Deep Photonics Corp. v. LaChapelle

699

Argued and submitted September 12, 2017; affirmed on appeal, cross-appeal

dismissed as moot April 29, 2020

DEEP PHOTONICS CORPORATION,

a Delaware corporation,

Plaintiff,

v.

Joseph G. LaCHAPELLE et al.,

Defendants.

James FIELD

and Joseph G. LaChapelle,

Third-Party Plaintiffs-Respondents

Cross-Appellants,

v.

Dong Kwan KIM,

Third Party Defendant-Appellant

Cross-Respondent,

and

DAEHONG TECHNEW CORPORATION,

a Korean corporation, et al.,

Third-Party Defendants.

Washington County Circuit Court

C114435CV; A158705

466 P3d 660

This appeal concerns claims brought by shareholders Joseph LaChapelle and

James Field (plaintiffs) on behalf of Deep Photonics Corporation (DPC) against

three directors of DPC (defendants). In the trial court, a jury found, among other

things, that defendants breached their duty of care to DPC and its shareholders

twice. The jury found that the second breach had caused DPC and its common

stock to decrease in value by $10 million. Defendant Dong Kwan Kim appeals.

Held: The trial court did not err in allowing plaintiffs’ shareholder derivative

claims to be tried to a jury. The court did not abuse its discretion in denying

defendants’ midtrial request to raise and rely on a provision in DPC’s certificate

of incorporation to exculpate them from damages for breaches of the duty of care.

The court did not err in imposing joint and several liability.

Affirmed on appeal; cross-appeal dismissed as moot.

Donald R. Letourneau, Judge.

700 Deep Photonics Corp. v. LaChapelle

Kevin H. Kono argued the cause for appellant-cross-

respondent. Also on the briefs were P. Andrew McStay, Jr.,

and Davis Wright Tremaine LLP.

Jeff S. Pitzer argued the cause for respondents-cross-

appellants. Also on the joint briefs were Pitzer Law, Charles

J. Paternoster, and Parsons Farnell & Grein, LLP.

Before Ortega, Presiding Judge, and Shorr, Judge, and

James, Judge.*

SHORR, J.

Affirmed on appeal; cross-appeal dismissed as moot.

James, J., concurring in part, dissenting in part.

______________

* Ortega, P. J., vice Wollheim, S. J.; Shorr, J., vice Garrett, J. pro tempore;

James, J., vice Hadlock, J. pro tempore.

Cite as 303 Or App 699 (2020) 701

SHORR, J.

This appeal concerns claims brought by share-

holders Joseph LaChapelle and James Field (plaintiffs)1 on

behalf of Deep Photonics Corporation (DPC) against three

directors of DPC: Dong Kwan Kim, Roy Knoth, and Bruce

Juhola (jointly, defendants).2 Kim is the only appellant. In

the trial court, a jury found, among other things, that defen-

dants breached their duty of care to DPC and its share-

holders twice. The jury found that one of the breaches of the

duty of care had not resulted in damages but that the other

breach had caused DPC and its common stock to decrease

in value by $10 million. The jury apportioned the damages

between defendants. The trial court entered a judgment

reflecting that verdict and making defendants jointly and

severally liable for the damages.

On appeal, in eight assignments of error, Kim

argues that the trial court erred in (1) denying his motions

for directed verdict and judgment notwithstanding the ver-

dict, (2) allowing the claims to be tried to a jury, (3) denying

his request, made midtrial, to raise and rely on a provision

in DPC’s certificate of incorporation that prohibits an award

of money damages against a director for breach of the duty

of care, and (4) imposing joint and several liability for the

awards against the three directors. In a cross-appeal that

1

Joseph LaChapelle and James Field are third-party plaintiffs in this

action. For purposes of this opinion, we refer to them as plaintiffs throughout.

2

This action began when DPC alleged claims against LaChapelle and Field,

among others. DPC’s claims were dismissed, and they are not at issue in this

appeal.

In the same action, LaChapelle and Field also brought direct and derivative

claims against DPC’s attorney, Brill, and his law firm. In our opinion on a pre-

vious appeal, we addressed issues related to those claims. See Deep Photonics

Corp. v. LaChapelle, 282 Or App 533, 536, 385 P3d 1126 (2016), rev den, 361 Or

524 (2017). The claims against Brill and his law firm also are not at issue in this

appeal.

LaChapelle and Field also asserted direct and derivative claims against

another director of DPC, Theodore Alekel. Before trial, those claims were sev-

ered from the claims against Kim, Juhola, and Knoth and, ultimately, they were

dismissed. Those claims also are not at issue in this appeal.

Finally, LaChapelle and Field also alleged direct claims—as opposed to

derivative claims on behalf of DPC—against defendants and against Daehong

Technew, a Korean corporation of which Kim is the majority shareholder. The

trial court dismissed those claims before trial, and they likewise are not at issue

in this appeal.

702 Deep Photonics Corp. v. LaChapelle

plaintiffs ask us to address only if we conclude that a new

trial is necessary, plaintiffs assign error to the trial court’s

use of a verdict form indicating that breaches of the duty of

loyalty by a majority of the board could be excused by the

vote of a single disinterested board member.

At the outset, we reject without further discussion

Kim’s assignments of error regarding the trial court’s denial

of his motions for directed verdict and judgment notwith-

standing the verdict. As explained below, we also conclude

that the trial court did not err in allowing plaintiffs’ share-

holder derivative claims to be tried to a jury, that the court

did not abuse its discretion in denying defendants’ midtrial

request to raise and rely on the exculpation provision in

DPC’s certificate of incorporation, and that the court did not

err in imposing joint and several liability. Accordingly, we

affirm, and we do not consider plaintiffs’ cross-appeal.

RIGHT TO A JURY TRIAL

We begin with Kim’s seventh assignment of error,

in which he contends that the trial court erred in allowing

plaintiffs’ shareholder derivative claims to be tried to a jury.

DPC is a Delaware corporation and, consequently, the par-

ties agree, its internal affairs are regulated by Delaware

law. See ORS 60.714(3) (“This chapter does not authorize

this state to regulate the organization or internal affairs of

a foreign corporation authorized to transact business in this

state.”).

Kim argues that, under Oregon law, a shareholder

derivative suit is equitable in nature and, consequently,

must be tried to a court, not a jury. Alternatively, he con-

tends that, if there is a right to a jury trial under Oregon

law, Delaware law should apply because Delaware law is the

substantive law that applies in the case and the right to

a jury trial is substantive under conflict-of-laws principles.

Kim contends, and plaintiffs do not dispute, that there is

no right to a jury trial on shareholder derivative claims for

breach of fiduciary duty under Delaware law.3

3

Delaware’s court of equity, the Delaware Court of Chancery, sits with-

out a jury. See Preston Hollow Capital LLC v. Nuveen LLC, 216 A3d 1, 12 n 64

(Del Ch 2019) (“[T]o the extent a jury in the Court of Chancery is not extinct

Cite as 303 Or App 699 (2020) 703

Plaintiffs respond that the nature of the relief

sought controls whether a party has a right to a jury trial

under Oregon law; they assert that, here, they brought a

claim for damages and, thus, they were entitled to a jury

trial. In response to Kim’s alternative argument, plaintiffs

assert that the right to a jury trial is a procedural matter

and, thus, under conflict-of-laws principles, it is governed by

the law of the forum state, here, Oregon.

We begin by considering whether plaintiffs had a

right to a jury trial under Oregon law. To evaluate whether

a party is entitled to a jury trial on a given claim, we employ

a two-step process: First we consider whether the legislature

has provided a jury trial by statute; second, if it has not, we

consider whether the constitution provides a right to a jury

trial. Goodyear Tire & Rubber Co. v. Tualatin Tire & Auto,

322 Or 406, 414, 908 P2d 300 (1995), modified on recons, 325

Or 46, 932 P2d 1141 (1997); see also Foster v. Miramontes,

352 Or 401, 404, 287 P3d 1045 (2012) (engaging in the same

two-step analysis).

Here, because the parties agree that the substance

of the claims at issue comes from Delaware law, they have

cited no relevant Oregon statutory provisions governing

the claims. To the extent that Delaware law might be rele-

vant to our statutory analysis under Oregon law (which nei-

ther party argues that it is), no Delaware statute provides

for a right to a jury trial on shareholder derivative claims

because, as noted above, 303 Or App at 702 n 3, those claims

are heard in Delaware in a separate court of chancery,

where there is no jury procedure at all. See Preston Hollow

Capital LLC v. Nuveen LLC, 216 A3d 1, 12 n 64 (Del Ch 2019)

(“[T]o the extent a jury in the Court of Chancery is not

extinct [because, historically, the court could empanel an

advisory jury], it is a vestigial structure.”). Accordingly, for

[because, historically, the court could empanel an advisory jury], it is a vestigial

structure.”). Shareholder derivative actions are heard exclusively in the Court of

Chancery and, consequently, carry no right to jury trial. See Aronson v. Lewis,

473 A2d 805, 811 (Del 1984), overruled on other grounds by Brehm v. Eisner, 746

A2d 244 (Del 2000) (“The derivative action developed in equity to enable share-

holders to sue in the corporation’s name where those in control of the company

refused to assert a claim belonging to it.”); Levien v. Sinclair Oil Corp., 300 A2d

28, 30 (Del Ch 1972) (derivative actions are “cognizable only in equity” (internal

quotation marks omitted)).

704 Deep Photonics Corp. v. LaChapelle

purposes of this opinion, we assume that no statute provides

a right to a jury trial on these shareholder derivative claims.

