.Brief the case:

Federal Deposit Insurance Corp. v. Castetter, 184 F.3d 1040 (9th Circuit Court of Appeals, 1999) [online]

a. What is the Business Judgment Rule? How does it apply to the facts of this case? Who relies on the

Business Judgment Rule for protection?

b. Describe and discuss the test that the court used to determine if the bank's directors were entitled to the

protection of the Business Judgment Rule. What criteria apply?

c. Suppose that the facts were somewhat different. Suppose that the president of the bank, whose family

members were in the business of selling automobiles, advocated that the bank concentrate on auto loans in

order to be able to increase his family's auto sales.

(1) Would that be a conflict of interest for him?

(2) Would it be a conflict of interest for the rest of the Board members? What if the Board of Directors

knew of the connection between the president and the family auto business?

d. What if the Board of Directors had not followed the advice of the experts it had called in? Would it be able

to avoid liability in this case? Why or why not?