In CASE 20

question 13

Multiple Choice

In CASE 20.4In re Abbott Laboratories Derivative Shareholders Litigation(2003) ,the shareholder-plaintiffs alleged the corporate directors breached their duty of good faith through their failure to follow up on repeated notices of regulatory noncompliance.How did the court rule?

• A) The court ruled the directors were not liable and did not breach any duty of good faith because they were unaware of the issues, and accepted corporate governance procedures did not require the disclosure of the noncompliance notices to them.
• B) The court ruledthe directors could not be held liable because the corporation's certificate of incorporation exempted directors from liability for breach of the duty of care.
• C) The court ruledthe business judgment rule applied and that the plaintiffs' allegations could not withstand the protection of that rule.
• D) The court ruledthe plaintiffs sufficiently pleaded allegations that, if true, constituted a breach of the duty of good faith leading to the directors' actions falling outside the protection of the business judgment rule.

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Definitions:

Desert Island

A secluded and uninhabited island, often used in scenarios and thought experiments in economics and ethics to explore human behavior in isolation.

Competitive Equilibrium

A market situation where supply equates demand, leaving no incentive for price changes, assuming all agents are price-takers.

Perfect Substitutes

Items that can replace each other without affecting the consumer's satisfaction negatively.

Perfect Complements

Goods that are consumed together in fixed proportions because the consumption of one enhances the value or utility of the other.