Corporations — breach of fiduciary duty

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Wisconsin Court of Appeals

Civil

Corporations — breach of fiduciary duty

On a motion to dismiss a claim for breach of fiduciary duty, the business judgment rule does not apply.

“In this case, the defendants’ arguments underscore part of the problem with applying the business judgment rule on a motion to dismiss in a notice pleading jurisdiction.  Data Key alleged in its complaint, among many other substantive allegations, that the directors engaged in ‘willful misconduct by willfully failing to deal fairly with the Plaintiffs and the Company’s other minority public shareholders in a matter in which they have a material conflict of interest.’ The defendants acknowledge this allegation but nonetheless argue that Data Key’s complaint comes ‘nowhere close to satisfying’ the exceptions to the business judgment rule and that ‘nothing resembling’ willful misconduct is alleged in Data Key’s complaint.  The defendants thus appear to take the position that application of the rule at the motion to dismiss stage of proceedings requires that a plaintiff plead facts sufficient to defeat the defense with considerable specificity.  Such specificity is generally not required for purposes of notice pleading.  Cf. WIS. STAT. § 802.03(2) (‘In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity.’)”

Reversed and Remanded.

Recommended for publication in the official reports.

2012AP1967 Data Key Partners v. Permira Advisors, LLC

Dist. IV, Wood County, Counsell, J., Blanchard, J.

Attorneys: For Appellant: Taeuber, Stacy, Madison; Brualdi, Richard B., New York, NY; For Respondent: Sennett, Nancy J., Milwaukee; Wronski, Andrew J., Milwaukee; Pearson, Eric Gordon, Milwaukee; Park, Amy S., Palo Alto, Calif.; Horvath, Richard S., Jr., Palo Alto, Calif.