Montana Takes Lead on Director’s Duties on Bonus Decision
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Montana Takes Lead on Director’s Duties on Bonus Decision

The Tenth Circuit certified multiple novel questions to the Montana Supreme Court concerning the complained of action by a director and controlling shareholder in a closely-held corporation awarding a $1.2 million bonus to her son, the company’s president. The state high court ruled that the bonus transaction, although not a contract involving consideration, was subject to safe harbor review under the state Business Corporation Act. The company sought the president’s continued service and he stayed on due to the bonus. On the other hand, the business judgment rule was held to be inapplicable to situations involving a director’s conflict of interest transaction. Finally, the court came down on both sides of the issue concerning the application of the test for breach of fiduciary duty by a controlling shareholder in a closely-held corporation involving a transaction where there is a conflict of interest as present here.

Warren v. Campbell Farming Corp., No. 2011 MT 324, OP 10-0493 (Mont. Sup. Ct. December 30, 2011).

Warren v. Campbell Farming Corp., .pdf