We turn to the second step in the analysis. Article I,

section 17, of the Oregon Constitution provides that, “[i]n all

civil cases the right of Trial by Jury shall remain inviolate.” 4

The Supreme Court “has emphasized that ‘the constitu-

tional right of trial by jury is not to be narrowly construed.’ ”

State v. N. R. L., 354 Or 222, 225, 311 P3d 510 (2013) (quot-

ing State v. 1920 Studebaker Touring Car et al., 120 Or 254,

263, 251 P 701 (1927)). “Rather, Article I, section 17, guar-

antees a right to jury trial for all civil claims or requests for

relief, absent a showing that the nature of the particular

claim or request at issue is such that it would have been

tried to a court without a jury at common law.” Id. at 226

(citing Miramontes, 352 Or at 425). Moreover, “[t]he fact that

a particular claim or request was not judicially recognized

at the time that the constitution was adopted or that such

a claim or request was created by the legislature thereafter

does not necessarily mean that Article I, section 17, does not

apply; it is the nature of the claim or request that is deter-

minative.” Id.; see also 1920 Studebaker Touring Car et al.,

120 Or at 263 (“[T]he constitutional right of trial by jury is

not to be narrowly construed, and is not limited strictly to

those cases in which it had existed before the adoption of the

Constitution, but is to be extended to cases of like nature as

they may hereafter arise.”).

Below, the trial court concluded that, in light of

the Oregon Supreme Court’s reasoning in Miramontes, the

parties are entitled to a jury trial on shareholder derivative

claims under that constitutional provision. As explained

below, we agree.

In Miramontes, the Oregon Supreme Court consid-

ered, and ultimately found persuasive, the United States

Supreme Court’s mode of analysis for jury trial rights under

4

Article VII (Amended), section 3, of the Oregon Constitution provides a

right to jury trial in “actions at law, where the value in controversy shall exceed

$750.” That provision was adopted when the Oregon Constitution was amended

in 1910. Miramontes, 352 Or at 408 n 5. Neither party argues that that provision

affects this case differently from Article I, section 17. Accordingly, we assume

that it does not.

Cite as 303 Or App 699 (2020) 705

the Seventh Amendment to the United States Constitution.

352 Or at 415-25. Under that mode of analysis, which the

United States Supreme Court adopted in light of the merger

of law and equity in the federal system under the Federal

Rules of Civil Procedure (FRCPs), a court focuses on the

nature of the relief requested to determine whether a case

presents a legal—as opposed to equitable—issue. Id. at

416-17 (summarizing Dairy Queen v. Wood, 369 US 469,

82 S Ct 894, 8 L Ed 2d 44 (1962)). If it does, the parties

are entitled to a jury trial on the legal issue, “even if the

evident equitable issues [are] the ‘basic’ issues or the legal

issue could be characterized as ‘incidental’ to the equita-

ble issues.” Id. (quoting Dairy Queen, 369 US at 470). Thus,

under the Seventh Amendment, the right to a jury trial

“ ‘depends on the nature of the issue to be tried rather than

the character of the overall action.’ ” Id. at 418 n 15 (quoting

Ross v. Bernhard, 396 US 531, 538, 90 S Ct 733, 24 L Ed 2d

729 (1970)).

After summarizing the federal approach, the

Oregon Supreme Court considered its case law from before

and after 1979, when the Oregon Rules of Civil Procedure

(ORCPs) dispensed with the procedural distinctions between

law and equity in Oregon. The court concluded, “before the

merger of law and equity, this court cited various reasons

for upholding an equity court’s exercise of jurisdiction over

what could otherwise be considered legal claims,” including

the need for separate trials on the law and equity sides of

the courts and “the notion that a plaintiff who improperly

joined equitable and legal claims had waived the right of

jury trial.” Id. at 424-25. After the merger of law and equity,

however, those reasons no longer justify trying legal claims

or issues without a jury:

“In sum, it is neither necessary nor advantageous to courts

or litigants to decide the substantive question of whether

a party is entitled to a jury trial based on whether a case

is ‘essentially’ equitable in nature, or whether a court of

equity would have had ‘incidental’ jurisdiction to decide a

legal issue as an adjunct to deciding an equitable issue in

1857.”

Id. at 425. Instead, “the right to jury trial must depend

on the nature of the relief requested and not on whether,

706 Deep Photonics Corp. v. LaChapelle

historically, a court of equity would have granted the relief

had the legal issue been joined with a separate equitable

claim.” Id. Thus, the Oregon Supreme Court adopted the

federal approach.

Miramontes involved two independent claims that

were brought together pursuant to a statute: one claim

sought equitable relief—a stalking protective order—and

the other sought legal relief—money damages. Id. at 403.

After adopting the federal issue-by-issue approach to jury

trial rights, the Oregon Supreme Court held that the defen-

dant had a right to a jury trial on the legal claim even

though it was joined with the equitable claim. Id. at 426.

This case presents a slightly different situation:

Here, rather than bringing an equitable claim and a legal

claim, plaintiffs brought a claim that adds a single equita-

ble overlay—the right of the shareholders to bring a claim

on behalf of the corporation—to an otherwise legal claim

for damages for breach of fiduciary duties. See Kollman v.

Cell Tech International, Inc., 250 Or App 163, 171, 279 P3d

324 (2012), rev den, 353 Or 410 (2013) (where economic dam-

ages were sought on a claim for breach of fiduciary duty,

“the nature of the relief sought” required the trial court to

try the claim “at law,” that is, by jury); Hoekstre v. Golden B.

Products, 77 Or App 104, 107, 712 P2d 149 (1985), rev den,

300 Or 563 (1986) (“[A] shareholder’s derivative suit is in

equity.”); see also Aronson v. Lewis, 473 A2d 805, 811 (Del

1984) (“The nature of the action is two-fold. First, it is the

equivalent of a suit by the shareholders to compel the corpo-

ration to sue. Second, it is a suit by the corporation, asserted

by the shareholders on its behalf, against those liable to it.”).

Regardless of that distinction, however, the court’s holding

in Miramontes still indicates that a jury trial was required

on plaintiffs’ claim.

In Ross, which the Oregon Supreme Court cited

with approval in Miramontes, the United States Supreme

Court explained that a shareholder derivative action “has

dual aspects: first, the stockholder’s right to sue on behalf

of the corporation, historically an equitable matter; second,

the claim of the corporation against directors or third par-

ties on which, if the corporation had sued and the claim

Cite as 303 Or App 699 (2020) 707

presented legal issues, the company could demand a jury

trial.” 396 US at 538. Historically, the common-law courts

prohibited shareholders from suing derivatively on behalf

of the corporation for the corporation’s legal claims because

the corporation had an adequate remedy at law, namely, the

corporation’s own legal claim for damages that was triable

to a jury. Id. at 539. Courts of equity created an exception to

recognize the claim in equity where the corporation refused

to assert the claim and, therefore, there was no adequate

remedy at law. Id.

The Ross Court explained, “Under the [FRCPs],

law and equity are procedurally combined; nothing turns

now upon the form of the action or the procedural devices

by which the parties happen to come before the court.” Id. at

540. Noting that the corporation is the real party in inter-

est, receives the proceeds of any judgment, and is bound

by the result of the action, the Court explained that “[t]he

heart of the [shareholder derivative] action is the corporate

claim.” Id. at 539. Consequently, the Court held, under its

issue-by-issue approach to the right to jury trial under the

Seventh Amendment, if the corporate claim “presents a

legal issue, one entitling the corporation to a jury trial under

the Seventh Amendment, the right to a jury is not forfeited

merely because the stockholder’s right to sue must first be

adjudicated as an equitable issue triable to the court.” Id.

The same reasoning applies under Article I, sec-

tion 17. As summarized above, in Miramontes, the Oregon

Supreme Court adopted the issue-by-issue approach to jury

trial rights. It did so for the same reason that the United

States Supreme Court adopted that approach: the merger

of law and equity pursuant to rules of civil procedure. The

Oregon Supreme Court explained that, in the post-merger

system, “ ‘[t]he availability of jury trial must be separately

determined for different issues when a case arises present-

ing both legal and equitable issues.’ ” Miramontes, 352 Or

at 421 (quoting Frederic R. Merrill, Abolishing Procedural

Distinctions Between Actions At Law and Suits in Equity;

Right to Jury Trial, ORCP 2, in Oregon Law Institute, 1980

Civil Procedure Rules 224 (1979)); see also Cornelison v.

Seabold, 254 Or 401, 406, 460 P2d 1009 (1969) (“[I]t should

708 Deep Photonics Corp. v. LaChapelle

be the nature of the particular issue in the proceeding,

rather than that of the entire proceeding, which should

dictate whether this issue is to be tried with or without a

jury.”).

We acknowledge that the Supreme Court has held

that the right to jury trial does not extend to claims or

requests for relief “that, standing alone, are equitable in

nature and would have been tried to a court without a jury

at common law.” Miramontes, 352 Or at 425. In 1859, the

concept of a shareholder derivative claim, brought in equity,

was recognized in some jurisdictions, although, as far as

we are aware, no such case was considered by the Oregon

Supreme Court until 1899. See Stanley v. Luse, 36 Or 25, 38,

58 P 75 (1899) (“The parties agree that the suit is, in effect,

one by the corporation, although brought on behalf of cer-

tain stockholders and all others similarly situated, and that

the relief available is such only as would be proper if the suit

had in reality been brought in the name of the corporation

itself.”).

