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Anyone know a good way of remembering/placing "good faith?" for Director breaches? Is it a subset of duty of loyalty/duty of care/an indepedent way to rebutt the BJR? I either wasn't in class or blacked out whenever this distinction was made and now there's some serious confusion.

The way I understand it, good faith is just a warm blanket, a lower standard than either duty of loyalty or duty of care.

YOU RANG??

buddingjd wrote:The way I understand it, good faith is just a warm blanket, a lower standard than either duty of loyalty or duty of care.

I thought good faith/duty of care were the same. If it is just a warm blanket, what would be the consequence of a breach? Rebut of BJR?

yeahyeah2121 wrote:Anyone know a good way of remembering/placing "good faith?" for Director breaches? Is it a subset of duty of loyalty/duty of care/an indepedent way to rebutt the BJR? I either wasn't in class or blacked out whenever this distinction was made and now there's some serious confusion.

It depends how your prof taught it. My prof taught that it is part of duty of loyalty analysis. Some profs teach it as if it's a separate duty. The way my prof taught it:

Good Faith Obligation:
1. There is no separate duty of good faith that can be independently violated by director and serve as basis for law suit.
2. Good faith analysis is part of duty of care or duty of loyalty analysis.

BJR --> Violation of Duty of Loyalty --> 2 Types of Bad Faith:
(the standard is very high)
1. Subjective bad faith (actual intent to harm).
2. Intentional dereliction of duty.

BJR --> Violation of Duty of Care --> Bad Faith (not really part of duty of care):
1. Lack of due care that rises to level of gross negligence MIGHT be bad faith, but it is unclear.
(2. Sustained/systemic failure to exercise oversight, but this is just an intentional dereliction of duty and thus a violation of the duty of loyalty, not care.)

bk187 wrote:

yeahyeah2121 wrote:Anyone know a good way of remembering/placing "good faith?" for Director breaches? Is it a subset of duty of loyalty/duty of care/an indepedent way to rebutt the BJR? I either wasn't in class or blacked out whenever this distinction was made and now there's some serious confusion.

It depends how your prof taught it. My prof taught that it is part of duty of loyalty analysis. Some profs teach it as if it's a separate duty. The way my prof taught it:

Good Faith Obligation:
1. There is no separate duty of good faith that can be independently violated by director and serve as basis for law suit.
2. Good faith analysis is part of duty of care or duty of loyalty analysis.

BJR --> Violation of Duty of Loyalty --> 2 Types of Bad Faith:
(the standard is very high)
1. Subjective bad faith (actual intent to harm).
2. Intentional dereliction of duty.

BJR --> Violation of Duty of Care --> Bad Faith (not really part of duty of care):
1. Lack of due care that rises to level of gross negligence MIGHT be bad faith, but it is unclear.
(2. Sustained/systemic failure to exercise oversight, but this is just an intentional dereliction of duty and thus a violation of the duty of loyalty, not care.)

This is what I learned as well. We were told that duty of good faith was part of the duty of loyalty, but the cases over time seem to have sneaked in some duty of care-like responsibilities into the duty of good faith. Basically the duty of good faith is just this kind of amorphous concept that kinda drifts in, out, and between DOC and DOL, and it's difficult to definitively place it in your outline.

I would echo that each professor teaches it differently. I specifically asked my professor this question and he stated Good Faith attempted to be its own category, but was eventually rolled into Duty of Care.

arizonairish wrote:I would echo that each professor teaches it differently. I specifically asked my professor this question and he stated Good Faith attempted to be its own category, but was eventually rolled into Duty of Care.

I took this class last year, but I'm pretty sure having good faith as its own separate category was caused by the Disney decision. A subsequent decision (Stone v. Ritter), rolled "good faith" back into the duty of loyalty (not care).

JollyGreenGiant wrote:I took this class last year, but I'm pretty sure having good faith as its own separate category was caused by the Disney decision. A subsequent decision (Stone v. Ritter), rolled "good faith" back into the duty of loyalty (not care).

Correct.