Court of Chancery of Delaware
2009 WL 857468
The Sutherland family owns all the stock of Dardanelle Timber Company (Dardanelle), a Delaware corporation which is itself the sole shareholder of Sutherland Lumber-Southwest, Inc. (Southwest). In addition to being the controlling shareholders of Dardanelle, Perry and Todd Sutherland (defendants) are directors and officers of both corporations. Mark Sutherland (defendant) holds no equity interest but is the third director of both corporations. Martha Sutherland (plaintiff) is a minority shareholder of Dardanelle and was a director of Southwest before being ousted in 2004. The certificates of incorporation for both Dardanelle and Southwest included an exculpatory provision. The provision purported to permit directors to engage in self-interested transactions with the corporation, provided they disclose their interest to the other directors and the board as a whole approves. The provision further stated that the self-interested directors may vote in favor of the transaction as with any other matter. In 2006, Martha Sutherland filed a derivative complaint on behalf of Dardanelle and Southwest against Perry, Todd, and Mark Sutherland for waste and breach of fiduciary duty. The complaint alleged that Perry and Todd, with Mark’s acquiescence, caused the companies to provide them with a number of personal benefits, including personal flights, tax and accounting services, and excessive compensation. Perry, Todd, and Mark filed a motion to dismiss the complaint for failure to state a claim, citing the exculpatory provisions.
Rule of Law
Holding and Reasoning (Lamb, J.)
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