Unlike most claims historically brought in equity, a

claim by shareholders on behalf of a corporation that seeks

monetary damages for corporate directors’ breach of fidu-

ciary duties does not seek equitable relief or require equi-

table balancing of a variety of considerations to reach a just

outcome. See, e.g., Frankland v. City of Lake Oswego, 267 Or

452, 479, 517 P2d 1042 (1973) (when a plaintiff seeks injunc-

tive relief, “[i]t is the duty of the court of chancery to con-

sider and weigh the relative convenience or inconvenience,

the relative injury sought to be cured as compared with

the hardship of injunctive relief” (internal quotation marks

omitted)); cf. Rebstock v. Lutz, 39 Del Ch 25, 28, 158 A2d

487, 489 (1960) (noting that a derivative claim for “a money

judgment against [corporate managers] based on corporate

wrongs” is essentially legal; “[e]quitable jurisdiction in such

a case does not rest upon the equitable remedy of account-

ing; it rests upon the derivative nature of a stockholder’s

suit”). Rather, as noted, shareholder derivative claims were

historically brought in courts of equity simply because law

courts did not recognize shareholders, rather than corporate

managers, as proper plaintiffs for corporate claims. Ross,

Cite as 303 Or App 699 (2020) 709

396 US at 534. Other than that discrete question of stand-

ing, the claims themselves are essentially legal, seeking

compensatory money damages for wrongs to the corpora-

tion. Id. at 538.

Thus, to the extent that shareholder derivative claims

can be characterized as claims that existed at common law

when the Oregon Constitution was adopted, we nevertheless

conclude that the relevant “claim” is the legal claim by the

corporation, rather than the easily separated equitable issue

of whether corporate shareholders have standing to bring

the action on behalf of the corporation. Under Miramontes,

the proper approach to jury trial rights is to consider the

issues in a case on an issue-by-issue basis, with a focus on

the relief requested. “To reach a different conclusion would

be to import into current practice procedures that may have

been necessary at one time but that our legislature has long

since abandoned.” 352 Or at 425.

We recognize that “[t]he right to a jury trial * * *

does not extend to cases that would have been tried to an

equity or an admiralty court in 1859.” McDowell Welding

& Pipefitting v. US Gypsum Co., 345 Or 272, 279, 193 P3d 9

(2008). The well-reasoned dissent focuses on the fact that a

shareholder derivative claim was tried to an equity court at

the time of the Oregon Constitution as a matter of historical

practice regardless of the nature of the underlying asserted

claim. That narrow historical focus ignores the unique

nature of the shareholder derivative claim at issue here. A

shareholder derivative claim is unique among claims con-

sidered by the Supreme Court to date. As noted above, there

is nothing about the underlying claim itself that is equitable

in nature or requires the jury to balance equitable factors

or exercise discretion. It is only that a law court tradition-

ally would not recognize the shareholder as a proper party

at the outset of a case—even when the corporation refused

to protect the shareholder’s rights in a law court—that his-

torically prevented the underlying legal claim from being

considered by a jury. The underlying legal claim, however,

was a claim that could be tried to the jury.

To ascertain whether the parties are entitled to a

jury trial in this case, we look to the pleadings to determine

710 Deep Photonics Corp. v. LaChapelle

the nature of each issue presented. Miramontes, 352 Or at

426. Here, the issue presented by the corporate claims—

breach of fiduciary duty claims seeking money damages—

is legal.5 See id.; see also, e.g., Thompson v. Coughlin, 329

Or 630, 638, 997 P2d 191 (2000) (“the nature of the relief

sought” determines whether a claim is at law or in equity);

Kollman, 250 Or App at 171 (breach of fiduciary claim seek-

ing economic damages is legal). Accordingly, plaintiffs were

entitled to a jury trial on that issue. The fact that the case

also required the court to resolve the equitable question of

whether plaintiffs had standing to bring the claim on behalf

of DPC does not change that conclusion. See Miramontes, 352

Or at 425 (adopting federal issue-by-issue analysis); accord

Ross, 396 US at 542 (“After adoption of the rules there is

no longer any procedural obstacle to the assertion of legal

rights before juries, however the party may have acquired

standing to assert those rights.”).

We turn to Kim’s alternative argument. As noted

above, under Delaware law, there is no right to a jury trial

on the claims at issue here. Consequently, Oregon law and

Delaware law are in conflict. Kim contends that, as a result

of that conflict, we should apply Delaware law.

The parties do not dispute that, under conflict-of-

laws principles, “even when foreign law applies, the law of the

forum will govern judicial procedures.” Snider v. Production

Chemical Manufacturing, Inc., 348 Or 257, 261 n 3, 230 P3d 1

(2010) (describing Equitable Life Assurance v. McKay, 306 Or

493, 497, 760 P2d 871 (1988)); see also Restatement (Second)

of Conflict of Laws § 122 (1971) (“A court usually applies its

own local law rules prescribing how litigation shall be con-

ducted even when it applies the local law rules of another

state to resolve other issues in the case.”); McKay, 306 Or

at 497 (holding that the Restatement rule, set out in section

122, is consistent with its previous cases and adopting that

rule). The question here, then, is whether the right to a jury

trial is “concerned primarily with judicial administration,”

5

Plaintiffs initially requested equitable relief as well as money damages,

but they informed the trial court at the summary judgment hearing that they

would not be pursuing equitable relief. Thus, by the time the court considered

defendant’s objection to a jury trial, only legal relief was at issue.

Cite as 303 Or App 699 (2020) 711

“relating to the administration of justice.” McKay, 306 Or at

497-98. If it is, then Oregon law applies. Id.

As explained below, we readily conclude that the

mode of trial—by judge or by jury—is an issue “concerned

primarily with judicial administration” and “relating to the

administration of justice.” Id. at 497; see also Snider, 348 Or

at 261 n 3 (“judicial procedures” are governed by the law of

the forum state; although California law governed arbitra-

tion procedures, Oregon law governed “the procedures for

taking an appeal from an Oregon circuit court’s ruling” on

a motion to compel arbitration).

In McKay, the Supreme Court held that the gen-

eral approach of the Restatement, set out in section 122—

“matters concerned primarily with judicial administration

are governed by the law of the forum state”—is consistent

with Oregon law. 306 Or at 497 (describing Restatement

§ 122). The court explained that, in the sections following

section 122, “the Restatement deals with specific issues”

relating to that principle that commonly arise in conflict-of-

laws cases. See Restatement ch 6, topic 2 (entitled “Specific

Applications of General Principle”). The court relied on one

of those sections, section 137, which provides that the local

law of the forum governs the competency of witnesses and

considerations related to their credibility. McKay, 306 Or

at 497-98 (noting that, under the Restatement approach,

“[r]ules governing the admissibility of evidence generally

are considered to be matters relating to the administration

of justice” and relying on section 138 in general and section

137 in particular).

Another of the specific applications of the general

principle of section 122 is section 129, which provides that

“[t]he local law of the forum determines whether an issue

shall be tried by the court or by a jury.” That is consistent

with the Supreme Court’s holding in McKay that matters

“concerned primarily with judicial administration” are gov-

erned by the law of the forum. 306 Or at 497; see also Central

Laborers’ Pension Fund v. McAfee, Inc., 17 Cal App 5th 292,

346, 225 Cal Rptr 3d 249, 296 (2017) (“While Delaware law

in this case supplies the relevant corporate governance gen-

eral standard of care, we find no basis on which to extend

712 Deep Photonics Corp. v. LaChapelle

the internal affairs doctrine to matters properly governed

by local forum rules, including * * * mode of trial (jury or

bench).” (Internal quotation marks and citations omitted.)).

Kim argues that Delaware law provides substantive

rights to application of its unique substantive “standards of

review” and to have the trial court explain its reasoning in

detail.6 He argues that only a judge, not a jury, can ade-

quately vindicate those rights. We disagree. As the record in

this case shows, the jury can be instructed on the appropri-

ate substantive standard of review and, through a detailed

verdict form, can explain its reasoning. Thus, Oregon law

governs here, and, under Article I, section 17, plaintiffs had

a right to a jury trial on their claims. The trial court did not

err in rejecting defendants’ objections to a jury trial.

EXCULPATION PROVISION

Next we address Kim’s first, second, and third

assignments of error, which all relate to a provision in DPC’s

certificate of incorporation. 8 Delaware Code section 102(b)(7)

allows a certificate of incorporation to contain

“[a] provision eliminating or limiting the personal liability

of a director to the corporation or its stockholders for mon-

etary damages for breach of fiduciary duty as a director,

provided that such provision shall not eliminate or limit

the liability of a director: (i) For any breach of the direc-

tor’s duty of loyalty to the corporation or its stockholders;

(ii) for acts or omissions not in good faith or which involve

intentional misconduct or a knowing violation of law;

(iii) under § 174 of this title [relating to unlawful dividends

and stock purchases and redemptions]; or (iv) for any trans-

action from which the director derived an improper per-

sonal benefit.”

6

Kim also contends that, in Hust v. Moore-McCormack Lines, Inc., 180 Or

409, 424, 177 P2d 429 (1947), the Oregon Supreme Court suggested that the right

to a jury trial is substantive, not procedural. To the extent that the court in

Hust made any suggestion about the right to a trial by jury—as opposed to the

question of whether an appellate court can revisit a jury verdict on appeal even

in the absence of error—we conclude that the court’s later recognition, in McKay,

that “[t]he determination whether another state’s laws should be applied in this

state’s courts requires more than a classification of those laws as ‘substantive’ or

‘procedural,’ ” 306 Or at 496, renders the court’s comments in Hust unhelpful in

resolving the issue before us.

Cite as 303 Or App 699 (2020) 713

DPC’s certificate of incorporation contains a provision elimi-

nating the liability of its directors for monetary damages “to

the fullest extent permissible under the Delaware General

Corporation Law.” We refer to that provision as the exculpa-

tion provision.

The parties appear to agree that, under a provision

like the one in DPC’s certificate of incorporation, directors

cannot under certain circumstances be held liable for money

damages for breaches of their duty of care.7 The parties dis-

agree as to when, and how, defendant directors must notify

the court and the opposing party that they plan to rely on

such a provision.

As discussed below, plaintiffs alleged that defen-

dants breached their duty of care, were “grossly negligent,”

and were uninformed in their business decisionmaking.

