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Cooke v. Oolie | 2000 Del. Ch. LEXIS 89 (2000)

The business-judgment rule is a doctrine that protects corporate officers from the imposition of liability for rational good-faith business decisions. In Cooke versus Oolie, the court considered whether the mere fact that corporate directors were also creditors of the company invalidated the business-judgment rule’s protection.

Nostalgia Network, or TNN, was a cable channel that specialized in old movies and TV series. In the late 1980s, TNN fell into financial difficulties. Two of its four directors, Sam Oolie and Morton Salkind, loaned the company some money, but this didn’t solve the network’s problems. The board decided to solicit proposals from other companies to purchase some or all of TNN’s common stock.

At the board meeting in December of 1989, the four directors considered five proposals. The four directors agreed that the USA Network’s proposal offered the most value to TNN and voted unanimously to pursue this deal.

The USA deal fell through, and the subsequent turmoil led to several shareholder lawsuits, including the one filed by Cooke and other shareholders challenging Salkind and Oolie’s pursuit of the USA deal. Cooke alleged that Oolie and Salkind had preferred USA’s proposal over the others because it included an agreement to repay their outstanding loans immediately. Cooke claimed that Oolie and Salkind had breached their fiduciary duty of loyalty by improperly favoring an offer that would give them personal benefits that didn’t accrue to other shareholders.

Oolie and Salkind argued that their decision to pursue the USA deal was protected by the business-judgment rule. Cooke countered that, as interested directors, they didn’t deserve the rule’s protection.

The chancellor considered Oolie and Salkind’s motion for summary judgment.

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