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last updated 31-Oct-2003

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CLASS NOTES

 

V. Corporate Duties
A. Duty of Care
1. Standards of Care
a. Monitoring Illegality

  •  Duty to supervise / monitor illegality 
    • duty to investigate? only when "on notice"? create monitoring devices? 
    • reaction to danger signs / correct behaviro / liability for failure not to respond
  • Relation of monitoring duty to  
    • business judgment rule 
    • MBCA § 8.30(a)
Baseball elegy of the day

"Summer died in New England and like rain sliding off a roof, the crowd slipped out of Fenway, quickly, with only a steady murmur of concern for the drive ahead remaining of the roar.  Mutability had turned the seasons and translated hope to memory once again.  And, once again, she had used baseball, our best invention to stay change, to bring change on.  That is why it breaks my heart, that game - not because in New York they could win because Boston lost; in that, there is a rough justice, and a reminder to the Yankees of how slight and fragile are the circumstances that exalt one group of human beings over another.  It breaks my heart because it was meant to, because it was meant to foster in me again the illusion that there was something abiding, some pattern and some impulse that could come together to make a reality that would resist the corrosion; and because, after it had fostered again that most hungered-for illusion, the game was meant to stop, and betray precisely what it promised."

A. Bartlett Giamatti, after Jim Rice flied out to center, allowing the Yankees to clinch the American League East in 1977
Problems

Foodtown Corp. runs a chain of grocery stores in Winston-Salem, a bucolic community of 170,000 in the piedmont region of North Carolina.  Winston-Salem has a blue law that requires businesses close on Sunday mornings.  The Foodtown board decides nonetheless to open its stores all day Sunday, and business couldn't be better.  A Foodtown shareholder sues the board claiming a breach of fiduciary duties.

Party A (Shareholder) Argue the court should compel the board to comply with the blue law. 

Party B (Management) Argue the court should not compel the board to comply with the blue law.

Readings