Question: Uncle signed a lease with Landlord on a storefront in Georgetown, D.C. Uncle convinced Nephew...

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Question: Uncle signed a lease with Landlord on a storefront in Georgetown, D.C. Uncle convinced Nephew to start a furniture store in the space. Uncle and Nephew formed a corporation to operate the store. Uncle owned 51 percent and Nephew 49 percent of the company's stock. Uncle signed a lease between himself and the store at a price that was 20 percent higher than the rent Uncle was paying Landlord. Uncle purchased a warehouse and then rented it to the corporation at a fair market rent. Nephew sued, alleging that the two leases were not valid. Were they? Strategy: Under the business judgment rule, the courts will not second-guess a corporate action. However, if a manager engages in self-dealing, the business judgment rule does not apply.