Court Opinion

ID: 9525049
Source: CourtListenerOpinion
Date Created: 2023-08-07 02:59:30.30094+00
Date Added: 2024-06-11T13:12:38.325060
License: Public Domain

UHLENHOPP, Justice
(concurring specially).
I concur in the majority opinion and result, but I would answer the certified question negatively on an additional ground. Under section 7.03(c)(iii) of the Restatement and Recommendations on Corporate Governance, the litigation committee device is unavailable where the action involves self-dealing between the corporation and persons having control. The action charges sales of the corporation’s stock at fraudulently low prices and for grossly inadequate consideration, and purchases of it by the four directors. Manifestly, this is a charge of self-dealing by directors. See Maclary v. Pleasant Hills, Inc., 35 Del.Ch. 39, 45-46, 109 A.2d 830, 836-37 (1954); Bennett v. Breuil Petroleum Corp., 34 Del.Ch. 6, 15, 99 A.2d 236, 239 (1953); Biltmore Motor Corp. v. Roque, 291 So.2d 114, 115 (Fla.App.), cert. denied, 303 So.2d 639 (Fla.1974); Katzowitz v. Sidler, 24 N.Y.2d 512, 518-19, 249 N.E.2d 359, 363-64, 301 N.Y.S.2d 470, 475-76 (1969); Lichtenberger v. Long Island Machinery Sales Corp., 71 A.D.2d 941, 947, 420 N.Y.S.2d 507, 513 (1979).
*719The term “control” in section 7.03(e)(iii) is not used solely in the sense of owning a dominant amount of voting stock. Under section 1.04 it includes the power to exercise a controlling influence over the management of a corporation through ownership of equity interests or intermediary persons, or by contract, “or otherwise.” Any one of these four directors, merely on the basis of his directorship, would not have power to exercise controlling influence over the management of the corporation. § 1.04, Comment. But this corporation had a board of four directors, and that board had charge of management of the corporation. H. Henn, Law of Corporations § 71 (2nd ed. 1970) (“Management of a corporation is vested in its board of directors.... ”). Acting together, the four directors had controlling influence over the management of the corporation and came within section 7.03(c)(iii). On the basis of section 7.03(c)(iii), the litigation committee device was thus unavailable and the committee’s report is of no effect.
HARRIS, J., joins in this special concurrence.