Opinion ID: 2345086
Heading Depth: 1
Heading Rank: 3

Heading: direct and derivative suits against directors

Text: The Court of Special Appeals held that § 2-405.1(a) provides the sole source of duties owed by corporate directors and that § 2-405.1(g) bars all direct shareholder claims against those corporate directors for breach of their fiduciary duties. [12] We find both of these conclusions to be erroneous, and hold that, in the context of a cash-out merger transaction, where the decision to sell the corporation already has been made, corporate directors owe their shareholders common law duties of candor and good faith efforts to maximize shareholder value, and that allegations of breach of those duties may be pursued through a direct suit by shareholders.
Section 2-401(a) states that [t]he business and affairs of a corporation shall be managed under the direction of a board of directors. § 2-401(a). In undertaking those managerial decisions, directors and officers owe the duty of care contained in § 2-405.1(a) [13] to the corporation and its shareholders. Mona v. Mona Elec. Group, Inc., 176 Md.App. 672, 695-96, 934 A.2d 450, 463 (2007). To fulfill this duty of care, directors must perform their managerial acts in good faith, in a manner they believe reasonably to be in the best interest of the corporation, and with the care that an ordinarily prudent person in a like position would use under similar circumstances. § 2-405.1(a). The Court of Special Appeals here found that § 2-405.1(a) is the sole source of directorial duties. Petitioners seek to refute this conclusion and argue that the only duties referred to in § 2-405.1(a) are those that involve the management of the business and affairs of the corporation, matters in which the corporation has an interest, such as the decision whether a corporation should be sold. Those duties, they concede, must be performed in the best interests of the corporation and are enforceable only by the corporation. Beyond and pre-existing § 2-405.1(a), however, lie additional common law duties (referred to by Petitioners as Shareholder duties) that are triggered once a threshold decision to sell the corporation has been made and which concern only matters personal to the shareholders. Those duties allegedly arise from the Board's undertaking to negotiate the price that shareholders will receive for their shares in a cash-out acquisition of ownership of the corporation, and include fiduciary duties of candor and maximization of the consideration offered for the shares. On this point, we agree with Petitioners and hold that directors of Maryland corporations owe fiduciary duties of candor and maximization of shareholder value to their shareholders beyond those enumerated in § 2-405.1(a), at least in the context of negotiating the amount shareholders will receive in a cash-out merger transaction. It long has been established, by cases decided both prior to and subsequent to the Legislature's enactment of the duty of care for corporate directors contained in § 2-405.1(a), that directors of Maryland corporations stand in a fiduciary relationship to the corporations that they manage and the shareholders of those corporations, a relationship that imposes on directors duties of care, loyalty, and good faith. Hoffman Steam Coal Co. v. Cumberland Coal & Iron Co., 16 Md. 456, 507 (1860); Booth v. Robinson, 55 Md. 419, 436-37 (1881); Storetrax.com, Inc. v. Gurland, 397 Md. 37, 53, 915 A.2d 991, 1000 (2007); Mona, 176 Md.App. at 695, 934 A.2d at 463. We have noted that the confidence reposed in them, and the position they occupy towards the corporation and its stockholders, require a strict and faithful discharge of duty, and they are not allowed to derive from their position, either directly or indirectly, any profit or advantage whatever, except it be with the full knowledge and concurrence of the company, represented by others than themselves. Booth, 55 Md. at 437; Coffman v. Maryland Publ'g Co., 167 Md. 275, 289, 173 A. 248, 254 (1934) (noting that officers and directors stand in a fiduciary relationship both to the corporation and to the stockholders, and may not under any circumstances use the power intrusted to them to promote their personal interests at the expense of the stockholders). We have found also that [i]t is clear that officers and directors of a corporation stand in a sufficiently confidential relation to the corporation's stockholders to impose a duty upon them to reveal all facts material to the corporate transactions. Parish v. Maryland & Virginia Milk Producers Ass'n, 250 Md. 24, 74, 242 A.2d 512, 539 (1968). These fiduciary duties are not intermittent or occasional, but instead are the constant compass by which all director actions for the corporation and interactions with its shareholders must be guided. Storetrax, 397 Md. at 54, 915 A.2d at 1001 (quoting Malone v. Brincat, 722 A.2d 5, 10 (Del.1998)). [14] It is without question that § 2-405.1(a) governs the duty of care owed by directors when they undertake managerial decisions on behalf of the corporation. When directors undertake to negotiate a price that shareholders will receive in the context of a cash-out merger transaction, however, they assume a different role than solely managing the business and affairs of the corporation. Duties concerning the management of the corporation's affairs change after the decision is made to sell the corporation. See Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., 506 A.2d 173, 182 (Del.1986) (noting that, once sale became inevitable, [t]he directors' role changed from defenders of the corporate bastion to auctioneers charged with getting the best price for the stockholders at a