovich v. Minn. Ins. Co., 2008 WI 75, ¶40 310 
Wis. 2d 751, 751 N.W.2d 764 (holding that claimants' allegation 
that the defendants "interfered with [their] interests" and that 
they were "aggrieved by" the conduct is sufficient to allege 
injury for purpose of triggering a duty to defend). 
No.  2012AP1967.ssa 
 
31 
 
motion to dismiss is not the appropriate procedure in which to 
argue the proper method for assessing the value of the 
corporation.64 
¶153 Accordingly, I would hold that, under our notice 
pleading requirements, the complaint sufficiently alleges a 
claim for a breach of fiduciary duty by the director-defendants.  
IV 
¶154 I turn to the claims of the plaintiff minority 
shareholder against the Pauls for breach of their fiduciary duty 
as majority shareholders.  The business judgment rule has no 
application to this claim.65 
¶155 Again, the elements for a claim of breach of fiduciary 
duty are: (1) the defendant had a fiduciary duty; (2) the 
defendant breached that duty; and (3) the breach of duty caused 
injury to the plaintiff.66   
¶156 On the first element, the plaintiff alleges that the 
Pauls, as majority shareholders, have a fiduciary duty to 
minority shareholders.67 
                                                 
64 Data Key Partners, 350 Wis. 2d 347, ¶46 ("To the extent 
that there are legal standards that would limit the methods by 
which [the plaintiff] may prove the value of its shares, the 
defendants will be free to argue those standards as applied to 
the evidence as the factual record develops."). 
65 The statutory version of the business judgment rule, Wis. 
Stat. § 180.0828, applies to directors, not controlling or 
majority shareholders.  An analysis of the business judgment 
rule's application to the pleading stage is not relevant to the 
issue of a majority shareholder's breach of fiduciary duty. 
66 Reget, 242 Wis. 2d 278, ¶12. 
67 Second Amended Complaint, ¶24. 
No.  2012AP1967.ssa 
 
32 
 
¶157 The plaintiff's allegation of such a fiduciary duty is 
in accord with our state's law.  In Wisconsin it is a "well-
settled and often applied rule of corporation law and equity 
that a majority stockholder occupies a fiduciary relationship 
toward minority shareholders."68   
¶158 Generally, when majority shareholders take control of 
the corporation's actions, they stand in the same fiduciary 
relation to other shareholders as does a director or officer: 
A majority shareholder who actually dominates the 
company, although not an officer, stands in the same 
fiduciary relation to the other shareholders as does a 
director or other officer.  If a shareholder exercises 
absolute de facto control over a corporation, such 
actual 
dominion 
carries 
with 
it 
fiduciary 
responsibility regardless of the presence or absence 
of de jure titles.  If a majority shareholder is also 
a director and the president or other chief officer of 
the 
corporation, 
that 
shareholder 
is 
generally 
considered a fiduciary. 
                                                 
68 Prod. 
Credit 
Ass'n 
of 
Lancaster 
v. 
Croft, 
143 
Wis. 2d 746, 754, 423 N.W.2d 544 (Ct. App. 1988) (citing S. Pac. 
Co. v. Bogert, 250 U.S. 483, 487-88 (1919)).   
No.  2012AP1967.ssa 
 
33 
 
12B William Meade Fletcher, Fletcher Cyclopedia of the Law of 
Corporations § 5811 (West 2009).69    
 
¶159 The complaint alleged the following relating to the 
Pauls' control of the sale of the corporation: 
• The director-defendants "essentially abdicated their 
responsibilities as directors in conjunction with the 
sale process——leaving it to be run almost exclusively 
by the Pauls";70 
• The Pauls used their own personal bank, Goldman Sachs, 
to serve as financial advisor for the corporation's 
sale, thus creating a conflict of interest;71 
                                                 
