Shareholders of Bear Stearns sued the directors of the corporation for damages for violation of the directors’ fiduciary duties in effecting a stock-for-stock Chapter 48 Management of Corporations 1155 merger with J. P. Morgan Chase for an implied value of $10 per share while the company’s stock had previously reached a 15-month high of $160. On March 10, 2008, information began leaking into the market that Bear Stearns had a liquidity problem. On March 13, 2008, the company was forced to seek emergency financing from the Federal Reserve and J. P. Morgan Chase. By the weekend of March 14–16, the company could no longer operate without major financing. In an effort to preserve some shareholder value while averting the uncertainty of bankruptcy (where stockholders would likely receive nothing), and represented by teams of legal and financial experts and relying on their financial advisor Lazard Freres & Co.’s opinion that the “exchange ratio is fair, from a financial point of view, to the shareholders,” the board of directors approved the initial merger agreement. The shareholder plaintiffs contended that the ultimate $10 share price paid was inadequate and they presented their experts who vigorously dissected the board’s decisions. What defense, if any, would you raise on behalf of the Bear Stearns board of directors? [In re Bear Stearns Litigation, 870 NYS2d 709 (Sup 2008)]

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