sale of the company). Beyond that point, in negotiating a share price that shareholders will receive in a cash-out merger, directors act as fiduciaries on behalf of the shareholders. See Paramount Commc'ns Inc. v. QVC Network Inc., 637 A.2d 34, 48-49 (Del.1994) (noting that once directors decide to sell control of a corporation, they have an obligation to search for the best value reasonably available to the stockholders). As a result of the confidence and trust reposed in them during the price negotiation, their ability to affect significantly the financial interests of the shareholders, and the inherent conflict of interest that arises between directors and shareholders in any change-of-control situation, the common law imposes on those directors duties to maximize shareholder value and make full disclosure of all material facts concerning the merger to the shareholders. See Bennett v. Propp, 187 A.2d 405, 409 (Del.1962). Based on the well-established principle that statutes are not presumed to make alterations in the common law other than as may be declared expressly, we disagree with the Court of Special Appeals's and Board Respondents' contentions that § 2-405.1(a) supersedes or supplants all recognized common law duties that pre-existed the adoption of the statute in 1976. See Walzer v. Osborne, 395 Md. 563, 573-74, 911 A.2d 427, 433 (2006); Davis v. Slater, 383 Md. 599, 615-16, 861 A.2d 78, 87 (2004); Romm v. Flax, 340 Md. 690, 698, 668 A.2d 1, 4-5 (1995). We read § 2-405.1(a) as codifying the duty of care owed by directors when acting in their managerial capacities, rather than as a replacement of all previously recognized common law fiduciary duties of directors owed to the corporation and its shareholders. As such, we hold that § 2-405.1(a) does not provide the sole source of directorial duties, and that other, common law fiduciary duties of directors remain in place and may be triggered by the occurrence of appropriate events. This view is shared in an opinion authored by the Maryland Attorney General in 1997. See 62 Op. Atty Gen. Md. 804 (Md.1977). There, the Attorney General contended that the statutory standard of care contained in § 2-405.1(a) imposes separate and distinct obligations upon corporate officers and directors from other common law duties, such as the duty to refrain from usurping a corporate opportunity. Id. at 812. In that opinion, cited favorably by the Court of Special Appeals in cases prior to the present litigation, see Indep. Distribs., Inc. v. Katz, 99 Md.App. 441, 461, 637 A.2d 886, 895 (1994), the Attorney General opined that when the Legislature enacted § 2-405.1(a), it did not intend to abrogate the fiduciary duty imposed upon a director or officer not to usurp a corporate opportunity. 62 Op. Atty Gen. Md. at 13-14. Although we deal here with directorial duties other than refraining from usurping corporate opportunity, the Attorney General's opinion suggests that, in enacting § 2-405.1(a), the General Assembly did not seek to occupy the entire field of directorial duties owed by corporate directors, but instead intended to codify the duty of care owed by directors in exercising their managerial duties. Our conclusion also is consistent with the Delaware Supreme Court's holding in Revlon. In that case, the Delaware Supreme Court held that, where it is clear that the board has determined that the corporation is for sale or sale is a foregone conclusion, the duty of the directors changed from the preservation of [the corporation] as a corporate entity to the maximization of the company's value at a sale for the stockholders' benefit. Revlon, 506 A.2d at 182. The court noted that, at this point, the directors' role changed from defenders of the corporate bastion to auctioneers charged with getting the best price for the stockholders at a sale of the company. Id. Board Respondents contend that § 2-405.1(f), an amendment to the statute added in 1999 stating that [a]n act of a director relating to or affecting an acquisition or a potential acquisition of control of a corporation may not be subject to a higher duty or greater scrutiny than is applied to any other act of a director, demonstrates the Maryland Legislature's intent to reject the reasoning of Revlon and the line of Delaware cases that follow it. As will be discussed infra, it is clear to us that the 1999 amendments to § 2-405.1 merely enhanced the protections and defense mechanisms that directors may employ against hostile takeover attempts. Revlon and the duties that it described are aimed at the duties involved in a situation where sale of the corporation is a foregone conclusion and the primary remaining interests are those of the shareholders in maximizing their share value in a sale. For that reason, coupled with the presumption regarding the effect of statutory enactments on the common law discussed infra, we conclude that § 2-405.1 does not supersede the common law duties long recognized in Maryland, including those characterized in Revlon, that, when faced with an inevitable or highly likely change-of-control situation, corporate directors owe their shareholders fiduciary duties of candor and maximization of shareholder value. Thus, we hold that the Court of Special Appeals erred in concluding that § 2-405.1(a) is the sole source of directorial duties for Maryland corporations and that that subsection supersedes and subsumes all pre-existing common law duties owed by corporate directors to their shareholders. Once the threshold decision to sell Laureate was made, Board Respondents owed fiduciary duties of candor and maximization of shareholder value to Petitioners, common law duties not encompassed or superseded by § 2-405.1(a).
