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An Introduction to the Law of Corporations: Cases and Materials, Fall 2017

Senior Aronson, et al., Defendants Below, Appellants, v. Harry Lewis, Plaintiff Below, Appellee.

Headnote

In Shlensky, the court described its policy of deferring to the decisions of the board of directors absent some evidence of fraud or wrongdoing. Aronson is the leading case for the restatement of the principle highlighted in Shlensky: the business judgment presumption, or the business judgment rule. This presumption, which is rooted in §141(a)'s allocation of exclusive management authority to the board of directors, requires that court leave board decisions undisturbed unless complaining stockholders present some evidence that the board made the challenged decisions in an uninformed manner, or in a manner not in good faith, or for reasons otherwise not in the best interests of the corporation (e.g. board self-dealing).

Note that the pleading burden is on the complaining stockholders. In the absence of facts to undermine the business judgment presumption, courts will leave board decisions, even bad ones, in place.