Boiler Room Traders, SARL, is a French entity headquartered in Paris.It specializes in dealing highly complex over-the-counter (OTC) derivatives with thin secondary markets.Boiler Room employs 40 persons: 30 dealers and an administrative staff of 10.

After several years successfully growing its business in Paris, Boiler Room has noticed that several competitors in New York have been gradually taking most of its Japanese customers. Apparently, United States law following implementation of the Dodd-Frank Act has made it easier to clear complex OTC derivatives transactions in New York than in Paris, or even London. As a result, Boiler Room decided to open a subsidiary, Boiler Room Traders, Inc., in New York.

Boiler Room Traders, Inc. is a Delaware company, and its principle place of business is New York.The subsidiary appointed Madame Dupont as CEO, Monsieur Tout-le-Monde as CFO, and Monsieur Smith as Chief Risk Officer.The subsidiary maintains a Board of Directors.In addition to the three (3) executives, there are four (4) non-executive directors for a total of seven (7) board members.Fifty-one (51) percent of the company is owned by Boiler Room Traders, SARL.The remaining forty-nine (49) percent is owned by a number of small shareholders; some are French, some are American.After one year of operation, Boiler Room Traders, Inc. recovered most of its Japanese business and turned a profit of $40 million.

On October 1, 2019, Mr. Yamada Taro visited the Boiler Room offices in New York, and requested a highly complex derivative based upon Japanese weather and electricity prices.Mr. Taro requested that the contract terminate in one (1) year.One of Boiler Room, Inc.'s New York employees determined that the market value of this derivative transaction to be $280 million.Because OTC derivatives dealers bear the risk of customer default, the employee immediately recognized that the transaction presented a substantial risk to Boiler Room.She called Monsieur Smith and discussed the transaction with him.As Chief Risk Officer, Monsieur Smith immediately recognized the inherent risk the transaction presented to Boiler Room.He called Monsieur Tout-le-Monde, the CFO.After three (3) hours of deliberation, Mssrs. Smith and Tout-le-Monde decided to carry out a conference call with a Japanese electricity specialist based in Tokyo.The specialist assured them that the market value of the transaction should remain stable for at least one (1) year.After an additional one-half (1/2) hour of deliberation following the phone call with the specialist, Mssrs. Smith and Tout-le-Monde approved the transaction.

On October 10, 2019, Japan experienced a terrible tsunami and electricity prices plummeted. Mr. Taro was forced to terminate the contract, and as result, Boiler Room Traders, Inc. was forced to sell the contract at a deep discount.Losses amounted to $100 million.Its shareholders wish to bring suit.

1.Where should the shareholders bring suit?Limit your answer to a single sentence.

2.Who should the shareholders sue?Limit your answer to a single sentence.

3.The shareholders should plead a violation of what fiduciary duty or duties and by what or whom?Limit your answer to a single sentence.

4.Suppose Boiler Room Traders, Inc. availed itself of 102(b)(7) of the DGCL.What breach should the shareholders plead?Limit your answer to a single sentence.

5.If the shareholders prevail, who receives the damages award?Limit your answer to a single sentence.

6.Describe Boiler Room Trader Inc.'s legal strategy.Be sure to discuss the business judgment rule.Limit your answer to a paragraph.

7.In an ideal world, what other actions could Boiler Room Traders, Inc., have taken prior to consummating the transaction with Mr. Taro?Limit your answer to a bulleted list.