The Court of Special Appeals held that Petitioners could not pursue their claims for breach of fiduciary duty directly because § 2-405.1(g), also added in 1999, bars all shareholder direct claims and they had presented no evidence that their grievances are personal to them rather than common to all of Laureate's shareholders. Thus any such claim for breach of fiduciary duties had to proceed derivatively, if at all. Petitioners argue that the only parties with any interest inand therefore, with any claim regardinghow much Laureate's public shareholders would personally receive for their shares are the shareholders themselves, and that the only means available for [Petitioners] to protect themselves from loss of their property for inadequate consideration as a direct result of the breaches of fiduciary duties by [Board Respondents] is through a direct action. They claim that, when it comes to the consideration that shareholders receive for their stock in a cash-out merger transaction, the corporation has no interest and, thus, no enforceable right to be asserted derivatively. In riposte, Board Respondents contend that a direct claim by a shareholder for breach of duty cannot proceed unless there was an independent and personal relationship between the shareholder and the director. We agree with Petitioners and hold that, in a cash-out merger transaction where the decision to sell the corporation already has been made, shareholders may pursue direct claims against directors for breach of their fiduciary duties of candor and maximization of shareholder value. The business and affairs of a corporation, including the decision to institute litigation, are managed generally under the direction of its board of directors. Bender v. Schwartz, 172 Md.App. 648, 665, 917 A.2d 142, 152 (2007). Ordinarily, a shareholder does not have standing to sue to redress an injury to the corporation resulting from directorial mismanagement. Mona, 176 Md.App. at 697-98, 934 A.2d at 464. Developed as a check on directorial power, the derivative form of action permits an individual shareholder or group of shareholders to bring suit to enforce a corporate cause of action against officers, directors, and third parties where those in control of the company refuse to assert a claim belonging to it. Bender, 172 Md. App. at 665, 917 A.2d at 152; Mona, 176 Md.App. at 698, 934 A.2d at 464. The purpose of the derivative action is to place in the hands of the individual shareholder a means to protect the interests of the corporation from the misfeasance and malfeasance of `faithless directors and managers.' Danielewicz v. Arnold, 137 Md.App. 601, 626, 769 A.2d 274, 289 (2001) (quoting Cohen v. Beneficial Indus Loan Corp., 337 U.S. 541, 548, 69 S.Ct. 1221, 1226, 93 L.Ed. 1528 (1949)). In Waller v. Waller , we outlined in detail the general concept of the derivative suit and the reasons for allowing such claims: It is a general rule that an action at law to recover damages for an injury to a corporation can be brought only in the name of the corporation itself acting through its directors, and not by an individual stockholder though the injury may incidentally result in diminishing or destroying the value of the stock. The reason for this rule is that the cause of action for injury to the property of a corporation or for impairment or destruction of its business is in the corporation, and such an injury, although it may diminish the value of the capital stock, is not primarily or necessarily a damage to the stockholder, and hence the stockholder's derivative right can be asserted only through the corporation. The rule is advantageous not only because it avoids a multiplicity of suits by the various stockholders, but also because any damages so recovered will be available for the payment of debts of the corporation, and, if any surplus remains, for distribution to the stockholders in proportion to the number of shares held by each. Waller v. Waller, 187 Md. 185, 189-90, 49 A.2d 449, 452 (1946). We continued to say that: Generally, therefore, a stockholder cannot maintain an action at law against an officer or director of the corporation to recover damages for fraud, embezzlement, or other breach of trust which depreciated the capital stock or rendered it valueless. Where directors commit a breach of trust, they are liable to the corporation, not to its creditors or stockholders, and any damages recovered are assets of the corporation, and the equities of the creditors and stockholders are sought and obtained through the medium of the corporate entity. Id. at 190, 49 A.2d at 452. In order to sue derivatively on behalf of the corporation, a plaintiff shareholder must overcome a number of procedural hurdles and demonstrate that he or she, rather than the corporation itself, should control the litigation. Specifically, before instituting suit, the derivative plaintiff either must make a demand on the corporation's board of directors to pursue the claim against the offending parties or demonstrate to the court