Constitutional Law · Del. · 1996
What Is Broz v. Cellular Information Systems, Inc. About?
What the court held
No. The Delaware Supreme Court held that Broz did not breach his duty of loyalty to CIS. The opportunity was not a corporate opportunity of CIS under the Guth factors, and Broz had no duty to make a formal presentation to or obtain a formal rejection from the CIS board before pursuing the license through his own company.
The rule it established
Under Delaware's corporate opportunity doctrine, as articulated in Guth v. Loft, Inc., a director may not appropriate for himself an opportunity belonging to the corporation. Whether an opportunity belongs to the corporation turns on a fact-specific inquiry into (1) whether the corporation is financially able to exploit the opportunity; (2) whether the opportunity is within the corporation's line of business; (3) whether the corporation has an interest or reasonable expectancy in the opportunity; and (4) whether by taking the opportunity, the fiduciary will be placed in a position inimical to his duties to the corporation. If these factors indicate the opportunity is corporate, the director must present it to the corporation and may only pursue it after effective rejection by a disinterested board. If the factors show the opportunity is not corporate, the director is not obligated to present the opportunity and may pursue it personally, particularly where the opportunity was presented in the director's individual capacity and no corporate resources or confidential information were misused. The analysis is performed based on facts and circumstances existing when the opportunity arose; interests of a prospective acquirer are not imputed to the corporation prior to the transfer of control.
Why it matters
Broz is a leading Delaware case clarifying the corporate opportunity doctrine and the duty of loyalty for directors with parallel business interests. It teaches that: (1) corporate opportunity is a flexible, fact-intensive standard anchored in the Guth factors; (2) there is no per se duty to present every potentially relevant opportunity to the board; (3) financial incapacity and a divestiture strategy weigh heavily against finding a corporate opportunity; (4) the analysis is frozen at the time the opportunity arises; and (5) a prospective acquirer's interests are not automatically those of the target. For students, Broz provides a blueprint for organizing corporate opportunity analyses on exams and in practice, and it underscores the protective function of timely, well-documented disclosures even when formal presentation is not strictly required.
Read the full Broz v. Cellular Information Systems, Inc. case brief — facts, procedural posture, issue, and reasoning.
- IRAC breakdownBroz v. Cellular Information Systems, Inc. restructured as issue, rule, application, and conclusion — the format exam answers are graded in.
- Study notesCondensed notes on Broz v. Cellular Information Systems, Inc. for outlining and review.
- Practice quizTest whether you can state the holding and rule of Broz v. Cellular Information Systems, Inc. under pressure.