Court Holds That the Business Judgment Rule Does Not Apply to Protect the Decisions of Corporate Officers in California

By: Kathryn N. Richter
Schnader Harrison Segal & Lewis LLP (Delaware and Pennsylvania, USA)

In a recent decision of importance to all corporate officers doing business in California, a federal district court applying California law has rejected the argument that corporate officers are shielded from personal liability by the Business Judgment Rule (“BJR”). It has been long accepted that the BJR will immunize corporate directors from personal liability for business decisions made in good faith and with reasonable care, as well as insulate their management decisions from judicial review. In rejecting the contention that the judicial policy of deference to business decisions and business judgment should extend not only to corporate directors, but also to corporate officers, the Court examined the history of the common law Business Judgment Rule, the legislative history and evolution of the California statutory authority1, and the lack of applicable judicial precedentd entire article. Click here to read entire article.