Defendants did not raise the exculpation provision in their

answer. The record indicates that both parties were aware

of the provision by the time of defendants’ reply in support

of their motion for summary judgment, but defendants did

not move to amend their answer or otherwise formally raise

the provision at that time. Before trial, defendants moved

in limine to exclude evidence of breaches of the duty of care,

basing their argument on the exculpation provision. The

trial court did not rule on the motion at that time, conclud-

ing that the issue related to jury instructions rather than

the presentation of evidence.

During plaintiffs’ case-in-chief, defendants moved

to introduce DPC’s certificate of incorporation, explaining

that “[i]t goes to the exculpatory clause issue.” The trial

court disagreed, explaining, “right now * * * that defense,

affirmative or otherwise, isn’t pled. Remember?”8 Later in

the trial, after plaintiffs had finished presenting their case-

in-chief, defendants moved to amend their answer to raise

7

Because, as explained below, we conclude that defendants did not timely

raise the exculpation provision, we do not need to address whether the require-

ments of 8 Del Code § 102(b)(7)(ii)-(iv) are satisfied here; for example, we do not

address whether the breaches of the duty of care that the jury identified are

exempt from the exculpation provision because they were not in good faith or

because the directors derived improper personal benefits from them.

8

The parties and the trial court had numerous discussions off the record.

The court’s comments appear to refer to one of those discussions.

714 Deep Photonics Corp. v. LaChapelle

the provision as a defense. The court held that the excul-

pation provision was a defense that had to be pleaded and

denied the motion to amend the answer to raise it at that

late date.

On appeal, Kim first contends that defendants did

not have to raise the exculpation provision in their answer;

in his view, defendants were free to raise the provision any

time. Second, he asserts that, even if the exculpation provi-

sion had to be raised in the answer, the trial court abused

its discretion in denying the motion to amend.9

We begin by considering Delaware courts’ treat-

ment of exculpation provisions under 8 Del Code § 102(b)(7).

The Delaware Supreme Court has explained that “the

adoption of a charter provision, in accordance with Section

102(b)(7), bars the recovery of monetary damages from

directors for a successful shareholder claim that is based

exclusively upon establishing a violation of the duty of

care.” Emerald Partners v. Berlin, 787 A2d 85, 91 (Del 2001).

“Although a Section 102(b)(7) provision does not operate to

defeat the validity of a plaintiff’s claim on the merits, it can

operate to defeat the plaintiff’s ability to recover monetary

damages.” Id. at 92. Because the provision defeats the plain-

tiff’s ability to recover damages, a trial on a claim for dam-

ages based exclusively on breaches of the duty of care “would

serve no useful purpose.” Id. Consequently, “if a shareholder

complaint unambiguously asserts only a due care claim,

the complaint is dismissible once the corporation’s Section

102(b)(7) provision is properly invoked.” Id. at 91 (emphasis

in original). That can take place “on a Rule 12(b)(6) motion

to dismiss,” on a motion for judgment on the pleadings, or on

a motion for summary judgment. Malpiede v. Townson, 780

A2d 1075, 1092 (Del 2001).

By contrast, if a complaint alleges a claim impli-

cating more than only the duty of due care—it implicates

the duty of loyalty or the duty of good faith—an exculpation

9

In his third assignment of error, Kim contends that the trial court “erred

in entering a form of judgment that contained a money award notwithstanding

the exculpation provision.” He advances no argument specifically addressing

that assignment of error. Accordingly, we reject it for the same reasons explained

below with respect to his first two assignments of error.

Cite as 303 Or App 699 (2020) 715

provision does not entitle the directors to dismissal of the

claim before trial. Emerald Partners, 787 A2d at 93. In that

case, “evidence of how the board of directors discharged all

three of its primary fiduciary duties” is relevant to the fact-

finder’s analysis. Id. As a result, in that situation, “the excul-

patory effect of a Section 102(b)(7) provision only becomes a

proper focus of judicial scrutiny after the directors’ poten-

tial personal liability for monetary damages has been estab-

lished.” Id. Said another way, if the complaint alleges more

than just breaches of the duty of care, the factfinder must

determine whether the directors breached their fiduciary

duties and, if they did, which duties they breached, and then

apply the exculpation provision by eliminating damages for

breaches of the duty of care.10

As that summary demonstrates, an exculpation pro-

vision functions like an affirmative defense. See id. at 91-92

(reiterating a previous holding that the provision is “in the

nature of an affirmative defense” and noting that “[a]n affir-

mative defense is ‘[a] defendant’s assertion raising new facts

and arguments that, if true, will defeat the plaintiff’s claim,

even if all the allegations in the complaint are true’ ” (quot-

ing Black’s Law Dictionary 430 (7th ed 1999) (some internal

quotation marks omitted))). Although the provision does not

technically defeat on the merits a claim implicating only the

duty of care, the Delaware Supreme Court has recognized

the “practical reality” that it makes such a claim pointless,

and, thus, justifies dismissal. Id. at 92. That court has also

explained that the exculpation provision “must be affirma-

tively raised by the director defendants,” id. at 91 (emphasis

in original), and held that “[d]efendants seeking exculpa-

tion under such a provision will normally bear the burden

of establishing each of its elements.” Emerald Partners v.

Berlin, 726 A2d 1215, 1223-24 (1999).

From that understanding—an exculpation provi-

sion can obviate the need to try a plaintiff’s claim; it must be

affirmatively raised by the defendants; and the defendants

10

Those determinations take place as part of an “entire fairness” analysis, in

which the factfinder determines whether the challenged transaction was entirely

fair to the corporation. Id.

In this case, it is undisputed that the complaint contained claims breaches of

the duty of loyalty.

716 Deep Photonics Corp. v. LaChapelle

bear the burden of establishing its elements—it follows

that director defendants must plead an exculpation provi-

sion before they can rely on it at trial.11 See In re Nantucket

Island Associates Ltd. Partnership Unitholders Litigation,

No. Civ.A 17379 NC, 2002 WL 31926614 at *3 (Del Ch

Dec 16, 2002) (noting that Delaware Chancery Rule 8(c)

requires an answer to set forth “any * * * matter constituting

an avoidance or affirmative defense,” and explaining that its

purpose “is to deal with [possible choices by defendants not

to raise defenses like exoneration in motions to dismiss or on

summary judgment] by putting the onus on defendants to

assert these defenses very early on in the case”); R. Franklin

Balotti & Jesse A. Finkelstein, 1 Balotti and Finkelstein’s

Delaware Law of Corporations and Business Organizations

§ 4.13 (2020) (“The preclusion of a duty-of-care claim pursu-

ant to a Section 102(b)(7) charter provision should be raised

as an affirmative defense.”).12

11

As explained above, defendants can move to dismiss under Delaware

Chancery Rule 12(b)(6) based on an exculpation provision. In that limited cir-

cumstance, where the motion to dismiss is filed before an answer, the defendants

need not first plead the provision in their answer. Malpiede, 780 A2d at 1092

(“The Section 102(b)(7) bar may be raised on a Rule 12(b)(6) motion to dismiss

(with or without the filing of an answer), a motion for judgment on the pleadings

(after filing an answer), or a motion for summary judgment (or partial summary

judgment) under Rule 56 after an answer, with or without supporting affidavits.”

(Footnote omitted.)).

That accords with ordinary procedure for motions to dismiss under Rule

12(b)(6). See Del Chancery Rule 12(b) (“Every defense, in law or fact, to a claim

for relief in any pleading * * * shall be asserted in the responsive pleading thereto

if one is required, except that the following defenses may at the option of the

pleader be made by motion: * * * (6) failure to state a claim upon which relief can be

granted[.]”); accord ORCP 21(A) (“Every defense, in law or fact, to a claim for relief

in any pleading * * * shall be asserted in the responsive pleading thereto, except

that the following defenses may at the option of the pleader be made by motion to

dismiss: * * * (8) failure to state ultimate facts sufficient to constitute a claim.”).

12

Kim relies on Delaware cases that, he argues, show that defendants are

not required to plead or even raise an exculpation provision until late in litiga-

tion, just before trial or even on appeal. The cases he relies on do not establish

that proposition. In each case, the court notes when the defendants first raised

the provision in their arguments or when the trial court or appellate court first

addressed the provision in its analysis, but does not address or indicate whether

the provision was pleaded. The cases provide no legal analysis of the pleading

issue. As explained in the text, in light of the Delaware Supreme Court’s repeated

statement that an exculpation provision is “in the nature of an affirmative

defense,” Emerald Partners, 787 A2d at 92 (internal quotation marks omitted),

and its thorough consideration of the procedural postures in which the provision

can be raised, Malpiede, 780 A2d at 1092, we conclude that the provision must be

pleaded.

Cite as 303 Or App 699 (2020) 717

The requirement of pleading the exculpation provi-

sion is even clearer under Oregon law. ORCP 19 B requires

an answer to “set forth affirmatively” a variety of enumer-

ated affirmative defenses and “any other matter constituting

an avoidance or affirmative defense.” Accord Del Chancery

Rule (8)(c) (establishing identical requirements). The Oregon

Supreme Court recently reiterated what it means to be an

affirmative defense: “ ‘[W]here the defendant desires to

present evidence which does not directly controvert a fact

necessary to be established by plaintiff, it is a new matter

which must be pleaded as an affirmative defense.’ ” Lasley v.

Combined Transport, Inc., 351 Or 1, 17, 261 P3d 1215 (2011)

(quoting Deering v. Alexander, 281 Or 607, 613, 576 P2d 8

(1978)). “This court has defined a ‘new matter’ as consisting

of ‘a statement of facts different from those averred by the

plaintiff and not embraced within the judicial inquiry into

their truth.’ ” Id. (quoting Hubbard v. Olsen-Roe Transfer

Co., 110 Or 618, 627, 224 P 636 (1924)). Here, defendants’

reliance on the exculpation was a “new matter”; it required

evidence that “[did] not directly controvert a fact necessary

to be established by plaintiff.” Id. Accordingly, it had to be

pleaded. ORCP 19 B.

