A recent opinion noted an issue that deserves further analysis; namely: are corporate officers protected by the business judgment rule (BJR)? In Palmer v. Reali, Civ. No. 15-994-SLR (D.Del. Sept. 29, 2016), the U.S. District Court for the District of Delaware observed in the context of denying a Rule 12(b)(6) motion that no cases were cited by the defendants to support the position that the BJR applied to officers (as compared to corporate directors). Id. at n.8.

A bankruptcy trustee alleged various breaches of fiduciary duties that the corporate officers engaged in preceding the filing of bankruptcy. Of course, it remains settled Delaware law that fiduciary duties apply to corporate officers as much as they do to corporate directors. But just as officers do not enjoy the exculpatory provisions of DGCL Section 102(b)(7), at least one court in Delaware was not aware of authority for, or was not provided with citations to support, the position that officers are entitled to the presumptions of the BJR. This aspect of corporate litigation scholarship would be a good topic for a law review article.

Hat tip to The Chancery Daily for bringing this recent decision to our attention.

Supplement: This post was only intended as a short observation of how one court treated the issue in footnote 8 of the opinion, but we are grateful to Professor Megan Shaner, a former Delaware corporate litigator, who brought to our attention her scholarship on the titular topic. For example, the good professor wrote an article in 2010 in the Business Lawyer, entitled “Restoring the Balance of Power in Corporate Management: Enforcing an Officer’s Duty of Obedience” in which she cites to the scholarship of Lyman Johnson (whose articles have been noted on these pages over the years) and friend-of-the-blog Larry Hamermesh (same), all of which discuss the application of the BJR to officers.