The Philadelphia Commerce Court recently issued an opinion declaring the business judgment rule alive and well for corporate boards in Pennsylvania. In a case involving a board’s decision to sell the company, the court relied upon the findings of a special litigation committee and rejected shareholder allegations that the SLC was biased and did not act in the best interest of the corporation. The Commerce Court opinion provides a useful reminder that corporate boards have broad discretion in their decision-making and that courts will generally stay out of the business of managing corporate affairs.

Philadelphia’s Commerce Court addressed these issues in Fundamental Partners v. Douglas A. Gaudet . The case involved a derivative and purported class action in which the plaintiffs claimed to act for the shareholders of Penn Millers Holding Corp. The plaintiffs first sent a written demand letter to Penn Millers alleging wrongdoing by the directors in connection with the proposed sale of the company to ACE American Insurance Co. (ACE). The plaintiffs followed that with a complaint filed in the Philadelphia Court of Common Pleas. The plaintiffs sued the Penn Millers board of directors and ACE, alleging that the directors breached their fiduciary duties to the shareholders by causing the company to merge with ACE.

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