A Reassessment of the Role of Good Faith in Personal Liability Before and After Stone v Ritter

Abstract

The paper explores the role of good faith within the traditional theory of fiduciary duty in the lead-up of the Delaware Supreme Court’s Stone ex-rel. AmSouth Bancorporation v. Ritter decision. The enforcement of the director’s liability is discussed concerning the doctrinal controversies concerning inter alia, the reach of the exculpation statute passed after the Smith v Van Gorkon holding. The paper also analyzes the conditions that a Plaintiff must survive a motion to dismiss a claim of director liability; the appropriate standard of review for alleged duty of liability breaches, and the role of good faith within the overall triad of traditional fiduciary responsibilities. Over a decade after this landmark case was decided, there is value in reconsidering whether the Stone judgment lived up to the promise of the Caremark holding and its reformulation of good faith as a judicial device for evaluating director liability in contexts that not do easily fit with the traditional doctrines of duty of care and loyalty.