Opinion ID: 217402
Heading Depth: 4
Heading Rank: 2

Heading: Pleading the failure to act in good faith

Text: The district court incorrectly required Plaintiffs to plead as part of their section 20(a) claim that Burns and Richter did not act in good faith. Although we have never held that good faith is an affirmative defense that the defendant has the burden of establishing in a section 20(a) action, many of our sister circuits have. See Laperriere v. Vesta Ins. Group, Inc., 526 F.3d 715, 721 (11th Cir.2008); In re Stone & Webster, Inc., Sec. Litig., 424 F.3d 24, 26 (1st Cir.2005); Southland Sec. Corp. v. INSpire Ins. Solutions, Inc., 365 F.3d 353, 384 n. 19 (5th Cir.2004); Dellastatious v. Williams, 242 F.3d 191, 194 (4th Cir. 2001); Donohoe v. Consol. Operating & Prod. Corp., 30 F.3d 907, 912 (7th Cir. 1994). In addition, we have considered a good faith exception similar to that of section 20(a) in the context of a director liability suit. In McCall v. Scott, 250 F.3d 997, 1000 & n. 1 (6th Cir.2001), we interpreted a provision of a Delaware corporation's Certificate of Incorporation that generally limited liability for directors of the corporation except for acts or omissions not in good faith. Id. at 1000. We noted that it is not the plaintiff who must establish bad faith at trial, but the defendant who bears the burden, however slight, to show good faith. Id. at 1000 n. 1 (citation omitted). The rule from McCall applies here as well and we choose to follow suit with our sister circuits. Good faith is an affirmative defense in section 20(a) claims and Plaintiffs were not required to plead that Burns and Richter acted without it.