In CASE 20

question 66

Multiple Choice

In CASE 20.3 In 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 ruled the 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 ruled the business judgment rule applied and that the plaintiffs' allegations could not withstand the protection of that rule.
• D) The court ruled the 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:

Preexisting Duty

An obligation that a party is already legally bound to perform, which cannot serve as consideration for a new contract.

Foreseen Difficulty

An anticipated challenge or problem that can be predicted based on current knowledge or trends.

Preexisting Duty

Preexisting duty refers to an obligation that a party is already legally required to perform, which cannot be used as consideration for a new contract.

Past Consideration

Something given or some act done in the past, which cannot ordinarily be consideration for a later bargain.