Sutherland v. Sutherland

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Plaintiff

  • Martha Sutherland, stockholder of Dardanell Timer Company (her and her children own 25% of common stock)

Defendant

  • Perry Sutherland (director, president, and CEO of Dardanelle and Southwest, him and his children own 25% of common stock, controls the trust that has all of the voting preferred stock)
  • Todd Sutherland (director of Dadanelle and Southwest and officer in both companies, him and his children own 25% of commone stock)
  • Mark Sutherland (director of Dardanelle and Southwest)


Plaintiff's Argument

There has been self dealing by the directors in the form of expensive hotels, corporate jet, etc.

Defendant's Argument

The defendant's say that a provision in the certificate of corporation saying that interested directors would be treated as disinterested for the purposes of approving corporate transactions. If this was the case, then the business judgment rule would be invoked rather than the entire fairness standard

Holding

The court argues that the provision in question simply defined quorum but did not actually mean what the defendant thought it means. However, even if it did mean what the defendants wanted it to mean, they would still be liable because DGCL Section 102(b)(7) prohibits any provision which does affect director liability for "any breach of the director's duty of loyalty to the corporation or its stockholders." Further, none of safe harbors in either 144(a)(1) or 144(a)(2) apply, so we will have the entire fairness standard here.