We turn to Kim’s argument that the trial court

abused its discretion in denying defendants’ motion, made

on the ninth day of trial, to amend their answer to raise a

new defense. “[A] trial court has broad discretion in deter-

mining whether to allow a party to amend the pleadings.”

Ballard v. City of Albany, 221 Or App 630, 637-38, 191 P3d

679 (2008) (citing Crandon Capital Partners v. Shelk, 219 Or

App 16, 40, 181 P3d 773, rev den, 345 Or 158 (2008)). “In

applying that standard, we uphold the trial court’s decision

unless it exercises its discretion in a manner that is unjus-

tified by, and clearly against, reason and evidence.” Sanford

v. Hampton Resources, Inc., 298 Or App 555, 577, 447 P3d

1192, rev den, 366 Or 64 (2019) (internal quotation marks

omitted).

“In evaluating the court’s exercise of its discretion,

we consider (1) the proposed amendment’s nature and its

relationship to the existing pleadings; (2) the prejudice, if

any, to the opposing party; (3) the timing of the proposed

amendment; and (4) the colorable merit of the proposed

718 Deep Photonics Corp. v. LaChapelle

amendment.” Id. (internal quotation marks omitted). Under

these circumstances, the court did not abuse its discretion.

Kim contends that the nature and timing of the

proposed amendment support his view that the trial court

had to allow it. He asserts that it was unjust for the court

to penalize defendants for moving to amend their answer so

late, because they moved to amend as soon as they learned

of plaintiffs’ intention to try claims for breach of the duty of

care. Kim argues that, in the complaint, plaintiffs did not

allege that defendants breached the duty of care; instead,

he argues, plaintiffs’ theory was exclusively that defendants

had conspired to breach their duties of loyalty and good

faith.

The problem with that position, as the trial court

recognized, is that the complaint alleged breaches of the duty

of care. As Kim acknowledges in his opening brief, plain-

tiffs alleged “that the ‘interested directors failed to exercise

due care’ and that ‘in addition to their lack of disinterest,’

defendants made ‘grossly negligent decisions’ because they

did not ‘fully inform themselves’ of” certain relevant facts.

(Quoting plaintiffs’ complaint.) Those allegations should

have put Kim on notice, from the outset, that plaintiffs’ the-

ory of the case included breaches of the duty of care.

With the understanding that breaches of the duty

of care were at issue from the time plaintiffs filed the

complaint, the nature and timing of defendants’ proposed

amendment weighs heavily against the conclusion that

the trial court had to allow it. Midtrial, defendants sought

to amend their answer to raise a defense that they could,

and should, have raised in their initial answer. Instead of

raising it at the beginning of the case, they waited through

discovery, through summary judgment, and even through

plaintiffs’ presentation of evidence at trial. The court was

entitled to conclude that it was simply too late to plead an

affirmative defense.

To the extent that Kim argues that plaintiffs

could not have been prejudiced by the proposed amend-

ment because they knew, at least after defendants’ reply on

summary judgment, that defendants wanted to rely on the

Cite as 303 Or App 699 (2020) 719

exculpation provision, we disagree. The trial court found

that plaintiffs would have strategized about, shaped, and

presented their case differently if defendants had actually

raised the exculpation provision early in the case, rather

than merely indicating a desire to rely on it, and the record

supports that understanding. Even if this is a case in which

the court could properly have exercised its discretion to

allow a very late amendment, the court did not abuse its

discretion by deciding not to allow it.

JOINT AND SEVERAL LIABILITY

Finally, we consider Kim’s eighth assignment of

error, in which he contends that the trial court erred in

entering a judgment imposing joint and several liability on

defendants. He argues that, under Delaware law, directors

are jointly and severally liable for breaches of their fiduciary

duties only if the factfinder is specifically instructed, and

determines, that they acted in concert, aided and abetted,

or conspired to breach their fiduciary duties.13

“Delaware has long recognized that ‘when the neg-

ligent acts of two or more persons concur in producing a sin-

gle indivisible injury, such persons are jointly and severally

liable, though there was no common duty, common design,

or concerted action.’ ” Campbell v. Robinson, No. 06C-05-176-

PLA, 2007 WL 1765558 at *2 (Del Super Ct June 19, 2007)

(quoting Leishman v. Brady, 2 A2d 118, 120 (Del Super Ct

1938), and citing Sears, Roebuck & Co. v. Huang, 652 A2d

568, 573 (Del 1995) (“Multiple defendants may be liable as

joint tortfeasors if each defendant’s negligence is found to be

a proximate cause of a plaintiff’s injury.”)). The Restatement

(Second) of Torts section 875 (1979) states the same princi-

ple: “Each of two or more persons whose tortious conduct is

a legal cause of a single and indivisible harm to the injured

party is subject to liability to the injured party for the entire

harm.”

Here, the jury found that the three directors’ neg-

ligent acts—which were votes in favor of a particular board

13

In the trial court, the parties agreed that Delaware law controls this issue.

Accordingly, we address only Delaware law.

720 Deep Photonics Corp. v. LaChapelle

decision—combined to form that single board decision,

which caused a single injury to DPC, namely, a loss of value

of the corporation and its common stock. The trial court

understood the legal principle stated above, applied to those

facts, to lead to the conclusion that defendants are jointly

and severally liable under Delaware law.

On appeal, Kim has not directed us to any author-

ity indicating that the trial court was incorrect. He points

out that no Delaware court has expressly stated that that

principle applies to directors’ liability for breaches of fidu-

ciary duty. That may be true, but it is not dispositive. Kim

does not attempt to distinguish claims for breach of fidu-

ciary duty from other claims involving joint tortfeasors, nor

does he present any other contention that persuades us that

the general principle does not apply here. Accordingly, we

conclude that the trial court did not err in applying joint and

several liability.

Affirmed on appeal; cross-appeal dismissed as moot.

JAMES, J., concurring in part, dissenting in part.

Regrettably, I must part ways with the majority

when it concludes that the Supreme Court’s decision in

Fisher v. Miramontes, 352 Or 401, 287 P3d 1045 (2012), frees

us from the constraints of Supreme Court precedent holding

that, under Article I, section 17, of the Oregon Constitution,

“[t]he right to a jury trial * * * does not extend to cases that

would have been tried to an equity or an admiralty court in

1859.” McDowell Welding & Pipefitting v. US Gypsum Co.,

345 Or 272, 279, 193 P3d 9 (2008). As I will discuss, in 1859,

shareholder derivative suits were tried to equity courts.

Accordingly, under Supreme Court precedent that has not

been disavowed and is still binding on us, Article I, section 17,

provides no right to a jury trial in this case. Thus, on that

point, I respectfully dissent.

However, I agree with the majority’s reasoning

and disposition on Kim’s remaining assignments of error.

But, because I would conclude that the trial court erred

in allowing plaintiffs’ claims to be tried by jury, I would

reverse on Kim’s appeal and would also address plaintiffs’

cross-appeal. I would conclude that the trial court erred in

Cite as 303 Or App 699 (2020) 721

allowing a verdict form indicating that the vote of a single

disinterested director exonerates a breach of the duty of loy-

alty by a majority of the board. Accordingly, I would reverse

on appeal and cross-appeal.

RIGHT TO A JURY TRIAL

The majority explains that, in Miramontes, the

Oregon Supreme Court adopted the issue-by-issue analyt-

ical approach to jury trial rights that the United States

Supreme Court set out in Dairy Queen v. Wood, 369 US 469,

82 S Ct 894, 8 L Ed 2d 44 (1962). That is true, but the major-

ity fails to grapple with the fact that, as Miramontes itself

acknowledges, that approach is limited to jury trial rights

for “newly created” claims, that is, claims that did not exist

when the Oregon Constitution was adopted. Miramontes, 352

Or at 413. Because shareholder derivative suits were recog-

nized in equity in the first half of the nineteenth century,

Ross v. Bernhard, 396 US 531, 534, 90 S Ct 733, 24 L Ed

2d 729 (1970), they existed, and were heard in equity, when

the Oregon Constitution was adopted. Thus, the Supreme

Court’s analysis in Miramontes does not apply here.

Article I, section 17, provides, “In all civil cases the

right of Trial by Jury shall remain inviolate.” The Supreme

Court has held that two separate analytical categories exist

under Article I, section 17. The first consists of civil claims

that existed “when the Oregon Constitution was adopted

in 1857.” Horton v. OHSU, 359 Or 168, 243, 376 P3d 998

(2016).1

For those claims, the court has consistently rea-

soned that, by wording Article I, section 17, as they did—

”the right of Trial by Jury shall remain inviolate”—the

framers enshrined then-current “laws and practice” in the

constitution. Or Const, Art I, § 17 (emphasis added); Tribou

v. Strowbridge, 7 Or 156, 158 (1879) (“This language of the

constitution indicates that the right of trial by jury shall

continue to all suitors in courts in all cases in which it was

1

The Supreme Court has been inconsistent in its statements of whether

1857—when the Oregon Constitution was adopted—or 1859—when it went into

effect—is the appropriate date. Compare Horton, 359 Or at 243 (citing 1857 as the

relevant year) with McDowell Welding & Pipefitting, 345 Or at 279 (citing 1859 as

the relevant year). For purposes of this case, the difference is immaterial.

