III”) the Court of Chancery held that the allegations in plaintiffs’ complaint that
the directors “consciously and intentionally disregarded” their fiduciary
responsibilities gave “rise to a reason to doubt whether the board’s actions were
taken honestly and in good faith” which excused demand and stated a viable
claim for a “breach of the directors’ obligation to act honestly and in good faith
in the corporation’s best interests” that would not be exculpated under the
Company’s Section 102(b)(7) based charter provision. Id. at 286 and 289.
Since Disney III, corporate lawyers, scholars, commentators and directors have wondered whether Disney would be the next Smith v. Van Gorkom, holding disinterested and independent directors liable for monetary damages for their business decision and undercutting the value of a Section 102(b)(7) based exculpatory provision. More importantly for those without an immediate interest in the case were the questions that Disney III raised: does Disney III reflect enhanced vigilance in the wake of Enron and other recent corporate scandals, or was it simply a perfect storm of bad facts, artful pleading, and application of deferential procedural standards; and if it is the latter, how could directors avoid being named in similar suits or have the lawsuits dismissed that will inevitably be brought under this undefined and amorphous good faith standard?
On August 9, 2005, with his post-trial Opinion, the Chancellor signaled that his earlier decision in Disney III did not reflect a fundamental change in the way Delaware courts would review business decisions, and that Disney III is best read as the reasoned result of the combination of a pleading that contained