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

Entire Fairness

When fiduciaries of the corporation lose the business judgment presumption, they will have to justify to the court that their actions were entirely fair to the corporation. A defendant director who bears the burden of proving its actions were entirely fair to the corporation has to bear a heavy burden. Unlike the business judgment presumption, which can a defendant can rely on to have a claim dismissed on the pleadings, when a defendant must bear the burden of proving the entire fairness of transaction, the defendant can only do that after a full trial. Consequently, losing the presumption of business judgment and being forced to prove at trial that the actions of the defendants were entirely fair to the corporation is often outcome determinative. Defendant directors will often seek to settle litigation rather than go to trial under the entire fairness standard.

In older cases, the "entire fairness" standard is also known as the "intrinsic fairness" standard or the "inherent fairness" standard.

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