that such demand would be futile due to the conflicting interests of the members of the board. Bender, 172 Md.App. at 666, 917 A.2d at 152; Mona, 176 Md.App. at 699, 934 A.2d at 465-66. Once demand is made, the corporation's board of directors must conduct an investigation into the allegations in the demand and determine whether pursuing the demanded litigation is in the best interests of the corporation. Bender, 172 Md.App. at 666, 917 A.2d at 152; Mona, 176 Md.App. at 700, 934 A.2d at 466. If the corporation, after investigation, fails to take the action requested by the shareholder, the shareholder may bring a demand refused action. Bender, 172 Md. App. at 666, 917 A.2d at 152; Mona, 176 Md.App. at 700, 934 A.2d at 466. In a derivative action, any recovery belongs to the corporation, not the plaintiff shareholder. Id. at 698, 934 A.2d at 465. It is well established that courts generally will not interfere with the internal management of a corporation. Devereux v. Berger, 264 Md. 20, 31, 284 A.2d 605, 612 (1971) (quoting Parish, 250 Md. at 74, 242 A.2d at 540). In a derivative action, the business judgment rule protects a disinterested director from liability to the corporation and its stockholders by insulating the business decisions made by the director from judicial review, absent a showing of fraud, self-dealing, unconscionable conduct, or bad faith. NAACP v. Golding, 342 Md. 663, 673, 679 A.2d 554, 559 (1996). The conduct of the corporation's affairs are placed in the hands of the board of directors and if the majority of the board properly exercises its business judgment, the directors are not ordinarily liable. Devereux, 264 Md. at 31-32, 284 A.2d at 612 (quoting Parish, 250 Md. at 74, 242 A.2d at 540). We have held that the business judgment rule applies to all decisions regarding the corporation's management. NAACP, 342 Md. at 673, 679 A.2d at 559. In contrast to a derivative action, a shareholder may bring a direct action, either individually or as a representative of a class, against alleged corporate wrongdoers when the shareholder suffers the harm directly or a duty is owed directly to the shareholder, though such harm also may be a violation of a duty owing to the corporation. Matthews v. Headley Chocolate Co., 130 Md. 523, 536, 100 A. 645, 650 (1917) (noting that shareholders may sue directly where they have suffered some peculiar injury independent of what the company has suffered); Waller v. Waller, 187 Md. at 192, 49 A.2d at 453; Bender, 172 Md.App. at 665-66, 917 A.2d at 152; Danielewicz, 137 Md.App. at 618, 769 A.2d at 284. Cases where direct harm is suffered by shareholders include, for example, actions to enforce a shareholder's right to vote or right to inspect corporate records. That the plaintiff suffered his or her injury in common with all other shareholders is not determinative of whether the injury suffered is direct or indirect. See Tooley v. Donaldson, Lufkin & Jenrette, Inc., 845 A.2d 1031, 1033 (Del.2004) (noting that the issue of whether a claim should be brought derivatively or directly turns on considerations of who suffered the alleged harm and who would receive the benefit of any recovery); Strougo v. Bassini, 282 F.3d 162, 171 (2d Cir.2002) (applying Maryland law) (noting that, in Maryland, where shareholders suffer an injury distinct from that of the corporation, rather than deriving from an injury to the business or property of the corporation, the corporation lacks standing to sue, and Maryland's `distinct injury' rule allows shareholders access to the courts to seek compensation directly). Where the rights attendant to stock ownership are adversely affected, shareholders generally are entitled to sue directly, and any monetary relief granted goes to the shareholder. Mona, 176 Md.App. at 697, 934 A.2d at 464; see also 13 William Meade Fletcher, Cyclopedia of the Law of Private Corporations § 5939 (2004 Rev. Vol.). If the plaintiff demonstrates that he or she has suffered the alleged injury directly, he or she need not make demand on the corporate board of directors or prove futility of demand, and the business judgment rule does not apply. A stockholder may proceed with a direct suit or a derivative suit against officers and directors depending on whether the complaining stockholder suffered direct harm or indirect harm as a result of decisions made by the officers or directors of a corporation. Wm. David Chalk, Maryland Corporate Practice and Forms: The DLA Piper Manual § 4.18 (2008); Mona, 176 Md.App. at 697, 934 A.2d at 464 (noting that a shareholder may bring a direct action against the corporation, its officers, directors, and other shareholders to enforce a right that is personal to him). Whether a cause of action is individual or derivative must be determined from the nature of the wrong alleged and the relief, if any, that could result if the plaintiff were to prevail. 