722 Deep Photonics Corp. v. LaChapelle

secured to them by the laws and practice of the courts at

the time of the adoption of the constitution.”); see also, e.g.,

McDowell Welding & Pipefitting, 345 Or at 279 (“The right

to a jury trial * * * does not extend to cases that would have

been tried to an equity or an admiralty court in 1859.”);

Moore Mill & Lumber Co. v. Foster, 216 Or 204, 225, 336

P2d 39, reh’g den, 216 Or 258, 337 P2d 810 (1959) (“This

court, like others, has recognized that constitutional pro-

visions such as those just cited assure trial by jury in the

classes of cases wherein the right was customary at the time

the constitution was adopted but do not extend it into other

areas.”); Dean v. Willamette Bridge Co., 22 Or 167, 169, 29

P 440 (1892) (“This provision of the constitution creates no

new right to trial by jury. It simply secures to suitors the

right to trial by jury in all cases where that right existed

at the time the constitution was adopted.”). Consequently,

for a claim that existed when the constitution was adopted,

Article I, section 17, guarantees a jury trial on the claim

if, and only if, “the common law provided a jury trial when

the Oregon Constitution was adopted in 1857.” Horton 359

Or at 243; see Moore Mill & Lumber Co., 216 Or at 225 (the

analytical question is whether “the right [to a jury trial]

was customary at the time the constitution was adopted”);

accord Miramontes, 352 Or at 425 (“Article I, section 17, and

Article VII (Amended), section 3, of the Oregon Constitution

do not guarantee a right to jury trial for claims or request[s]

for relief that, standing alone, are equitable in nature and

would have been tried to a court without a jury at common

law.”).

The second analytical category under Article I, sec-

tion 17, consists of “newly created” claims, that is, claims that

did not exist when the constitution was adopted. Miramontes,

352 Or at 413. The court’s recognition of that category began

with its opinion in State v. 1920 Studebaker Touring Car,

120 Or 254, 251 P 701 (1926), in which it “rejected the argu-

ment that no right to a jury trial attaches to a claim unless

there was a firmly established common-law right to a jury

trial for that claim in 1857.” Miramontes, 352 Or at 408

(describing Studebaker). The Studebaker court explained,

“the constitutional right of trial by jury is not to be narrowly

construed, and is not limited strictly to those cases in which

Cite as 303 Or App 699 (2020) 723

it had existed before the adoption of the Constitution, but is

to be extended to cases of like nature as they may hereafter

arise.” Studebaker, 120 Or at 263.

Thus, the analytical question for a claim that did

not exist when the Oregon constitution was adopted is

whether it is “ ‘of like nature’ to claims that were triable to a

jury at common law.” Miramontes, 352 Or at 409. Ultimately,

as the majority explains, in Miramontes, the court adopted

the federal issue-by-issue approach to that question. The

court explained that “Article I, section 17, and Article VII

(Amended), section 3, preserve the right to jury trial for

claims that are properly categorized as ‘civil’ or ‘at law’ ” and

a newly created claim “seeking monetary damage for injury

inflicted fits within those terms, even if it does not have a

precise historical analog.”2 Id. at 426.

Thus, I begin by considering which of the two analyt-

ical categories includes shareholder derivative claims. That

requires me to determine whether shareholder derivative

claims existed when the Oregon Constitution was adopted.

As the United States Supreme Court explained in Ross, in

1791, when the Seventh Amendment was adopted, although

a corporation could enforce a legal right at common law,

“[t]he common law refused * * * to permit stockholders to call

corporate managers to account in actions at law.” 396 US at

534. Although a corporation could bring legal claims, the

right of a shareholder to bring a claim on behalf of a corpo-

ration was not recognized at law or in equity in 1791.

“The possibilities for abuse, thus presented, were not

ignored by corporate officers and directors.” Id. As a result,

“[e]arly in the 19th century, equity provided relief both in

this country and in England.” Id. The case of Robinson v.

2

If the Miramontes court had been writing on a blank slate, I would under-

stand its holding more broadly. That is, I agree with the majority that some parts

of Miramontes can be understood to suggest that Article I, section 17, provides

a right to a jury trial on every legal issue, and every claim seeking money dam-

ages, in every case. However, as discussed further below, 303 Or App at 725-27

(James, J., concurring in part and dissenting in part) the court recognized that it

was not writing on a blank slate, and it did not purport to overrule the long line of

case law establishing that, if a claim is one that was tried to an equity court when

the constitution was adopted—and thus was not a claim “at law”—then Article I,

section 17, provides no right to a jury trial on that claim.

724 Deep Photonics Corp. v. LaChapelle

Smith, 3 Paige Ch 222 (NY 1832) is commonly credited as

the first shareholder derivative suit in the United States.

Bert S. Prunty, Jr., The Shareholders’ Derivative Suit: Notes

on its Derivation, 32 NYU L Rev 980, 986-88 (1957) (discuss-

ing Robinson and earlier cases recognizing aspects of what

we now identify as shareholder derivative claims).

The concept in the early American cases, including

Robinson, was that directors were trustees and stockholders

were beneficiaries. “By thus bringing the dispute within the

ambit of existing and unquestioned doctrine, [that charac-

terization] provided a ready-made set of substantive rules

to govern the directors and at the same time satisfied the

requirement of a ground for equitable jurisdiction.” Id. at

986. The United States Supreme Court first addressed a

shareholder derivative suit in Dodge v. Woolsey, 59 US 331,

18 How 331, 15 L Ed 401 (1855), applying a similar the-

ory. Ross, 396 US at 534. In England, shareholder deriva-

tive suits originated in the same general time frame. See

Prunty, Jr., 32 NYU L Rev at 980 (discussing the leading

case of Foss v. Harbottle, 2 Hare 461, 67 Eng Rep 189 (Ch

1843), and highlighting earlier cases). All of the cases were

heard in courts of equity.

In Oregon, the oldest shareholder derivative suit

that I have identified is Stanley v. Luse, 36 Or 25, 58 P 75

(1899). There, the Supreme Court noted that “[t]he par-

ties agree that the suit is, in effect, one by the corporation,

although brought in behalf of certain stockholders and all

others similarly situated, and that the relief available is

such only as would be proper if the suit had in reality been

brought in the name of the corporation itself.” Id. at 31. That

case was heard in equity. Id. at 38.

In the course of evaluating whether jury trials were

customary for particular claims when the constitution was

adopted, the Oregon Supreme Court has considered the

state of the common law (and practices in courts of equity)

generally—in the United States and in England—as well

as Oregon statutes and cases. See, e.g., McDowell Welding

& Pipefitting, 345 Or at 282, 285 (citing treatises, an early

Oregon case, an early Arkansas case, and an English case

in support of its conclusion that only equity courts, not

Cite as 303 Or App 699 (2020) 725

law courts, would have enforced executory accords when

the Oregon Constitution was adopted); Molodyh v. Truck

Insurance Exchange, 304 Or 290, 295-96, 744 P2d 992 (1987)

(citing cases decided in the 1850s in Indiana, Maryland,

and New York in the course of deciding “whether plain-

tiff had a well-established right to have a jury determine

the amount of damages in an action on an insurance pol-

icy when our constitution was adopted”); Kendall v. Post, 8

Or 141, 146 (1879) (citing a national treatise regarding the

right to jury trial on the amount of damages resulting from

condemnation and noting that “[t]he authorities referred to

by [the author], in support of his position, show that this

question has been long since settled beyond any doubt or

controversy”).

Based on the same types of authority, I conclude

that the history of the development of shareholder deriva-

tive suits in both England and the United States, described

above, before the adoption of the Oregon Constitution means

that shareholder derivative suits existed when the Oregon

Constitution was adopted. As explained above, shareholder

derivative suits began to appear in the United States in the

1830s, and only slightly later in England. By the latter half

of the 1850s, when our constitution was adopted, they were

well established as the means by which shareholders could

bring claims against directors and officers on behalf of the

corporation. See, e.g., Dodge, 59 US at 341-44.

Thus, shareholder derivative suits fall in the first

analytical category described above. Consequently, the ques-

tion under Article I, section 17, is whether a “right to a jury

trial was customary at the time the Oregon Constitution was

adopted.” Horton, 359 Or at 173. The answer is that it was

not. Shareholder derivative claims were uniformly heard in

equity, where there was no right to trial by jury.

The majority does not squarely address the long

line of Supreme Court precedent establishing that, for

claims that existed when the constitution was adopted, the

analysis under Article I, section 17, is based on historical

practice. Instead, the majority assumes that the analysis

in Miramontes applies to all claims, regardless of whether

they existed before or after the constitution was adopted.

But Miramontes was not so far reaching.

726 Deep Photonics Corp. v. LaChapelle

The action in Miramontes, brought under ORS

30.866, Oregon’s civil stalking statute, included a claim

for a stalking protective order and a claim for compensa-

tory money damages based on the same facts. 352 Or at

403. The question was whether the defendant had a right

to a jury trial on the damages claim, which, in the plain-

tiff’s view, provided a new remedy that was not available

at common law. Id. The court recognized that the statutory

action was newly created—it did not exist at the time of the

constitution—and rejected the plaintiff’s initial argument

that newly created claims never carry the right to a jury

trial. The court explained that the question it had to answer

was “whether plaintiff’s claim for damages in her civil

stalking case is ‘of like nature’ to claims that were triable

to a jury at common law.” Id. at 413. The plaintiff contended

that the court should apply a history-based test to answer

that question; she argued “that her claim for monetary relief

is ‘incidental’ to what is essentially an equitable claim [for

a stalking protective order] and that, because Oregon per-

mitted a court trial of such incidental requests in 1857, it

should continue to do so.” Id. at 419.

In the course of considering the plaintiff’s initial

argument, the court noted that several of the cases that

the plaintiff cited were inapposite to the question before it

because “the claims at issue * * * were recognized and triable

to a court at common law.” Id. at 410; see also id. at 410 n 6

(summarizing cases). That is, the court in Miramontes did

not need to address its precedent involving claims that were

recognized and triable to a court at common law because

it was considering only a newly created claim, for which

different analysis applies. See also Horton, 359 Or at 226

(describing Miramontes as holding that the “state constitu-

tional jury trial right extends to new causes of action that

are ‘of like nature’ to claims and defenses that would have

been tried to a jury in 1857” (emphasis added)).

