B-172
ALTERNATE CASE PROBLEM ANSWERS
CHAPTER 40
CORPORATE DIRECTORS,
OFFICERS, AND SHAREHOLDERS
40-1A. Inspection rights
(Chapter 40—Page 788)
The court denied the motion to dismiss, but after the defendants gave Hagen twelve boxes of corporate
records—two years after Hagen’s initial request—the court issued a summary judgment in the
40-2A. Duty of loyalty
2000. Then, a few months later, while still employed as President of Digital Commerce, [Sullivan]
solicited ASR’s business for himself.” The court pointed out that the “[a] corporate officer or director is
APPENDIX B: ALTERNATE CASE PROBLEM ANSWERS—CHAPTER 40 B-173
40-3A. Shareholder proposals
(Chapter 40—Page 784)
The appellate court affirmed the lower court’s decision, holding that the proposal dealt with a matter
relating to the conduct of ordinary business operations and that the failure to mention the proposal did
40-4A. Duty of care
(Chapter 40—Page 779)
The trial court pierced the veil of the corporation to hold Mullins liable, and Mullins appealed. The
appellate court affirmed the decision of the trial court, holding that knowledge of the advertising
B-174 APPENDIX B: ALTERNATE CASE PROBLEM ANSWERS—CHAPTER 40
40-5A. Duty of loyalty
(Chapter 40—Pages 780–782)
The Delaware state trial court held that Broz breached his fiduciary duty because he failed to present to
40-6A. Business judgment rule
(Chapter 40—Pages 779–780)
The court concluded in part that Wittman failed to state a claim for breach of the duty of care. The
40-7A. Fiduciary duty of directors
(Chapter 40—Pages 780–782)
The fiduciary obligation of undivided loyalty imposed on directors and officers precludes them from
40-8A. Business judgment rule
(Chapter 40—Pages 779–780)
B-176 APPENDIX B: ALTERNATE CASE PROBLEM ANSWERS—CHAPTER 40
cannot institute a derivative suit on the corporation’s behalf by merely showing that the board’s refusal
to act was unwise, inexpedient, negligent, or imprudent.” Here, Pace and Fuentez “contend that the
40-9A. Duties of majority shareholders
(Chapter 40—Pages 791–793)
The court found that Alex had engaged in fraud and Atlas had engaged in conduct that was fraudulent,
oppressive, and unfairly prejudicial toward John. Among other relief, a buy-out was ordered. On appeal,
40-10A. A QUESTION OF ETHICS
1. All directors of a corporation owe their primary fiduciary duty to the corporation.
Consequently, they must use their good faith judgment to make decisions that they believe will benefit
2. Corporate directors cannot serve two masters at the same time if they expect to guide the
affairs of the corporation competently. By forcing directors to ignore private agreements that they may
3. If several incompetent directors were attempting to exclude other, more competent directors
from actively managing the corporation’s affairs, then it might be in the interests of the shareholders to