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Summaries and analysis of recent Delaware court decisions concerning business-related litigation.
Morris James Blogs
Chancery Applies the Corporate Opportunity Doctrine and Finds Duty of Loyalty Breach
Under the corporate opportunity doctrine, one way for a fiduciary to breach her duty of loyalty is to take personal advantage of an opportunity presented to or rightfully belonging to the corporation. This case involved such a breach—a director and executive purchased a building that he knew the company was interested in acquiring in order to house its operations. The test for identifying corporate opportunities is a holistic one in which the Court examines whether: (1) the corporation can afford the opportunity; (2) it is within the corporation’s line of business; (3) the corporation has an interest or expectancy in it; and (4) by taking it, the fiduciary places himself in a position adverse to his corporate duties. The decision is a noteworthy read for its discussion of those factors, in particular, the line of business prong. In that regard, the Court focused on the corporation’s clear interest and expectancy in purchasing the building and the nature of the opportunity as concerning an “operational decision about how to manage or expand an existing line of business.”