Question
The 10-member board of directors of Dave-Sells, Inc., votes to sell Dave-Sells's potato chip manufacturing division for $70,000,000, although Dave-Sells has received offers from other
The 10-member board of directors of Dave-Sells, Inc., votes to sell Dave-Sells's potato chip manufacturing division for $70,000,000, although Dave-Sells has received offers from other prospective purchasers for $80,000,000 cash. The division is sold to a corporation owned by all the directors of Dave-Sells. Scarra, a shareholder of Dave-Sells, initiates a derivative suit against Dave-Sells's directors for selling the division for too little money. Two directors resign and are replaced by two new directors, who are appointed by the remaining directors. The board appoints the two new directors to a shareholder litigation committee, which decides that the corporation should not sue the directors who sold the division. The board of directors asks the court to dismiss Scarra's derivative suit on the grounds that she failed to make a demand on the board and that the business judgment rule requires the court to follow the committee's decision not to sue the directors. Will the court dismiss the suit?
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