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5 hours for multiple-choice


2-2.5 hours for essay question (30 minutes brainstorming)
CORPORATION ESSAY CHECKLIST
1. Are we under Delaware law or MBCA? Moreover, does the NASDQ or NYSE Rules
apply?
2. Who is bringing the lawsuit? (Majority s/h, minority s/h, bidder, outsider?)
3. What are they alleging?
a. Breach of duty of care
i. Focuses on the process directors take in making decisions. They are required to
exercise reasonable care in overseeing corporations affairs and in making business
decisions.
b. Breach of the duty of loyalty
i. Requires a director to place the best interests of the corporation

c.
d.
4. Is this
a.

above his own personal interests.


ii. Duty of oversight
iii. Duty of good faith
Breach of Federal Regulation of proxies
Unconstitutionality of something under state or federal law?
a derivative or direct suit?
Does it affect the corporation as a whole or just individual s/h; does it

benefit the corporation as a whole, or just individual s/h?


5. Is demand required or excused?
a. Yes if derivative, but can be excused (except under MBCA must always
make demand)
6. What type of transaction are we in? (is it a cash-out merger/hostile takeover,
parent-sub transaction, tender offering, selling controlling shares, solicitation of
proxies, board actions or lack thereof, demanding the board do something,
oversight)
7. What is the standard that applies to this particular transaction?
a. BJR?
i. Standard for the duty of care, decision must be: informed (rebut
my showing gross negligence); had a rational business purpose
(rebut by showing waste); disinterested (rebut by showing that the
directors or managers had personal interests); independent of
outside influence (rebut by showing dominancewas beholden or
under the influence of someone)
1. Trans Union Case (Smith v. Van Gorkom)
2. Shlensky v. Wrigley

3. Schnell v. Chris
4. Dodge v. Ford (limits to the BJR)
5. Theodora Holding Corp. V. Henderson
ii. Board Oversight (breach of duty of loyalty)
1. Monitoring of legal complianceGraham v. Allis-Chalmers
2. Caremark
3. Stone v. Ritter
4. ATR v. Aranteta
5. Citigroup
b. Internal affairs (whether or not such acts fall under internal affairs is
likely the standard)
i. McDermott v. Lewis
ii. Louisiana Pacific Case
iii. Anti-takeovers: CTS Corp., Amanda Acquisition Corp.,
c. Piercing of the Veil?
i. The Parent completely dominates the subsidiary so that the corporate entity as to this
transaction had at the time no separate mind of its own. Merely that the parent is
the sole s/h is not sufficient.
ii. The defendant must have used this arrangement to commit fraud or wrong, to
perpetrate a violation of a positive legal duty. This is basically a claim of
undercapitalization.
iii. The aforesaid control and breach of duty is the proximate cause of the injury or the
unjust level of compensation
iv. *When the corporation disregards corporate formalities to the point where they can
be deemed to have forfeited corporate protection.
v. *When corporations involved in hazardous activities and they dont maintain a
capital cushion to be available in case its activities give rise to liability.
* From Browning Ferris, Posner says this
1. Walkoyszky v. Carlton
2. Radaszewski v. Telecom
3. Kinney Shoe v. Polan
4. Garmedal v. Westin Hotel
5. OTR Associates v. IBC
d. S/h authority/ Duties to s/h
i. Lovenheim v. Iroquois
ii. Auer v. Dressel
iii. Blasius
iv. CA, Inc. v. AFSCME
v. Duties to shareholder
1. Disclosure of materiality-TSC Industries v. Northway
2. Basic, Inc. v. Levinson
3. Virginia Bankshares, Inc. v. Sandberg
4. Gantler v. Stephens
5. CausationMills v. Electric Auto-Lite Co.
6. State lawMalone v. Brincat
e. Entire Fairness?
i. Conflict of Interest

f.

1. eBay
2. Walt Disney
Revlon duties?
i. What the Revlon duties trigger? Was the company effectively up for

sale?
1. New controlling s/h-Paramount v. Viacom
2. Effectuate a long-term business planParamount v. Time
3. Deal ProtectionsToys R US
4. Substantive CoercionChesapeake
g. Unocal Test?
i. A reasonable threat ?
ii. Was the response reasonable in relation to this threat
h. Blasius under Unocal?
i. Oppression of minority s/h in closed corp.?
i. Triggs v. Triggs
ii. Smith v. Atlantic Properties
iii. Wilkes v. Springside Nursing Home
iv. Merola v. Evergen Corp.
v. Nixon v. Blackwell
vi. Matter of Kemp & Beatley
vii. Bonavita v. Corbo
viii. Haley v. Talcott (dissolution)
j. Insider Trading (gets reviewed under Martha Stwert, Oracle)
k. Conflict of Interest w/in the Board/ Independence of Board
i. Breach of duty of loyalty
1. Self-dealingBenihana of Tokyo
2. EBay
3. Walt Disney
l. Independence of Independent Committee?
m. Majority minority s/h approval?
n. Corporate opportunity?
o. Proxy contest?
8. How will you apply the standard to this particular set of facts
a. The pros and the cons
9. What is the likely outcome, given the standard and the facts
10. Any other information that is important to note? (Policy, indemnification,
Delaware law, MBCA, federal law, BJR, equity?)

Does the defensive measure relate to shareholder election of directors or a shareholder vote that would effectuate a
change in corporate control (e,g., a vote on a merger, as was the case in Mercier)?
If no, go to Unocal two-step reasonableness analysis.

If yes, was it adopted for the primary purpose of impeding the effectiveness of a shareholder vote on
either of those matters? That is, was the primary purpose to make it more difficult to elect new directors or
to effectuate a change in control?
If no, go to Unocal two-step reasonableness analysis.
If yes, there must be a compelling justification for the measure.
Factors in determining primary purpose:
Was it adopted in response to a threat to control of the company by the current board?
If no, it probably was not adopted to impede an effective shareholder vote,
absent evidence otherwise, even though it may relate to shareholder voting.
If yes, it likely was adopted for the primary purpose of impeding an effective
shareholder vote. The impact of the defensive measure in this case need not be
preclusive in order to trigger the requirement for a compelling justification,
although it still must make more difficult an effective shareholder vote to elect
new directors or effect a change in control.
However, even if it was not adopted in response to a threat, does it nonetheless have the
effect of precluding an effective shareholder vote? I.e., is an effective shareholder vote
realistically unattainable?
If no, proceed to Unocal two-step reasonableness analysis
If yes, there must be a compelling justification for the measure. This means that
the measure must be a response to an especially serious threat to the corporation.
Is there a compelling justification?
If no, the measure is invalid.
If yes, the measure is valid. Concluding that the measure has
a compelling justification also effectively is a conclusion that
the measure is a reasonable response to a very serious threat
Unocal two-step reasonableness analysis
Does the board reasonably perceive a genuine threat to the corporation?
If no, the measure is invalid.
If yes, proceed to second question below.
If the board reasonably perceives a genuine threat, is the defensive measure a proportionate response to it?
If no, the measure is invalid.
If yes, the measure is valid.

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