Opinion ID: 216284
Heading Depth: 1
Heading Rank: 4

Heading: Supreme Judicial Court's Response

Text: On August 23, 2010, the Supreme Judicial Court issued an opinion answering our certified question in the affirmative. Halebian III, 457 Mass. at 621, 931 N.E.2d at 987. The court reasoned, inter alia: If we were to adopt the plaintiff's assertion that the Legislature's inclusion of the phrase, commenced after rejection of a demand, was intended to deny a corporation the benefit of the business judgment doctrine where it failed to reject a shareholder's demand before the filing of a derivative complaint, we would be giving § 7.44 an interpretation that would be in direct conflict with other language in the same section and that would be inconsistent with the statutory scheme embodied in the Act and reflected in the commentary of its drafters. For these reasons, despite the statute's unfortunate inclusion of a phrase that, when read in isolation, would suggest that § 7.44(a) was intended to limit dismissals under the business judgment doctrine to derivative proceedings commenced after rejection of a demand, we conclude that the Legislature did not intend such a limitation. Rather, we conclude that the Legislature intended that a derivative action must be dismissed under § 7.44 following a corporation's independent determination, made in good faith and after reasonable inquiry, that maintenance of the derivative proceeding is not in the best interests of the corporation, regardless whether the derivative complaint has been filed before or after the corporation's rejection of the shareholder's demand. Id. at 632-33, 931 N.E.2d at 995. We now resolve the instant appeal in light of the careful opinion of the Supreme Judicial Court of Massachusetts in response to our certified question.