69 See 2 James Cox & Thomas Hazen, Treatise on the Law of 
Corporations 
§ 11:11 
(3d 
ed. 
2013) 
("The 
basis 
for 
the 
controlling stockholder's fiduciary obligation is the sound 
policy that, just as directors are bound by certain fiduciary 
obligations, one who has the potential to control the board's 
actions should be subject to an obligation as rigorous as those 
applied to the directors."); Yanow v. Teal Indus., Inc., 422 
A.2d 311, 322, 178 Conn. 262, (1979) ("[T]he majority has the 
right to control, but when it does so, it occupies a fiduciary 
relationship toward the minority, as much as the corporation 
itself or its officers and directors.");  Knaebel v. Heiner, 663 
P.2d 551, 552-53 (Alaska 1983) ("It is well established that 
majority stockholders are considered fiduciaries with respect to 
minority stockholders within the same corporation.  This 
fiduciary duty encompasses the obligation to act in good faith, 
to enter into transactions that are fair, and to fully disclose 
material facts."); Linge v. Ralston Purina Co., 293 N.W.2d 191, 
193-94 (Iowa 1980) ("[M]ajority shareholders do owe a fiduciary 
duty to minority shareholders."). 
70 Second Amended Complaint, ¶47. 
71 Second Amended Complaint, ¶¶47, 67. 
No.  2012AP1967.ssa 
 
34 
 
• Mr. Paul was the primary contact for Goldman Sachs at 
the corporation and served as the liaison between 
Goldman Sachs and the corporation;72 
• The Pauls "completely dictate[d] the timing of the 
sale process from beginning to end."73 
¶160 Viewing 
these 
allegations 
as 
admitted 
by 
the 
defendants under our standard of review for a motion to dismiss, 
I would hold that they sufficiently allege the first element, 
namely 
that 
the 
Pauls 
as 
majority 
shareholders 
directly 
controlled the behavior of the company, triggering their 
fiduciary duty to the minority shareholders. 
¶161 On the second element, the nature of this fiduciary 
duty, the duty is one of good faith, fair dealing, and loyalty.74 
The majority shareholders "may not use their position of trust 
to further their private interests."75  
                                                 
72 Second Amended Complaint, ¶48. 
73 Second Amended Complaint, ¶49. 
74 See Zastrow, 291 Wis. 2d 426, ¶¶28-29 (holding that 
fiduciary duty includes duty of loyalty and duty to refrain from 
acting in self-interest); Modern Materials, 206 Wis. 2d at 442 
("It is well established that a corporate officer or director is 
under a fiduciary duty of loyalty, good faith and fair dealing 
in the conduct of corporate business."). 
75 Notz v. Everett Smith Group, Ltd., 2009 WI 30, ¶20, 316 
Wis. 2d 640, 764 N.W.2d 904 (quoting Rose, 56 Wis. 2d at 228-
29). 
"A consistent facet of a fiduciary duty is the constraint 
on the fiduciary's discretion to act in his own self-interest 
because 
by 
accepting 
the 
obligation 
of 
a 
fiduciary 
he 
consciously sets another's interests before his own."  Zastrow, 
291 Wis. 2d 426, ¶28. 
No.  2012AP1967.ssa 
 
35 
 
¶162 The complaint alleges that the Pauls breached their 
majority shareholders' fiduciary duty of fair dealing and 
loyalty through self-dealing and by exerting undue influence 
over the board to cause a sale of the entire company in a manner 
that 
benefited 
the 
Pauls 
at 
the 
expense 
of 
minority 
shareholders.   
¶163 The allegations of self-dealing in the complaint, 
which this court must accept as true, can constitute a claim for 
breach of fiduciary duty upon which relief can be granted.  
¶164 The complaint alleges that the Pauls would have 
received a tangible personal benefit from one offer and not the 
other.  The plaintiff alleges that the Pauls rejected the higher 
Plato bid and accepted the Permira bid for several reasons, but 
alleges that at least one reason was that the higher Plato bid 
did not include a favorable licensing agreement for the Pauls: 
[U]nlike the Sale Agreement with Permira, the Plato 
Proposal apparently did not include the grant to Base 
Camp 
Learning 
Services, 
Inc. . . . , 
a 
company 
controlled by the Pauls, of a non-exclusive, non-
transferable license to use certain of Renaissance's 
software products and services for the internal 
educational use of the family and descendants of the 
Pauls . . . .76  
¶165 The courts do not use the motion to dismiss as an 
opportunity to weigh the facts.77  Rather, a court gauges the 
motion to dismiss by viewing the facts alleged as true.  The 
                                                 