Ultimately, the court rejected the plaintiff’s argu-

ment that it should take a history-based approach to deter-

mine whether a newly created claim is “of like nature” to

claims that were triable to a jury at common law, holding

that “the right to jury trial must depend on the nature of

Cite as 303 Or App 699 (2020) 727

the relief requested and not on whether, historically, a court

of equity would have granted the relief had the legal issue

been joined with a separate equitable claim.” Miramontes,

352 Or at 425.

Thus, in Miramontes, the court did not address

claims for relief that existed when the constitution was

enacted. The court stated that it was addressing what it

means for a newly created claim to be “ ‘of like nature’ to

claims that were triable to a jury at common law,” id. at

413, and it distinguished cases involving claims that “were

recognized and triable to a court at common law.” Id. at 410.

It did not overrule the court’s well-established precedent

regarding claims that existed when the constitution was

enacted.

As an alternative to its suggestion that Miramontes

applies to all claims, the majority reasons that,

“to the extent that shareholder derivative claims can be

characterized as claims that existed at common law when

the Oregon Constitution was adopted, we nevertheless con-

clude that the relevant ‘claim’ is the legal claim by the cor-

poration, rather than the easily separated equitable issue

of whether corporate shareholders have standing to bring

the action on behalf of the corporation.”

303 Or App at 709. In my view, the Supreme Court’s case

law, which is binding on this court, does not allow for

the distinction that the majority attempts to draw. The

Supreme Court has long held that the framers of the Oregon

Constitution intended Article I, section 17, to incorporate

“laws and practice,” as they existed when the constitution

was enacted. Tribou, 7 Or at 158. As explained above, when

the constitution was enacted, as a matter of law and prac-

tice, shareholder derivative suits were brought in equity

and, thus, tried without juries. They are not excepted from

the Supreme Court’s frequently reiterated rule that “[t]he

right to a jury trial * * * does not extend to cases that

would have been tried to an equity or an admiralty court

in 1859.” McDowell Welding & Pipefitting, 345 Or at 279; see

also Miramontes, 352 Or at 425 (“Article I, section 17, and

Article VII (Amended), section 3, of the Oregon Constitution

do not guarantee a right to jury trial for claims or request

728 Deep Photonics Corp. v. LaChapelle

for relief that, standing alone, are equitable in nature and

would have been tried to a court without a jury at common

law.”).

Thus, I conclude that Article I, section 17, does not

guarantee a right to a jury trial on shareholder derivative

claims. Because the trial court erred in denying defen-

dant’s objection to the claims being tried to the jury, I would

reverse and remand. See Dean, 22 Or at 169 (remanding for

a new trial to the court after the court had empaneled a jury

to determine damages after a default, because there was no

right to a jury trial on the claims).

DUTY OF LOYALTY CLAIMS

I turn to plaintiffs’ cross-appeal, in which they

assign error to the trial court’s indication on the verdict form

that plaintiffs’ duty of loyalty claims failed if “a majority of

the disinterested board members who voted” authorized the

decision. Because the same legal issue would be likely to

arise on remand, I address it as well. I provide factual back-

ground here as necessary to understand the parties’ argu-

ments and my analysis.

The following facts are undisputed. During the

relevant time period, from early 2009 to early 2010, defen-

dants Kim and Juhola were directors of Deep Photonics

Corporation (DPC). Kim also owned 90 percent of Daehong

Technew Corporation, a Korean corporation. Defendant

Knoth was a shareholder and attended board meetings

throughout the relevant time period, and he became a direc-

tor in May 2009. In addition to defendants, LaChapelle,

Theodore Alekel, and Mike Kelly were directors of DPC.

Until early September 2009, LaChapelle was DPC’s presi-

dent and chief executive officer. Thus, after May 2009, DPC

had six directors: defendant Kim, defendant Juhola, defen-

dant Knoth, Alekel,3 Kelly—who was not a party to any of

the claims in this litigation—and plaintiff LaChapelle.

In the claims at issue here, plaintiffs contended that

defendants and Alekel had breached their duty of loyalty to

3

Alekel was named as a defendant on the claims at issue here, but the claims

against him were severed before trial and eventually dismissed. As a general

matter, he was aligned with defendants.

Cite as 303 Or App 699 (2020) 729

DPC in making three decisions. First, plaintiffs challenged

the board’s decision, in August 2009, to cease operations in

Corvallis, where all of the company’s operations had taken

place, and pack up and ship all work in progress to Kim’s

company, Daehong Technew, in Korea. Second, plaintiffs

challenged the board’s decision, in September 2009, to name

Alekel president and chief executive officer of DPC. Third,

plaintiffs challenged the board’s decision, in January 2010,

to approve a renegotiated loan agreement with Daehong

Technew, under which DPC agreed to give Daehong Technew

a security interest in its intellectual property.

Plaintiffs presented evidence that Kim, Juhola,

Knoth, and Alekel had conflicts of interest with regard

to the three decisions. They also presented evidence that

defendants and Alekel conspired to take a series of actions,

including the removal of LaChapelle as president and CEO,

the three actions identified above, and additional actions,

that were intended to benefit themselves personally and

that destroyed DPC’s potential for success.

The first challenged decision was approved by a

majority of the six directors including Kim, Juhola, Knoth,

Alekel, and Kelly.4 The second and third decisions were

approved unanimously by the same directors; LaChapelle

was not at the meetings.

With those background facts in mind, I consider the

Delaware law that governs the parties’ dispute. Then I set

out the relevant portions of the disputed verdict form.

Two aspects of Delaware law regarding conflicts of

interest are relevant here: first, voidability of a corporate

decision when a majority of the directors who voted for it

have conflicts of interest, and second, the elements of a

common-law breach of fiduciary duty claim. Historically,

in Delaware, “a contract or transaction in which a majority

of voting directors or officers had an interest was generally

presumed to be voidable.” Blake Rohrbacher, John Mark

Zeberkiewicz, & Thomas A. Uebler, Finding Safe Harbor:

Clarifying the Limited Application of Section 144, 33 Del J

4

At trial, the parties disputed whether LaChapelle had voted in favor of the

decision to move operations to Korea.

730 Deep Photonics Corp. v. LaChapelle

Corp L 719, 722 (2008); see also, e.g., Oberly v. Kirby, 592 A2d

445, 466 (Del 1991) (“At common law, a corporation’s stock-

holders did have the power to nullify an interested trans-

action[.]”). To change that situation, in 1967, the Delaware

General Assembly enacted 8 Delaware Code section 144,

which now provides, as follows:

“(a) No contract or transaction between a corporation

and 1 or more of its directors or officers, or between a corpo-

ration and any other corporation, partnership, association,

or other organization in which 1 or more of its directors or

officers, are directors or officers, or have a financial inter-

est, shall be void or voidable solely for this reason * * * if:

“(1) The material facts as to the director’s or officer’s

relationship or interest and as to the contract or transaction

are disclosed or are known to the board of directors or the

committee, and the board or committee in good faith autho-

rizes the contract or transaction by the affirmative votes of

a majority of the disinterested directors, even though the

disinterested directors be less than a quorum[.]”

(Emphasis added.) Thus, compliance with section 144(a)(1)—

including authorization of a corporate contract or transac-

tion by “the affirmative votes of a majority of the disinter-

ested directors, even though the disinterested directors be

less than a quorum”—prevents a transaction from being

held “void or voidable” “solely” because the directors or offi-

cers have conflicts of interest.5

However, the fact that section 144 saves a trans-

action from voidability based “solely” on the existence of

a conflict of interest does not prevent a court from con-

sidering the separate question of whether the directors

or officers nevertheless breached their fiduciary duties by

approving it. In re Cox Communications, Inc. Shareholders

Litigation, 879 A2d 604, 614-15 (Del Ch 2005) (Section 144

“has been interpreted as dealing solely with the problem of

per se invalidity; that is, as addressing only the common

law principle that interested transactions were entirely

invalid * * *. The somewhat different question of when an

interested transaction might give rise to a claim for breach

5

The parties have not addressed whether the board decisions at issue were

contracts or transactions within the meaning of section 144 or whether the other

requirements of that section were met, and I do not address those questions.

Cite as 303 Or App 699 (2020) 731

of fiduciary duty—i.e., to a claim in equity—was left to the

common law of corporations to answer. Mere compliance

with [section] 144 did not necessarily suffice”); see also, e.g.,

Fliegler v. Lawrence, 361 A2d 218, 222 (Del 1976) (“[Section

144] merely removes an ‘interested director’ cloud when

its terms are met and provides against invalidation of

an agreement ‘solely’ because such a director or officer is

involved.”); Zimmerman v. Crothall, 62 A3d 676, 704-05

(Del Ch 2013) (“Section 144 * * * addresses the common

law rule or concept that self-interested transactions with

a director’s corporation were void or voidable.”); Cumming

v. Edens, No. 13007-VCS, 2018 WL 992877 at *22 (Del Ch

Feb 20, 2018) (“Based on the plain language of the statute,

and my reading of the persuasive authority on the sub-

ject, I am satisfied that compliance with Section 144(a)(1)

does not necessarily invoke business judgment review of

an interested transaction. The Court must still adhere to

settled common law principles when fixing the appropriate

standard of review by which fiduciary conduct should be

measured.” (Emphasis in original; footnote omitted.)); CDX

Liquidating Trust v. Venrock Associates, 640 F3d 209, 219

(7th Cir 2011) (noting that compliance with section 144(a)(1)

does not answer accusations of disloyalty and collecting

Delaware cases; “a disloyal act is actionable even when

a conflict of interest is not”); Leo E. Strine, Jr., Lawrence

A. Hamermesh, R. Franklin Balotti, & Jeffrey M. Gorris,

Loyalty’s Core Demand: The Defining Role of Good Faith

in Corporation Law, 98 Geo L J 629, 656 n 85 (2010) (“To

date, the Delaware courts have generally read [section

144] more narrowly[—as simply preventing a transaction

from being void or voidable solely because of a conflict of

interest—]while drawing on it in crafting rulings in

equity.”); R. Franklin Balotti & Jesse A. Finkelstein, 1

Balotti and Finkelstein’s Delaware Law of Corporations and

Business Organizations § 4.16[A] (2020) (“Apart from the

statutory safe-harbor analysis [of section 144], the courts

also scrutinize interested-director transactions under a

common-law fiduciary review.”).

