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Court Of Chancery Affirms Business Judgment Rule Applies In Bet The Company Case

Posted In Fiduciary Duty

In re The Dow Chemical Company Derivative Litigation, C.A. 4319-CC (January 11, 2010)

In an era when "too big to fail" seems to be an accepted reason to do the extraordinary, in this case the plainitffs tried to argue that a 'bet-the-company" deal requires a board to be right or be held for the consequences. The Court soundly rejects that argument and held the business judgment rule protects the board from second guessing in even the biggest deals.

This decision is also an excellent summary of the law dealing with when demand must be made on a board before filing a derivative suit. The Chancellor was once a law professor and his teaching skills are on full display in this case.

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