76 Second Amended Complaint, ¶54. 
77 Cf. In re A.S., 2001 WI 48, ¶35, 243 Wis. 2d 173, 626 
N.W.2d 712 (noting, in another civil context, that "in reviewing 
a motion to dismiss, we do not weigh the facts . . . ."). 
No.  2012AP1967.ssa 
 
36 
 
allegations of the complaint, taken as true, claim that the 
Pauls got a personal benefit in the Permira deal but not in the 
Plato deal.  This assertion is sufficient to support a 
reasonable inference that the Pauls engaged in self-dealing and 
violated their fiduciary duty of loyalty.78  
¶166 Given the notice pleading standards of our state, I 
would hold that the complaint in the instant case sufficiently 
alleges 
that 
the 
Pauls 
in 
their 
capacity 
as 
majority 
shareholders breached their fiduciary duty of loyalty to the 
minority shareholders.  This allegation states a claim upon 
which relief can be granted. 
¶167 On the third element, requiring an allegation that the 
breach of fiduciary duty caused injury to the plaintiff, the 
complaint alleges that the sale of the corporation to Permira 
resulted in the minority shareholders' receiving less than the 
full value of their shares.79 
¶168 As I have explained previously,80 the difference in 
prices between the two offers sufficiently alleges an injury 
                                                 
78 When a controlling shareholder sits on both sides of a 
transaction, the burden is on that controlling shareholder to 
demonstrate that the transaction was fair.  12B William Meade 
Fletcher, Fletcher Cyclopedia of the Law of Corporations, 
§ 5811.10 (West 2009) ("When a majority, dominant or controlling 
shareholder deemed to be a fiduciary is challenged for having 
engaged 
in 
self-dealing in 
property 
or 
services 
of 
the 
corporation, that shareholder has the burden of coming forward 
with evidence and the burden of persuasion to show that the 
transaction was scrupulously fair."). 
79 Second Amended Complaint, ¶4. 
80 See ¶¶83-85, supra. 
No.  2012AP1967.ssa 
 
37 
 
caused by the Pauls' alleged breach of fiduciary duty for 
purposes of notice pleading and a motion to dismiss.   
¶169 For the reasons set forth, I would agree with the 
court of appeals that the complaint satisfies the requirements 
of notice pleading.  Our pleading rules require only that a 
complaint plead a "short and plain statement of the claim, 
identifying 
the 
transaction 
or 
occurrence 
or 
series 
of 
transactions or occurrences out of which the claim arises and 
showing that the pleader is entitled to relief."  Wis. Stat. 
§ 802.02(1).   
¶170 The complaint in the instant case gives fair notice to 
the defendants of the claims upon which relief can be granted.  
I am not presented with sufficient reason to create an exception 
to our notice pleading requirements in the present case.  
¶171 Accordingly, I would affirm the decision of the court 
of appeals that the circuit court erred in granting the motions 
to dismiss the two claims discussed above, and I would remand 
the matter to the circuit court for further proceedings 
consistent with this opinion. 
* * * * 
¶172 For the reasons set forth, I dissent. 
¶173 I am authorized to state that Justices ANN WALSH 
BRADLEY and N. PATRICK CROOKS join this dissent. 
 
 
No.  2012AP1967.ssa 
 
 
 
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