Benihana of Tokyo, Inc. v. Benihana, Inc.

In this case a company called BFC invests in Benihana, providing $20 million in exchange for preferred stock. The problem is that one of Benihana's directors, John Abdo, is also a director and 30% owner of BFC. Abdo negotiated the terms of the investment on behalf of BFC, which means he was negotiating against Benihana. The founder and largest shareholder of Benihana is suing, arguing that Abdo breached his fiduciary duty of loyalty. The trial court found that the conflict was disclosed to the board, and the board approved it, so the business judgment presumption applies.

The big question here is about the effect of DGCL 144. The text says that if the conflict is disclosed and the transaction is still approved in good faith by the disinterested directors, then the contract isn't void solely because of the conflict. But "not void" isn't a standard of review. What standard should apply? The defendants argue DGCL 144 also triggers the business judgment presumption (absent some other rebutter). The plaintiff argues the DGCL speaks only about voidness, and because there's a conflict, the entire fairness standard applies.