Professor Christopher M. Bruner, Associate Professor of Law and Ethan Allen Faculty Fellow, recently published his article, Good Faith in Revlon-Land in the New York Law School Law Review. The article was part of a symposium issue featuring articles on the nature and importance of the evolving fiduciary duty of good faith.
Professor Bruner’s article addresses the high hurdle for plaintiffs challenging directors’ good faith in the sale of a company as set by the Delaware Supreme Court in Lyondell Chemical Company v. Ryan. He argues that the Lyondell standard effectively imports into the transactional context the exacting standard previously applied in the oversight context.
The article starts by tracing the evolution of the good faith concept over recent decades and then contrasts the strict state of mind requirement found in In re Walt Disney Co. Derivative Litigation with an even stricter standard applied the same year in Stone v. Ritter to establish bad faith in the board oversight context. Prof. Bruner then turns to Lyondell, where the Delaware Supreme Court in 2009 extended the exacting standard of Stone to the transactional context.
He argues that while Lyondell undoubtedly limits directors’ liability exposure, it is amenable to a reading that preserves some limited capacity for the good faith component of the duty of loyalty to discipline boards in the sale of a company.