# Deep Photonics Corp. v. LaChapelle

> Court of Appeals of Oregon · April 29, 2020 · 303 Or. App. 699

URL: https://www.frixlaw.com/law-library/cases/10600089

## Case

- **Court:** Court of Appeals of Oregon
- **Decided:** April 29, 2020
- **Citations:** 303 Or. App. 699; 466 P.3d 660
- **Precedential status:** Published
- **Opinion:** Opinion
- **Judges:** Shorr
- **Cited by:** 2 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10600089

## Opinion text

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.

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10600089. Public record. Not legal advice.