IN RE LEMINGTON HOME FOR AGED, 10-4456. (2011)
Court: Court of Appeals for the Third Circuit
Number: infco20111020082
Visitors: 1
Filed: Oct. 20, 2011
Latest Update: Oct. 20, 2011
Summary: ORDER AMENDING OPINION VANASKIE, Circuit Judge. IT IS NOW ORDERED the above captioned case be amended as follows: Footnote 5 shall now read: The District Court erroneously held that the presumption of the business judgment rule is overcome only by evidence of gross negligence. The District Court cited a Delaware Supreme Court case which held that "under the business judgment rule director liability is predicated upon concepts of gross negligence." Aronson v. Lewis, 473 A.2d 805 , 812 (Del
Summary: ORDER AMENDING OPINION VANASKIE, Circuit Judge. IT IS NOW ORDERED the above captioned case be amended as follows: Footnote 5 shall now read: The District Court erroneously held that the presumption of the business judgment rule is overcome only by evidence of gross negligence. The District Court cited a Delaware Supreme Court case which held that "under the business judgment rule director liability is predicated upon concepts of gross negligence." Aronson v. Lewis, 473 A.2d 805 , 812 (Del...
More
ORDER AMENDING OPINION
VANASKIE, Circuit Judge.
IT IS NOW ORDERED the above captioned case be amended as follows:
Footnote 5 shall now read:
The District Court erroneously held that the presumption of the business judgment rule is overcome only by evidence of gross negligence. The District Court cited a Delaware Supreme Court case which held that "under the business judgment rule director liability is predicated upon concepts of gross negligence." Aronson v. Lewis, 473 A.2d 805, 812 (Del. 1984) (overruled on other grounds). Pennsylvania, however, recognizes directors' and officers' liability for negligent breach of fiduciary duty. See, e.g., Wolf v. Fried, 373 A.2d 734, 735 (Pa. 1977) ("[E]ven in the absence of fraud, self-dealing, or proof of personal profit or wanton acts of omission or commission, the directors of a corporation may be held personally liable where they have been imprudent, wasteful, careless and negligent and such actions have resulted in corporate losses."). Of course, a non-profit corporation may restrict the circumstances under which a director may have personal liability for negligent acts by adoption of an appropriate by-law, see 15 Pa. C.S. § 5713(a), in which event a director may be liable for a breach of fiduciary duties or a failure to perform the duties of the office only if "the breach or failure to perform constitutes self-dealing, willful misconduct or recklessness." 15 Pa. C.S. § 5713(a)(2). While the Home adopted an appropriate by-law, there is a genuine dispute of fact as to whether alleged breaches of fiduciary duties constituted self-dealing. Moreover, there is no comparable statutory limitation of liability for the officers of a non-profit corporation. Thus, a trial is required on the claims against Causey and Shealey on the question of whether they failed to exercise "such care, including reasonable inquiry, skill and diligence, as a person of ordinary prudence would use under similar circumstances." 15 Pa. C.S. § 5712(c).
Source: Leagle