Some Delaware cases have suggested that, if a

transaction is approved as contemplated in section 144(a)(1),

the transaction will be reviewed under the business

732 Deep Photonics Corp. v. LaChapelle

judgment rule rather than for entire fairness to the corpora-

tion.6 See, e.g., Benihana of Tokyo, Inc. v. Benihana, Inc., 906

A2d 114, 120 (Del 2006) (“After approval by disinterested

directors, courts review the interested transaction under

the business judgment rule.”). However, the majority view

among Delaware cases—and, in my opinion, the only view

that is faithful to the text of section 144—is that “section

144 does not play any role in determining which standard

of review applies.” Rorbacher, et al., 33 Del J Corp L at 736.7

Here, plaintiffs contended that defendants had

breached their fiduciary duties—specifically, as relevant

here, their fiduciary duty of loyalty—not that the challenged

actions were voidable or void because of conflicts of interest.

Thus, the verdict form needed to lead the jury through the

proper analysis for a claim of breach of the duty of loyalty.

Although the standards for the statutory analysis

under section 144 and the common-law question of whether

the board has breached its duty of loyalty “are phrased sim-

ilarly,” “they are in fact quite different.” Id. at 737-38. As

set out above, under section 144(a)(1), a transaction is saved

6

The business judgment rule is a substantive “standard of review” that cre-

ates a presumption in favor of the validity of the action of a corporation’s board

of directors. If the plaintiff rebuts the application of the business judgment rule,

a court applies the “entire fairness” standard of review instead, reviewing the

transaction to evaluate whether it is entirely fair to the corporation. Krasner v.

Moffett, 826 A2d 277, 287, 287 n 40 (Del 2003).

7

I also note that this case is factually distinguishable from Benihana of

Tokyo, Inc. As another court summarized,

“Benihana of Tokyo, Inc., a derivative suit much like this one, provides

an illuminating contrast to this case. A director was interested but his inter-

est was known to the board. Having settled that point, the court went on to

consider whether he had breached his fiduciary duty to the corporation, and

concluded that he had not. He ‘did not set the terms of the [challenged] deal;

he did not deceive the board; and he did not dominate or control the other

directors’ approval of the Transaction. In short, the record does not support

the claim that [he] breached his duty of loyalty.’ Id. at 121.”

CDX Liquidating Trust, 640 F3d at 219 (citation omitted).

Here, plaintiffs not only presented evidence that four of the five directors

that voted in favor of each decision had conflicts of interest, they also presented

evidence that those directors conspired to take those actions from motives of per-

sonal gain rather than to protect the corporation’s interests. To the extent that

approval under section 144 could potentially entitle directors to review under

the business judgment rule under some circumstances, plaintiffs’ evidence here

makes review under the business judgment rule inapposite.

Cite as 303 Or App 699 (2020) 733

from voidability if, among other requirements, the board

ratifies the conflicted transaction “by the affirmative votes

of a majority of the disinterested directors.” By contrast, in

a common-law claim for breach of the duty of loyalty, like the

claims that plaintiffs raised here, the plaintiff rebuts the

application of the business judgment rule “when the major-

ity of a board of directors is the ultimate decisionmaker and

a majority of the board is interested in the transaction.”

Krasner v. Moffett, 826 A2d 277, 287 (Del 2003); see also,

e.g., Puma v. Marriott, 283 A2d 693, 693-95 (Del Ch 1971)

(concluding that the business judgment rule applied because

the challenged transaction had been approved by the five

outside directors, who formed a majority of the nine-member

board and who were not alleged to have conflicts of interest).

To put the difference between those two standards

in context, consider the example of a nine-member board of

directors, eight of whom have conflicts of interest in a given

action. “[A] nine-member board with a single disinterested

director may approve a covered transaction and reap the

benefits of the section 144 safe harbor.” Rorbacher, et al.,

33 Del J Corp L at 737. That is, the vote of the single dis-

interested director saves the transaction from being void-

able even though eight of the nine directors have conflicts of

interest.

By contrast, in a common-law claim for breach of the

duty of loyalty, “a transaction approved by the nine-member

board discussed above (with the single disinterested direc-

tor) will be subject to the entire-fairness standard.” Id. That

is so because a majority of the directors who are approving

the transaction—eight of the nine total directors—have con-

flicts of interest. Because “a majority of the board is inter-

ested in the transaction,” the board action is not entitled

to the protection of the business judgment rule; instead, a

court will evaluate the action for entire fairness to the cor-

poration. Krasner, 826 A2d at 287; Rorbacher, et al., 33 Del

J Corp L at 737. Thus, section 144 “is best seen as estab-

lishing a floor for board conduct”—compliance prevents a

board action from being voidable—“but not a ceiling,” in the

sense that compliance with section 144 does not, in and of

itself, prevent a court from reviewing the substance of the

734 Deep Photonics Corp. v. LaChapelle

transaction for entire fairness. HMG/Courtland Properties,

Inc. v. Gray, 749 A2d 94, 114 n 24 (Del Ch 1999).

Next, I consider the verdict form that plaintiffs

challenge. On the parts of the verdict form relating to defen-

dants’ breaches of the duty of loyalty, the jury was asked a

series of questions similar to the following about each of the

challenged decisions:

“1. Did any defendant breach his duty of loyalty?

“__ Yes __ No

“If no, go to questions concerning [the next challenged

decision]. If yes, go to next question.

“2. Did at least [a majority of the board, consisting of

either three or four directors, depending on the decision]

violate their duty of loyalty?

“__ Yes __ No

“At least nine of the same jurors who answered yes to

question 1, must agree on the answer to question 2. If no,

go to questions concerning [the next challenged decision]. If

yes, go to next question.

“3. Did the defendants prove that a majority of the disin-

terested board members who voted authorized the decision?

“__ Yes __ No

“At least nine of the same jurors who answered yes to

question 2, must agree on the answer to question 3.

“If you answer yes, go to the questions concerning [the

next challenged decision]. If you answer no, go to question

4.

“4. Did the defendants prove the decision was entirely

fair to the corporation?

“__ Yes __ No

“At least nine of the same jurors who answered no to

question 3, must agree on the answer to question 4.

“If you answer yes, go to the questions concerning [the

next challenged decision]. If no, you need to answer the

Cite as 303 Or App 699 (2020) 735

questions about this transaction in the damage section of

this form.”

With respect to each of the three breaches of the

duty of loyalty, the jury answered “yes” to questions 1 and 2,

finding that a majority of the board of directors had breached

their duty of loyalty.

The jury also answered “yes” to question 3, indicat-

ing that defendants had proved “that a majority of the disin-

terested board members who voted authorized the decision.”

The parties agree that that answer was based on the fact

that Kelly was the only disinterested director, and he voted

in favor of the challenged decisions.

On appeal, plaintiffs contend that the trial court

erred by including the third question on the verdict form. I

agree.

Because the single disinterested director voted in

favor of each action, each action complied with the voting

requirement of section 144(a)(1) and, consequently, was not

voidable solely because of the conflicts of interest.8 But plain-

tiffs did not claim that the challenged actions were voidable

solely because of the conflicts of interest; to the contrary,

they asserted, and presented evidence, that defendants had

breached their duty of loyalty by conspiring to take actions

that put their own personal interests above those of DPC.

As explained above, compliance with section 144(a)(1) does

not excuse breaches of the duty of loyalty. Rorbacher, et al.,

33 Del J Corp L at 721 (“[I]f a transaction complies with

the section 144 safe harbor, it will not be invalidated solely

on the grounds of the offending interest, but will be ana-

lyzed under the common law regarding breach of fiduciary

duty. Section 144 will then have nothing more to do with the

transaction.”); see also, e.g., CDX Liquidating Trust, 640 F3d

at 219 (“[The defendant directors] persuaded the district

judge that disclosure of a conflict of interest [and compliance

with section 144] excuses a breach of fiduciary duty. It does

not. It just excuses the conflict.”).

8

As noted above, 303 Or App at 732 n 7 (James, J., concurring in part and

dissenting in part), plaintiffs did not, and do not, contend that the board actions

did not comply with the other requirements of section 144(a)(1), relating to full

disclosure of the conflicts and good faith. Accordingly, I express no opinion on

those questions.

736 Deep Photonics Corp. v. LaChapelle

Instead, “when the majority of a board of directors

is the ultimate decisionmaker and a majority of the board is

interested in the transaction, the presumption of the busi-

ness judgment rule is rebutted.” Krasner, 826 A2d at 287;

see also Malpiede v. Townson, 780 A2d 1075, 1094 n 65 (Del

2001) (“If the plaintiff were to establish by proof at trial a

prima facie case of a loyalty violation, defendants would then

have the burden to establish entire fairness.”). The fact that

a majority of the disinterested directors voted in favor of the

challenged actions does not govern the outcome of plaintiffs’

duty-of-loyalty claims. I thus conclude that the trial court

erred in denying plaintiffs’ objection to a verdict form that

instructed the jury to end its evaluation of plaintiffs’ loyalty

claims if it found that “a majority of the disinterested board

members who voted authorized the decision,” and I would

reverse on the cross-appeal.

Accordingly, I dissent in part and concur in part in

the majority opinion.