Rawcliffe v Anciaux, et al.

Rawcliffe appealed the dismissal of his shareholder suit alleging violations of fiduciary duties and corporate waste by creating a spring-loaded stock settled stock appreciation rights plan and accepting rights under the plan. The Court affirmed. It held that the legislature adopted the common law meaning of good faith in Utah Code 16-10a-840(1)(a) and directors are allowed under that standard to personally benefit from their decisions absent dishonesty of belief, purpose or motive which results in intentional harm to the corporation, benefit to the directors which is detrimental to the corporation or intentional dereliction of or conscious disregard for the director’s responsibilities and held the requirement to act in the corporation’s best interest in 840(1)(c) is satisfied if the director subjectively believes the acts are in the corporation’s best interests and that belief is objectively reasonable. It held that under Utah code 16-10a-840(4)(b), directors can only be held liable if the actions are done with gross negligence (meaning utter indifference to consequences), willful misconduct (meaning knowledge the actions will likely harm the corporation) or intentional infliction of harm to the corporation. It held the claims here were properly dismissed as the award of spring-loaded rights did not violate the plan and served the legitimate purpose of incentivizing directors and officers to stay with the corporation.