12B Fletcher § 5911 (2009 Rev. Vol.). This Court held that, where a shareholder is cheated through misrepresentation and fraud during a sale of stock, no right of action accrues to the corporation because the stock is the personal property of the stockholder. Llewellyn v. Queen City Dairy, Inc., 187 Md. 49, 61, 48 A.2d 322, 328 (1946). In such a case, the right of action lies with the stockholder. Id. Here, Petitioners claim that Board Respondents violated the fiduciary duties of candor and maximization of value that they owed directly to Laureate's shareholders. As discussed above, where a shareholder's action is based on breach of a duty owed directly to the shareholder, a direct action may be filed against the directors. Thus, because the fiduciary duties of Board Respondents were owed directly to Petitioners as shareholders, Petitioners may proceed directly against Board Respondents. In addition, it is clear that, here, the injury alleged, namely, a lesser value that shareholders received for their shares in the cash-out merger, is an injury suffered solely by the shareholders and not by Laureate as a corporate entity. Such an injury, if suffered, is a direct one, separate from any injury suffered by the corporation, thus allowing Petitioners to proceed with their direct action against Board Respondents. A higher or lower price received by shareholders for their shares in the cash-out merger in no way implicated Laureate's interests and causes no harm to the corporation. Were Petitioners required to bring their action derivatively, any recovery would go to the corporation. Such a result demonstrates the error of labeling Petitioners' action a derivative claim, as Board Respondents retaining control of Laureate, the defendants who allegedly breached their fiduciary duties to the shareholders, would share in any potential recovery. Petitioners alleged a direct claim against Board Respondents and were not required to proceed derivatively in the name of the corporation.
The Court of Special Appeals concluded that § 2-405.1(g), which provides that [n]othing in this section creates a duty of any director of a corporation enforceable otherwise than by the corporation or in the right of the corporation, barred Petitioners' direct claim and that the statute contemplated no forms of action for breach of fiduciary duties enforceable other than derivatively. That court also found that the statute supersedes the common law with respect to claims by shareholders against directors for breach of their fiduciary duties. Petitioners contend that subsection (g) was intended solely to provide a board of directors with additional protections in defending against an unsolicited takeover where the corporation is not for sale and was not designed to affect or eliminate the duties of corporate directors owed directly to shareholders once the decision is made voluntarily to sell the company. They argue that subsection (g) merely states that, when a duty owed to the corporation under § 2-405.1 is breached, that breach may be enforced only by the corporation or in the right of the corporation. Board Respondents counter that subsection (g) plainly provides that claims for breach of fiduciary duty against directors may be brought only by the corporation or derivatively on its behalf. The cardinal rule of statutory interpretation is to ascertain and carry out the true intention of the Legislature. Reichs Ford, 388 Md. at 517, 880 A.2d at 316; W. Corr. Inst. v. Geiger, 371 Md. 125, 140, 807 A.2d 32, 41 (2002). We look first to the language of the statute itself and its stated intention, according the words of the statute their ordinary and natural significance. Reichs Ford, 388 Md. at 517, 880 A.2d at 316; Geiger, 371 Md. at 141, 807 A.2d at 41-42. Where the words of a statute are plain and free from ambiguity, and express a definite and simple meaning, courts do not normally look beyond the words to determine legislative intent. Id. at 141, 807 A.2d at 42. In conducting statutory interpretation, [w]e neither add nor delete words to a clear and unambiguous statute to give it a meaning not reflected by the words the Legislature used or engage in forced or subtle interpretation in an attempt to extend or limit the statute's meaning. BAA, PLC v. Acacia Mut. Life Ins. Co., 400 Md. 136, 151, 929 A.2d 1, 10 (2007) (quoting Taylor v. NationsBank, N.A., 365 Md. 166, 181, 776 A.2d 645, 654 (2001)). The statute is to be read so that no word, phrase, clause, or sentence is rendered meaningless. Reichs Ford, 388 Md. at 517, 880 A.2d at 316. Where a statute is plainly susceptible of more than one meaning and thus contains an ambiguity, however, courts consider not only the literal or usual meaning of the words, but also their meaning and effect in light of the setting, the objectives and purpose of the enactment. Romm, 340 Md. at 693, 668 A.2d at 2. In construing statutory language, we seek to avoid results which are illogical, unreasonable, or inconsistent with common sense. Id. According to our reading, the language of subsection (g), which states that [n]othing in this section creates a duty of any director of a corporation enforceable