On Good Faith and the Future of Scienter in Delaware Corporate Law

23 Pages Posted: 30 Mar 2008

Date Written: March 28, 2008

Abstract

In 2006 the Delaware Supreme Court handed down a set of opinions, In re Walt Disney Co. Derivative Litigation and Stone v. Ritter, which were intended to clarify the often invoked, but rarely defined, notion of corporate good faith. In doing so, the Court introduced scienter as a key element in determining corporate fiduciary duties. Far from being a mere clarification of the law, this new element has undermined the rationale for many of the Delaware Supreme Court's most famous precedents. This note analyzes the current state of corporate fiduciary duties in Delaware, and the possible effects stemming from this new element of scienter. It also proposes that the Delaware Supreme Court has introduced considerable uncertainty into the law by not clearly explaining what facts plaintiffs must allege in order to establish scienter.

Keywords: business, corporate, law, Disney, Stone, Ritter, Caremark, good faith, business judgment rule, scienter, Delaware, Blasius

JEL Classification: K3, K31, K00, K1, K19, K39

Suggested Citation

Nemunaitis, Justin, On Good Faith and the Future of Scienter in Delaware Corporate Law (March 28, 2008). Available at SSRN: https://ssrn.com/abstract=1114347 or http://dx.doi.org/10.2139/ssrn.1114347

Justin Nemunaitis (Contact Author)

Chicago-Kent College of Law ( email )

565 W. Adams St.
Chicago, IL 60661-3691
United States

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