otherwise than by the corporation or in the right of the corporation, plainly means that, to the extent § 2-405.1 creates duties on directors such as the duty of care contained in § 2-405.1(a), those duties are enforceable only by the corporation or through a shareholders' derivative action. The language of the statute makes no mention of barring direct shareholder actions against directors based on duties created other than by § 2-405.1, such as the fiduciary duties of candor and maximization of shareholder value discussed infra. See § 2-405.2 (The charter of the corporation may include any provision expanding or limiting the liability of its directors and officers to the corporation or its stockholders ....) (emphasis added). Thus, based on the plain language of § 2-405.1(g), we hold that the subsection does not bar direct shareholder actions where such actions are based on duties imposed or authorized otherwise than by § 2-405.1. For the sake of testing the validity of our construction, we note that evidence from the legislative history of the 1999 amendments explicitly states that the Legislature, in adding subsection (g), sought to strengthen Maryland's laws relating to unsolicited takeovers of corporations and real estate investment trusts. Bill Analysis of S.B. 169 (1999); Senate Judicial Proceedings Committee Report of Feb. 25, 1999 (noting that the bill gives Maryland corporations and real estate investment trusts (REITs) additional tools to avoid unwelcome takeovers as they occur today). The short title of S.B. 169 was Corporations and Real Estate Investment Trusts-Unsolicited Takeovers. More specifically, the amendments made clear that the standard of care for directors did not require them to accept, recommend, or even respond to unsolicited takeover bids, and that a director's failure to act solely because of the amount of consideration offered to stockholders would not expose that director to liability. Additionally, the amendments state that actions of directors relating to acquisitions, namely, implementing defensive mechanisms used to frustrate or prevent hostile takeovers, are not subject to a higher duty or greater scrutiny than any other acts of directors. The entirety of the legislative history of the 1999 amendments to § 2-405.1 suggest that subsections (f) and (g) were enacted to address problems presented in hostile takeovers of Maryland corporations. Subsections (f) and (g) were not intended to remove the ability of shareholders to bring direct claims for breach of fiduciary duty in situations where there is an imminent voluntary change of corporate control or ownership, rather than a hostile takeover. To the contrary, the legislative history states that (f) and (g) were meant to reject in Maryland the heightened scrutiny imposed on directors of Delaware corporations in hostile takeover situations by the Delaware Supreme Court in Unocal Corp. v. Mesa Petroleum Co., 493 A.2d 946 (Del. 1985), a relatively rare rejection in Maryland of Delaware's acknowledged leadership in developing a coherent body of corporate law to which we and many other states ordinarily look for guidance. [15] Board Respondents contend anticipatorily that this reading of § 2-405.1 is at odds with the provisions of § 2-405.1(c) and § 5-417 of the Courts and Judicial Proceedings Article, the latter of which states that [a] person who performs the duties of that person in accordance with the standard provided under § 2-405.1 of the Corporations and Associations Article has no liability by reason of being or having been a director of a corporation. Md.Code Ann., Cts. & Jud. Proc. § 5-417 (1974, 2006 Repl.Vol.). As noted earlier, however, the standard of care provided by § 2-405.1(a), which otherwise would immunize directorial actions from judicial scrutiny, is inapplicable to decisions made outside the purely managerial context, such as negotiating the price shareholders will receive in a cash-out merger transaction. Thus, while § 2-405.1(c) and § 5-417 of the Courts and Judicial Proceedings Article provide for liability to be limited by the business judgment rule as codified in § 2-405.1(a), those provisions do not immunize directors from liability for breach of their common law duties of candor and maximization of shareholder value once the threshold decision to sell the corporation is made. We hold, therefore, that the Court of Special Appeals erred in holding that § 2-405.1(g) bars all shareholders' direct suits. In the context of a cash-out merger transaction, where the decision to sell the corporation already has been made by the Board of Directors, those directors owe common law fiduciary duties of candor and maximization of shareholder value directly to the shareholders themselves, and claims for breach of those duties may be brought directly, despite the provisions of § 2-405.1(g). Thus, we hold that Petitioners may proceed in a direct action against Board Respondents based on their claims of breach of fiduciary duties owed directly to them by Board Respondents.